LDC, the UK’s leading mid-market private equity investor, has exited its investment in Capital Economics in a sale to Phoenix Equity Partners (‘Phoenix’), which has acquired a controlling stake in the business. Phoenix’s investment, which values the business at circa £95m, will be made alongside the existing management team and shareholders. Roger Bootle will retain a significant stake in the business.
Capital Economics is one of the leading independent macro‐economic research companies in the world. Their team of more than 60 experienced economists provide award‐winning macroeconomic, financial markets and sectoral analysis, forecasts and consultancy from offices in London, New York, Toronto, Singapore and Sydney. The business provides research subscriptions, data and events to approximately 1,500 global institutions.
Capital Economics’ existing backer LDC, the private equity arm of Lloyds Banking Group, will exit its minority stake. Since their investment in October 2014, the business has grown revenues by 30% to over £22.5m in its latest financial year, launched several new services and opened new offices in New York and Sydney. It has expanded the team by 30% to over 140 employees across its five locations. The transaction provides a return for LDC of 2.5x money and an IRR of 43%.
The investment by Phoenix will allow Capital Economics to continue to accelerate its growth. Phoenix’s support will enable investments in new services and in technology to enhance and personalise client delivery. A number of potential acquisitions have also been identified. Phoenix will work closely with CEO Bob Dowson and the Capital Economics team to achieve the growth plan. Roger Bootle will remain Chairman of Capital Economics and continue the same part time role in the business. Chief Economist Jonathan Loynes will be stepping down later this year after 18 years of exceptional service. Neil Shearing, Capital Economics’ highly regarded Emerging Markets Chief Economist, will be promoted to the Chief Economist role.
Chris Neale, Partner at Phoenix, said: "Capital Economics is an exceptional business with outstanding economists and staff, and an unrivalled reputation for macro‐economic insight. It has grown every year since inception, building up a global base of loyal repeat clients. Demand for high quality, independent research continues to increase and we are excited about the future potential of the business. We look forward to working with Bob and the team to help accelerate growth over the coming years."
Bob Dowson, CEO of Capital Economics, said: "In the last three years, with support from LDC, we have opened new offices and launched new services. But we want to do more. Our financial services clients would like us to help with new areas such as investment strategy advice or more global commercial property coverage. We would also like to expand our existing offering to nonfinancial clients. Finally, as our output continues to grow, we want to use technology to help clients to personalise and tailor the insight they receive from us to enhance its value. Phoenix’s investment will allow us to seize these opportunities."
Troy Harris‐Speid, Investment Director at LDC, said: "Capital Economics is a great example of how private equity can accelerate growth, create scale and drive real value creation. We’ve enjoyed supporting Roger and Bob in building a business like Capital Economics whose independence, innovation and international scale provides a genuine point of difference in its market. This is an excellent outcome for the business, its clients and its people and we wish the team every success as they continue their growth journey with Phoenix."
Phoenix was advised by Livingstone; LDC and Capital Economics by BDO and Wyvern.