16 profile Great timing at HIG Europe
When leading US private equity provider HIG Capital set out to establish its European operations in London in mid 2007, it may have been great timing or just good luck. Either way HIG has proved that it is in the right place at the right time, writes Richard Willsher
Time spent setting up shop, hiring staff, finding offices and obtaining approvals led HIG into the beginning of the credit crunch, which, a year later morphed into the full blown financial crisis. The banks had stopped lending and it was a tough time for investing private equity funds. So, fortuitously perhaps, HIG managed to avoid the mad bubble when some private equity investors were still going all out to buy over-leveraged businesses at what now look to have been very high prices.
HIG’s UK managing director Paul Canning explains that he was the first “man on the ground“ in Europe for HIG in 2007 and that as he helped to build his team during 2008 and 2009, some of HIG’s first activities were getting involved in distressed situations, where companies were heavily laden with debt and needed help with capital restructurings. HIG’s model allows it to buy distressed debt and to get fully involved in helping to restructure businesses. But he was also preparing for better times that were to follow.
Investing in SMEs
“We have a very simple business model,“ Canning explains. “Like any good business that I like to back, we believe that we have some key differentiators, but ultimately HIG is quite an opportunisitic investment house and it’s all about our ability to come up with solutions for companies and then being able to execute on them quickly.“
He explains that HIG is a specialist investor in small and medium- sized businesses, typically with annual sales in the range £25 million to £250m. The European business takes its lead from its Miami HQ’d parent that has invested in over 200 small and medium-sized businesses since it was established in 1993. The business model is based on three basic building blocks:
1. Extremely flexible capital. HIG is prepared to invest at any stage in the life cycle of a business
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whether early-stage, growth- phase, buyout or distressed. It has £1 billion of long term committed capital into Europe available to invest into these types of situations.
2. An international approach. HIG is not a single country investor. The UK team works closely with its offices in the US, France and Germany to make investments wherever the opportunities exist and where it believes it can bring real added value to its investee companies, especially those looking to internationalise.
3. The HIG investment team itself.
“The approach that
we’ve taken to building our team,“ says Canning, “ties in very much with the solutions-driven aspect of our business model. We’ve got a strong mix of skills and backgrounds within our now 45-strong European team. This ranges from operational backgrounds, with some of the team who have spent all their working lives to date in industry. We also have strategic consulting backgrounds as well as all the blue-chip financial backgrounds you would expect to see ranging from distressed experience to growth private equity experience. Add that together and we have a group of people that we believe can really get to grips with investing the capital under our management for the best results for the companies we invest in and for our investors.“
10 deals and counting
Since those fairly unpromising beginnings as the financial markets shut up shop in late 2008, HIG has been busy. In 2009 HIG Europe invested over £250m into a range of distressed situations where its flexible capital allowed it to help businesses with issues as the credit crunch hit. In the past year it has continued to invest, notching up new investments into 10 businesses. But the more recent investment activity has swung back towards growth capital and buyout situations. True to its model, those businesses have
The HIG team focused on the Thames Valley and Solent. From left: Alastair Mills, Julie Bjune, Paul Canning, Thomas Scriven
also been based across Europe including France, Germany, the Netherlands and Spain as well as in the UK. “We’re committed to investing now to hopefully take advantage of the upswing in three or four years’ time,“ Canning explains. “It’s still a difficult time with some banks still very conservative in their lending criteria. But we’re taking a longer term view and we think that now is a great time to be investing capital.“
He is particularly keen to look at businesses in the south east of England where, in areas such as the Thames Valley and the Solent region he sees real opportunities. He comes across a lot of very good companies, that are international in their perspective, have weathered the global financial meltdown and are well placed to take advantage of opportunities in their marketplaces. In many cases they lack the growth capital they need to grasp those opportunities. HIG sees part of its role being to fill that gap and help such businesses fulfil their potential.
So what would Canning say to businesses in the region? “If your business truly has some sort of differentiator to make it stand out, if you are thinking about where to
THE BUSINESS MAGAZINE – SOLENT & SOUTH CENTRAL – APRIL 2011
take your business next, if you have an international aspect to your business, or if you are wondering where you can access growth or development capital if the banks aren’t prepared to step up, or if you are looking to realise some of the wealth you have tied up in your business then,“ he concludes, “we’d love to talk to you because we think we should be able to help.“
With two deals recently announced in the region and others in the pipeline it looks as though HIG has arrived at just the right time. And there are bound to be businesses who will welcome HIG as providing a means for them to grasp the opportunities that face them, which they may have been unable to do until now.
Details: Paul Canning 020-7318-5704
pcanning@higcapital.com www.higcapital.com
See opposite for details of the two recent HIG deals.
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