3i has exited its investment in Selwood Group, a UK construction equipment, pump hire and sales company, in which it originally invested in 1994 when it bought two businesses Palmer Scaffolding and Selwood from BTR. At that time 3i invested GBP12.5 million and was supported by NatWest on the debt side. Five years into the life of the investment in 1999 the existing management team – in their forties – wanted to exit, which they did following the sale of Palmer Scaffolding.
A new management team was bought in to work alongside the only remaining member of the management team, Kevin Bright, who then in his early thirties stayed with the company as managing director. The new management team was given an equity incentive plan and at the time of the sale 3i took some GBP12.25 million in cash and GBP7.5 million in depreciated dividends from the company but still retained an equity stake.
In November of the following year Bright and the new team bought Pyramid Plant Hire with the help of debt financing.
Now 3i has exited the business with a further GBP99.4 million in its pocket and an IRR of some 24 per cent and leaving Selwood with a capitalisation of GBP27 million. 3i’s exit has been funded by Selwood increasing its bank debt – provided by Royal Bank of Scotland and Lombard. PricewaterhouseCoopers, which advised on the original buyout in 1994, also advised management on the exit. The exit leaves management with 100 per cent equity in the Selwood Group.