Cinven reaps 3x as NCP changes hands

3i has agreed to pay fellow private equity house Cinven £550m (US$965m) for NCP, the UK’s largest operator of car parks. The transaction nets Cinven a return of around 3x its investment.

Cinven acquired the business from Cendant in 2002 for £820m. Since that original MBO, the group has been transformed from an asset-heavy owner of multi-storey car parks to a manager of on and off-street parking. The key element in this transformation was the £609m sales in 2003 of NCP’s property assets to an investor group comprising investor Igal Ahouvi and Delek Investments.

Securing contracts from local authorities to manage their parking facilities was also a key part of Cinven’s strategy. NCP now manages more than 900 car parks throughout the UK and 230,000 on and off-street parking spaces. It has contracts with 31 local or regional government authorities. As well as operating and maintaining the physical infrastructure of parking spots and meters, the company also manages enforcement in the form of attendants and clamping. Additionally, the NCP enforces bus lane violations and may be well positioned to bid for tenders on the planned expansion of congestion charges across the UK.

As a result of these initiatives, Ebitda has doubled to more than £42m, over 30% of which has been generated by new business lines. This growth in profitability, combined with a strong cashflow profile, enabled Cinven to return 70% of the original investment to investors by the sale and leaseback and other refinancings.

Part of the rationale behind 3i’s acquisition is to continue NCP’s transformation into an outsourcing specialist for the public sector, offering a range of both parking and traffic management services. According to a statement from the group, the introduction of the Traffic Management Act 2004 will hasten this process.

“There is a huge opportunity for organic growth by picking up further contracts from local authorities and expanding the range of services that we offer existing customers,” said Jonathan Russell, 3i’s head of European buyouts. “We have backed a significant amount of businesses in this area, including Capita in the UK and Keolis in France, and feel that NCP is well-positioned to benefit from further outsourcing of local authority services.”

3i is backing the existing management team led by Bob Macnaughton, chief executive. Senior debt facilities are being provided by Mizuho. The purchase price includes an element of proceeds from recent property disposals, which will be received by the company shortly.

Citigroup Global Markets ran the auction for Cinven, while KPMG provided vendor due diligence. UBS and Deloitte acted as 3i’s financial advisers. 3i portfolio company ERM did the environmental due diligence.