Corporate advisory firm Pembridge has led its first deal, the GBP5 million management buyout of Lexis Public Relations. Pembridge launched its business accelerator services in October last year and has recently added a business services offering. The firm is targeting advertising and media agencies, PR companies, designers, marketing and brand strategy consultants, as well as firms that support the creative processes (research, planning and information providers) and content-focused companies.
The founding team of eight partners draws on experience in PR, advertising, marketing and the media to support the growth of creative companies. Rose Lewis joined the team this year from 3i, where she was responsible for identifying and managing media and technology investments, including the GBP20 million Ministry of Sound deal.
Pembridge is taking a minority stake in Lexis and a non-executive directorship on the company’s board. The deal was financed by the Pembridge partners, Lexis’ incoming management team, a group of business angels who invest in creative projects and with bank debt. Mark Adams, a partner at Pembridge, says the firm does not have a formal fund but is considering launching one depending on performance in the first year.
Otto Stevens, who led the Lexis deal for Pembridge, said: “Our deal with Lexis has proved that MBOs are possible in this sector. Pembridge is at the forefront of leading this type of deal, making financing available and giving our portfolio companies the option to remain independent. We predict that more creative service firms will be taking this route in the future.”
The firm is looking to take a 10 to 15 per cent stake in portfolio companies from start-up to development capital stage. Adams says this size stake is too small to interest traditional venture capital firms: “VCs want too much and it deprives the management of the opportunity to invest in their own company.” He also believes the creative sector has been neglected by venture capitalists because its people-based businesses do not offer traditional security and their economic model is too distant. Adams hopes the firm will complete around four deals this year, some smaller than Lexis and some larger.
The business accelerator provides corporate finance advice, venture capital funding, non-executive directors and mentors, back-office support tools, training, workshops and advice. Pembridge Business Services provides outsourced finance, IT, HR and telecoms services to support creative businesses.