This year’s winner of EVCJ’s Realisation of the Year is Inflexion Private Equity for selling Viking Moorings. Exit opportunities were rare in 2009 so to generate a 12x return on an investment and complete one of the most successful deals in the firm’s was no easy task.
Back in July, when the biggest piece of private equity news was the £553m Wood Mackenzie secondary transaction, Inflexion was finalising the sale of Aberdeen-based Viking to HSBC Private Equity for £170m. The exit represented a 12x return, and together with the proceeds from additional holdings through Inflexion-managed funds, the sale yielded a net profit of £12.2m. Over the past three years, Inflexion has invested £50m in Viking.
Viking began life in 1986 as Balmoral Marine, a subsidiary of Scottish offshore engineering group Balmoral, and established itself as a market leader in the hire and sale of mooring systems and associated products for use in the North Sea oil and gas industry.
Inflexion acquired the business in 2006 for £22m, taking an 80% shareholding, upon which it changed its name to Viking. F&C Private Equity also took part in the MBO, and invested £1.06m for a 9.2% share. Inflexion partner Tim Smallbone and investment director Catherine Richards joined the board. The investment was made from Inflexion’s £150m 2003 fund.
Viking had several features that drew the London-based firm’s attention. These included being the clear market leader; excellent growth opportunities, such as the use of alternative mooring technologies like fibre rope; further potential expansion into the Mediterranean and Far East; as well as the potential for in-fill acquisitions and capex-led growth. The services which Viking provides include initial design and engineering assessments, computer modelling and simulation, procurement of equipment, mobilisation, equipment rental and demobilisation, through to spooling and equipment testing.
Wider market trends also made it an attractive investment – the growing demand for worldwide crude oil and natural gas, higher oil prices, significant forecast increases in deepwater drilling and increasing seabed congestion all combined for an interesting proposition for Inflexion.
On top of this was the senior management team incumbent at the Aberdeen, Scotland business, the majority having over 10 years’ service within Viking. Inflexion added an executive chairman, Steve Curl, to guide the company.
Inflexion developed the business by strengthening the management team and an aggressive capital expenditure programme with £50m capex spent over three years. Upon acquisition the business had 60 employees; under Inflexion’s watch this increased to more than 100.
Further value was added to the core moorings equipment supply business with Inflexion overseeing the development of design and advisory packages and supporting international expansion, building a strong global presence and most recently opening an office in Singapore to service the growing markets in Asia, Australia and China Pacific regions.
It wasn’t the easiest exit in the world. The sale took 18 months to complete due to fluctuating oil prices affecting the company’s valuation. Of the exit, managing partner of Inflexion Private Equity Simon Turner said: “Viking Moorings is the market leader in a strong industry and has grown enormously in the last three years. We’re pleased that Inflexion has been able to play a key role in that growth, driving capital expenditure and international expansion such that the company has seen a very strong growth in three years. Viking epitomises the benefits that private equity investment can bring to a business – having a strategic vision for a business with the money to back it up. We’re delighted to be retaining an investment in Viking and look forward to working with HSBC.”
Inflexion will continue to take part in the future of Viking Moorings, investing £25m back into the business in order to participate in the next phase of investment. Viking, which has bases in Aberdeen and Norway, and is expected to branch out into Asia, Africa and Australia, saw its turnover soar from £12m a year at the time of the buyout to an expected £50m this year. EBITDA has grown from £4.9m to a forecast £25.5m.
Target: Viking Moorings
Sale Price: £170m
Return Multiple: 12x
Hold Period: 42 months
Buyer: HSBC Private Equity
WHY THE FIRM WON
• Generated a 12x return
• Added executive chairman
• Increased turnover from £12m to an estimated £50m
• Undertook an aggressive £50m capital expenditure programme
• Increased EBITDA from £4.9m to an estimated £25.5m
• Increased employee numbers from 60 to over 100
• Exited a company operating in the oil and gas sector during a challenging period
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