Sovereign returns 11.9x on CVS investment

Sovereign Capital, the UK private equity buy and build specialist, has realised its investment in veterinary services consolidator CVS Group through the flotation of CVS on AIM.

The flotation at a market value of £105.7m has returned 11.9x money invested and provided an IRR of 52% to Sovereign over the life of the investment.

CVS was established in August 1999 and, with financial backing from funds managed by Sovereign, it started the consolidation of the veterinary practice market. To-date, it has made 39 acquisitions and now comprises 45 practices nationwide, together with three diagnostic laboratories.

Based in Diss, Norfolk, CVS operates as two divisions. The practice division comprises 127 small animal veterinary surgeries, which it claims is more than double the number of such surgeries operated by its nearest competitor, and one equine surgery.

The three laboratories making up the diagnostic division provide services to CVS and to third parties. CVS currently employs more than 1,200 staff, including over 270 vets.

Under the current management team of Simon Innes, chief executive, and Paul Coxon, finance director, sales have increased to £39m in 2007, generating Ebitda of £5.1m.

Innes says: “I am delighted with the flotation. PLC status will enhance our awareness and reputation in the industry, help drive business and attract potential acquisitions.”

Sovereign Capital has also purchased residential care provider Positive Lifestyles through portfolio company Alkare. The price was not disclosed. Established in 2001, Cardiff based Positive Lifestyles currently helps rehabilitate 32 clients with intensive support needs across nine homes.

Sovereign bought Alkare in April 2006 for £22m (€31.8m). The purchase of Positive Lifestyles was the second buy-and-build investment for Sovereign in September. Earlier in the month, portfolio company STL, a national vocational training provider, bought Orient Gold, a provider of apprenticeship and adult learning.

London-based Sovereign has a track record in the healthcare sector, with previous investments including CHOICE, the £15m buy-in management buyout of Truecare, the £12m bolt-on acquisitions of Tregynon Hall and Aran Hall for the SENAD group, and the £12.5m institutional buyout of the Orchard End group. In June this year, it paid £11m for Parallel Options, a mental health care company.

Sandrine Bradley