Palatine Private Equity has backed the secondary management buyout of social housing contractor Forrest, investing GBP16million for a significant minority stake.
The deal is Palatine’s fourth investment from its second Fund, which achieved a final close of GBP150million in June this year. The transaction sees private equity firm LDC achieve a partial exit, but leaves Palatine and LDC with a combined majority stake in the business.
Bolton-based Forrest is a leading provider of essential refurbishment and responsive maintenance services to the social housing market in the North of England. Over the last three years Forrest has established a renewables division becoming one of the first registered installers under the Government’s Green Deal and Energy Company Obligation (ECO) initiatives. The business also undertakes new build development and estate renewal services for its core social housing customer base.
The company works with major social housing clients including Bolton at Home, City West Housing Trust, Salix Homes and Blackpool Coastal Homes. While the company predominantly works in the North West it also has clients in Yorkshire, the North East and the South West of England.
Forrest, which now boasts an order book worth GBP1.2billion, has seen its turnover grow from GBP38million in 2007 to over GBP100million. Sales grew by almost 50 per cent in 2012, which also saw the business launch an environmental services division and open a regional service centre in Bolton.
The business employs around 500 people and also operates a responsive maintenance division from a site in Leeds.
Forrest is led by chief executive Lee McCarren and managing directorMark Lyons. Palatine managing partner Gary Tipper, partner Ed Fazakerley and investment manager James Winterbottom worked on the deal.
Tipper and Fazakerley will join the Forrest board as non-executive directors. Bob Holt, chairman of social housing company Mears Group plc, will become non-executive chairman. Current chairman Robert Morgan will leave the business.
Ed Fazakerley, Partner at Palatine Private Equity, says: “Forrest is one of the leading social housing contractors in the North West and has shown impressive growth, both in turnover and profit, under the management of Lee McCarren, Mark Lyons and the management team.
“Management has succeeded in broadening the business offering in order to capitalise on the significant new-build and renewables opportunities that are available in the social housing arena. We are looking forward to working closely with Lee and the management team to exploit these growth opportunities.”
Lee McCarren, Chief Executive Officer at Forrest, says: “LDC, led by Jonathan Bell, have been a hugely supportive partner for the business over the past six years. With Palatine alongside us as an additional investor, we can continue to drive improvements in the quality of our customer service offering, as well as developing more new and complementary service lines. This on-going strategy has been the key to our many consecutive years’ growth and to our strong, long-term customer relationships.
“On behalf of the business, I’d like to thank Robert for his invaluable counsel and for the time and energy which he has invested into Forrest since he became our chairman. He has played an influential role in the company’s recent successes.”
Jonathan Bell, Director and Co-Head of LDC in the North West, who will remain on the board says: “We have supported Forrest’s consistent growth in the social housing support services sector and its transition into the leading regeneration specialist in the North of England. We are committed to working with Palatine to continue to support the business as it further develops its environmental services offering and targets new framework opportunities.”
A team at Deloitte, led by partner Paul Trickett, advised LDC and management on the deal and a team at Deloitte in Manchester, led by partner Jodi Birkett, provided financial duediligence. David Crout at PMSI Consulting provided commercial due diligence. Dave Foreman, a partner at Praetura Capital provided banking and financial services.
RBS and Santander Structured Finance provided senior debt and working capital facilities of GBP26m. The RBS team was led by Tony Dean and James Adams and the Santander team comprised Chris Thomas and Paul Wickers.
Rebecca Grisewood of Gateley provided legal support to Palatine and Jonathan Robinson and Darren Ormsby of DWF acted on behalf of LDC and management. Richard Oman of Addleshaw Goddard advised the banks. Management due diligence was carried out by the Quinn Partnership with Marsh carrying out insurance due diligence.
