Investment strategy
The Funds managed by Harwood Private Equity invest in established small and medium-sized UK businesses operating across a wide range of sectors. We seek to make a difference by supporting companies with strong potential and high-quality operational management that are undervalued and often neglected by the investor community.
The team has historically completed between two and four acquisitions per year over the life of the five private equity funds (1999 to present). We favour low leverage and enjoy exclusive relationships in the market, aiding the acquisition of businesses at attractive entry multiples.
Harwood Private Equity has invested a total of £724 million in sixty-six acquisitions from five funds over the past 25 years. Eighty per cent of these acquisitions have been either management buyouts (MBOs), expansion capital and consolidation (buy-and-build) opportunities or public-to-private (PTP) transactions. We have made multiple profitable investments across a wide range of sectors.
The UK lower mid-market is a fertile area for deal origination. Harwood Private Equity’s reputation plays a key role in initiating transactions with private companies. Members of the team have been operating in this market for many years and have built a strong network of company management teams, institutional investors in public companies, advisory professionals and business sector specialists. Their wide-ranging relationships provide opportunities for potential investments.
The listed and unlisted companies that Harwood Private Equity targets will typically have high-quality operational management, stable revenues, good market share and rapid growth potential. Yet these companies often lack access to finance, strategic know-how and restructuring opportunities. HPE uses its skills in support of management to provide finance and expertise in a range of areas, such as improving financial controls, creating mergers and acquisitions (M&A), and developing and executing a growth strategy. Harwood Private Equity seeks to strengthen portfolio companies by facilitating new contract wins, accelerating geographical expansion and introducing potential partners.
The firm are specialists in executing PTP investments, having completed twenty-six such transactions since 1999. We are one of the few investors in UK smaller-company private equity that maintains contact with a broad range of stakeholders in the small-cap listed sector. Developing these close relationships has proved to be crucial in identifying, planning and completing PTP transactions. We deal directly with a target company’s board, management and key investors. The PTP transaction can be attractive to the shareholders of many quoted companies that have reached a stage where the benefits of a public listing have all but disappeared and there is no practical route to liquidity in the public markets.
We are single-minded about generating growth and increasing the profitability of our portfolio companies, whether by roll-out, acquisition or buy-and-build. We can produce rapid improvements in results, significantly shortening the J-curve effect post-acquisition.
Harwood Private Equity requires its portfolio companies to maintain exacting standards of corporate governance. We always join the board of the companies to maintain our oversight. HPE recognises the impact of ESG (environmental, social and governance) issues on financial performance. It believes that compliance with best-practice ESG policies creates value most tangibly through sustainability, customer retention, reputational standing, personnel efficiency, margin improvement and ease of exit. For this reason, the firm’s due diligence process considers ESG factors prior to the acquisition of companies. We manage improvements to ESG practice post-acquisition.
We identify an exit strategy for a target company before making an investment. We successfully employ a wide range of exit routes, tailored to maximise investor-returns. While the majority have been trade sales, initial public offerings (IPOs) and secondary private equity sales are also frequent exit routes.
