When a “Secondary” is actually a “Senary” buy out…

On the face of it, last week’s deal announcing that Bridgepoint Partners was to pay GBP 750m for Zenith Group, a West Yorkshire-based car leasing and fleet management company, was nothing special. In the greater scheme of some of the recent deals announced, the deal value was not particularly notable and the industry in which Zenith operates is relatively mature and has no single global behemoth. However, this deal sets a precedent in that should it complete (and there is no reason to believe it won’t) it will represent Zenith’s sixth private equity investor in 13 years.

The company’s private equity journey began back in December 2003, when 3i Group backed the management to buy the company from its then shareholders. Then in July 2005 Dunedin Capital Partners replaced 3i Group. This was followed by Barclays Private Equity in June 2006. Each of these three financial sponsors held a 40 per cent stake in the company along with the management that 3i had originally backed. When Barclays exited the company in August 2008, the structure of the next deal changed, with Morgan Stanley Global Private Equity acquiring 100 per cent in a deal structured as an institutional buy out. Fast forward to February 2014 and this time it was HG Capital’s turn at the wheel, with them paying a reported GBP 231m for the business.

Now, just 3 years later, HG Capital are selling Zenith for just over 3x’s the price they paid to Bridgepoint. For me this is testament to the fact that the Zenith management team are clearly comfortable working with financial investors and that the business lends itself well to the private equity business model. It also serves as proof that if a company can service its debt and continue to grow then theoretically the PE business model could be applied ad infinitum – providing someone is always prepared to pay more than the last buyer.