Rockpool Annual Review 2022
Successful exits generate excellent returns for Rockpool investors
2022 saw significant exits and returns for Rockpool investors, generating average realised equity returns of 3.4x. We actively invested throughout the year, following our flexible investment strategy to focus on buoyant sectors and exciting, resilient investment opportunities. These investments include four new platform businesses and four follow-on investment rounds into portfolio companies to support acquisitions and organic growth.
During the year, Rockpool returned a total of £54m to investors through three full exits as well as debt refinancings and interest payments. The successful exits demonstrate Rockpool’s ability to identify and grow smaller businesses through a combination of organic and M&A strategies, and to make timely sales.
All three exits delivered significant value to Rockpool investors. The sale of Blume (formerly MMA Digital) to Fletchers (backed by Sun European Partners) generated a 4.4x return for equity investors and an outstanding 293% IRR. During this period, profitability more than tripled thanks to key senior hires and the acquisition of customer acquisition specialist, Online Legal.
The sale of Boston MFO to Horizon Capital also generated a strong return for investors, with the business more than doubling in size during Rockpool ownership. Rockpool first backed management in an MBO in 2019 and the business has grown substantially via organic growth and the acquisition of IQE in 2020.
The sale of Fortus to its management team (supported by AIB Bank) generated a return of 2.5x equity and an IRR of 36% for investors. Rockpool backed Fortus’ management team to fund a buy-and-build strategy in 2019, providing additional funding in 2021 to support further acquisitions, culminating in Fortus reaching revenues of over €100m.
These successes highlight Rockpool’s strong relationships with mid-market private equity buyers and our ability to support and grow high-quality businesses.
Exceptional year for new platform businesses
Rockpool has had an outstanding year for closing new investment opportunities and we are delighted to add four new platform businesses to the portfolio.
In August, Rockpool invested in Finitor Wealth, a financial planning and wealth management group with over 3,000 clients and £750 million of assets under advice (AUA). Rockpool’s investment enabled the management buy-out and the simultaneous acquisitions of two further financial planning businesses, Ascent Financial Consulting and FMB, with additional target firms in the pipeline. The initial acquisitions bring AUA to over £1.1 billion, with the aim to continue the buy-and-build strategy during Rockpool’s investment.
In September, we completed the MBO of EC Electronics, a manufacturer of high-quality electronics-based products and sub-assemblies for customers across various fast growth industries including “internet of things”, medical devices, electric vehicles, building controls and environmental monitoring. The funding will assist EC Electronics to continue its growth journey through further bolt-on acquisitions.
Part of Rockpool’s investment strategy is to identify opportunities in the most attractive high-growth markets. The technology industry has demonstrated strong sustained growth and continues to attract high levels of interest from mid-market PE firms, despite weaker economic conditions. This year, Rockpool has provided equity release and growth capital to two technology businesses, ERA (July) and Rosetta Brands (November).
ERA delivers cloud infrastructure-as-a-service solutions to a broad range of customers within the post-production, visual effects and broadcast media sectors. Rockpool provided the existing management team with additional growth capital to expand the company’s service offering and accelerate growth opportunities in new geographies India and Canada.
Rosetta Brands is a provider of software-enhanced services, offering its clients with an “ecommerce-as-a-service” outsourced Amazon function, helping them to maximise their success selling through Amazon with a combination of agency, optimisation, and vendor services. Rosetta Brands has grown rapidly with its service revenues more than doubling in each of the last three years. Rockpool’s investment will fund further growth and geographic expansion.
Follow-on funding to fuel portfolio company growth
In 2022, our flexible funding model allowed us to fund a wide range of projects and initiatives for our portfolio businesses.
Our portfolio company EA-RS Group, a leading provider of fire protection systems, acquired six additional companies, adding new capabilities to expand the group’s range of services and geographical coverage. These acquisitions bring the group’s total to eleven acquisitions since Rockpool’s investment in January 2021, providing the company with additional scale and market opportunities. The company also secured a £40m refinancing package with Ares Management and Barclays, led by Rockpool. This will support the group’s continued growth and expansion, both organically and through M&A.
In June, Rockpool investors provided further capital to Mecsia, to fund the acquisition of SK Heating & Cooling. This acquisition widens Mecsia’s product offering as well as adding new customer sectors. With group turnover now approaching £50m and with over 400 employees, Mecsia is a significant provider of mechanical and electrical engineering services in the UK commercial property market.
In December, we invested further funding into Xiatech, enabling the company to capitalise on the increasing demand for its software and to invest in product development. Revenues have more than doubled since Rockpool’s initial investment in December 2020 and the company is on track to deliver further revenue and earnings growth in 2023.
In December, we provided further funding to EC Electronics to fund the acquisition of Swan EMS, providing the group with greater scale and enhanced production capacity in the UK.
Transformative platform company success
2022 has been a transformative and successful year for many of Rockpool’s portfolio companies. As part of their growth strategy, three platform companies, Mecsia (formerly Cambridge Maintenance Services), Alchemist (formerly Interact) and Xiatech, have launched new brands, enabling them to expand their target audience, modernise and reflect their growth.
This year has also proven a great success for House of Hackney, who have been awarded the prestigious Queen’s Award for Enterprise for International Trade, reflecting their successful growth in the United States.
Team promotions and growth
In April 2022, Simon Collins and Toby Hurdle were promoted to Investment Manager and Executive respectively as part of the continued development of our investment team. We congratulate them both for their outstanding contributions and well-deserved promotions. We also welcomed Bethany Walls, who joins the team as an Investment Analyst.
There have been several new hires in the relationship team to support our growing investor base, which continues to expand thanks to the success and reputation of Rockpool in delivering returns. We welcomed Tom Skinner, Louis Neale, Alex Weighton and Dylan Lyons, who all joined as Private Client Executives.
Utilising our flexible investment strategy in 2023
We expect 2023 to be another active year for Rockpool, as we continue to seek new platform investments, with several exciting opportunities in the pipeline. Additionally, many of our existing portfolio companies are in talks to acquire businesses in their respective markets.
Rockpool continues to use its flexible investment strategy to react to economic events and focus on opportunities in resilient sectors with a proven business model. We look forward to sharing more information about these opportunities and others throughout the year, whilst continuing to deliver first class outcomes for our investors.
