Rockpool Annual Review 2021
An exceptional year for Rockpool investors
2021 saw significant exits and returns for Rockpool investors, validating Rockpool’s strategy of investing in growing UK SMEs. We were also actively investing throughout the year, investing in two new platform businesses and making four follow-on investments into portfolio companies to support both acquisitions and organic growth.
We returned a total of £230m to investors during the year received from exits, refinancings and interest payments. All three successful exits were to UK mid-market private equity firms, providing further evidence of the strength of our model: investing in businesses too small for mid-market private equity, working to sustainably grow portfolio companies organically and through M&A, and exiting as they reach greater scale.
Our headline exit of 2021 was Outright Games, sold to EMK Capital, achieving an exceptional return of 12.7x for Rockpool investors in August. We also achieved an excellent outcome from the sale of Hartley Botanic to Alcuin Capital Partners in May for a 5.7x equity return, and from the exit of long-standing portfolio company Airedale Catering Equipment to Rubicon Partners for a 4.4x equity return in June.
New platform businesses
Buy-and-build and acquisition-led growth are an important element of the Rockpool thesis and in 2021 we were pleased to add two new platform businesses.
In January, we invested in EA-RS Fire Engineering Group, providing acquisition finance to support the company’s buy-and-build strategy. EA-RS is a market-leading fire safety and security business offering fire detection, suppression, servicing and maintenance. The EA-RS team, joined by experienced chair Andrew Aylwin, had already proved its ability to acquire and integrate businesses in this fragmented industry.
Rockpool’s minority investment has allowed EA-RS to grow into new geographies and verticals; in November, we invested a second larger follow-on round into the company to capitalise on further acquisition opportunities. Deploying Rockpool’s capital to make 5 acquisitions and with more in the pipeline, run-rate EBITDA is already over £6.5m compared to £1.6m in 2020.
Rockpool’s deal-by-deal model allows us to invest across a diverse range of businesses. In October we made our first investment in the legal tech sector, providing equity release and acquisition capital to acquire a majority stake in Manchester-headquartered MMA Digital. The company is a market-leader in generating and qualifying online leads for law firms and has grown revenues almost 5x since 2018. We look forward to working with CEO & Founder Dez Derry on future organic and acquisition-led growth.
Supporting portfolio companies with further funding
As the UK and world economy began to recover from the Covid-19 shock, our flexible funding model was able to react, supporting portfolio businesses with fresh capital to take advantage of the economic upswing.
We provided further capital to our 2019 investment Fortus Group, alongside debt finance from AIB to allow the business to acquire Enterprise Security Distribution and Re:Sure Monitoring in March. The acquisition of Enterprise significantly scaled up Fortus’ UK presence and Re:Sure brought recurring service income into the group alongside the core security systems distribution revenue.
In May, our portfolio company Cambridge Maintenance Services, a provider of mechanical and electrical maintenance, compliance and testing services, acquired Acorn Engineering Group. Rockpool investors provided further capital with Clydesdale Bank providing senior leverage. The acquisition of Acorn widens CMS’s geographical offering as well as adding new sectors to the group.
Despite the impact of Covid-19 on travel, our pet and housesitting platform business, TrustedHousesitters was profitable through 2021. We were delighted to invest further in the business in August to give the company the financial resources needed to capitalise on the recovery in the travel sector. Revenue is now significantly higher than pre-Covid 2019 levels and the business expects further strong growth in 2022.
In December, we invested further funding into portfolio company Rooftop Cinema Club providing growth capital for the roll out of new open air cinema sites in the US. Rooftop 2021 sales were 70% higher on a like for like basis versus 2019.
Finally, portfolio company MomentumABM acquired Boston-based ITSMA which has added significant scale to the US operations of the business.
Team promotions and growth
2021 saw continued developments in our investment team with both Darran Green and Guy Ellis promoted to Partner, and Ben Hutchinson to Investment Director. We congratulate all three for their outstanding contributions to the firm, with particular credit to Ben for his role leading the growth and sale of Outright Games.
In 2022 we expect to expand the Rockpool investment team further, as well as add to our relationship team that supports our ever-growing base of investors. In 2021, our relationship team increased our investor base by 18% as more high net worth investors became aware of Rockpool’s track record of delivering returns.
2022 is likely to be a very active year for Rockpool
This year looks likely to be another busy one as we are currently working on our next buy-and-build platform investment, in the IFA market, as well as commencing a number of sell-side processes. Many of our portfolio companies are also in discussions to acquire competing businesses in their respective markets. We look forward to sharing the details of these as the transactions complete in 2022.
