Project Vanguard – investment pack and application
Co-invest with WestBridge in £22 million MBO of successful, profitable and fast-growing B2B healthcare business
This is an opportunity to co-invest with award-winning private equity house WestBridge Capital (“WestBridge”) and other institutional investors to support the £22 million management buyout (MBO) of Bespoke Health & Social Care Limited (“Bespoke”).
Founded in 2011, Bespoke is an established profitable healthcare business which specialises in delivering complex care to severely disabled patients within their own homes. Bespoke’s clients are the NHS Clinical Commissioning Groups (“CCG”).
Impressively, Bespoke has grown its revenue at a 3-year CAGR of 25% (FY16–FY19). In the last financial year ended in December 2019, it generated revenue of £14.5 million and EBITDA of £2.5 million, forecast to reach £3 million this year. Note, this is not guaranteed and past performance is not a guide to the future.
In June 2020, WestBridge II (“the Fund”), a private equity buyout fund, invested £9.6 million to support the £22 million MBO and committed a further c.£7.9 million to support a buy and build strategy.
Of this total funding, the Fund is now making £1.3 million capacity available to its select group of strategic co-investment partners (typically, family offices). Wealth Club has an exclusive allocation of £700k.
Through a combination of loan notes and ordinary shares, investors target gross returns are 38% IRR and a 3.2x money multiple (assuming no multiple arbitrage), with further potential upside available from the execution of an accelerated buy and build strategy – high risk and not guaranteed. The business operates in a highly acquisitive market; it has the potential to be attractive to many active trade and private equity buyers, providing the business can scale as it plans to do –not guaranteed. Experienced investors should form their own view.
This private offer is only available to individual experienced investors through Wealth Club – representing a rare and exclusive opportunity to access private equity.
The minimum investment through Wealth Club is £25k, of which 55% will be required at outset, with the remainder subject to several drawdown notices to fund planned acquisitions – the first one is expected in Q1 2021.
Interested investors may wish to act quickly as this deal will close on 24 September and is expected to fill quickly. Please read the investment pack very carefully before you start your application.
Read important documents and apply
How does the application process work?
- You start and submit the application online
- Before you can make your payment, you will need to send proof of ID. This is required to enable Capital Law to perform Anti Money Laundering checks and accept your funds. Please provide a copy of a valid full UK Passport or a copy of a valid full UK or Northern Ireland photocard Driving Licence – you can email a scanned copy or photograph to [email protected]
- After you provide proof of ID, you will receive the bank details you should use to make your payment
- Once your funds have been received, to complete the process, Capital Law will send you the final form and pre-filled application and deed and declaration of trust for printing, signing and witnessing, for return to Capital Law
Please remember, this deal will close on 24 September and is expected to fill quickly. The deadline applies to cleared funds and all signed documents returned to Capital Law. If you have any questions or require assistance, please contact us.
- Co-invest with Westbridge, experienced PE firm with a strong track record of delivering investor returns – note past performance is not a guide to the future
- £22 million MBO appears to be attractively priced
- Already profitable underlying business with significant growth potential operating in a fragmented market
- WestBridge has committed significant follow on capital to fund buy and build strategy
- Forecast sales of £60 million and EBITDA of £10 million in 5 years – not guaranteed
- Target returns of 38% IRR / 3.2x money multiple, through interest-bearing loan notes and ordinary shares – high risk and not guaranteed
- Loan note interest of 12.5% – 10.0% is expected to be paid quarterly once bank covenants allow (estimated in 2 years time). The remainder of the 12.5% will be rolled until exit – interest is variable, paid net of 20% withholding tax and not guaranteed
- Deal expected to qualify for investor relief (10% CGT – note, tax rules can change and benefits depend on circumstances)
- Exclusive: private equity deals are usually difficult for individual investors to access
- Limited capacity – £700k Wealth Club allocation
- Single company deal with no diversification, high risk
- Minimum investment £25,000 (55% payable upon subscription, remaining 45% payable later to fund acquisitions)
- Limited time offer – deal must close 24 September
This overview is based on the information available in the offer documents prepared by Westbridge. Wealth Club has not reviewed or verified the information included, the company forecasts or the deal details. Please read the full investment pack carefully to form your own view and ensure you wholly understand the potential benefits and risks.
Based in Nottingham, Bespoke was founded in 2011 by Paul Sais to provide bespoke care packages outside the hospital environment (e.g. in the patients’ own homes) where care can be nurse-led and delivered by trained care staff.
Bespoke provides ‘care-at home’ services to high acuity patients (meaning they need close or vigilant additional nursing) in two distinct sectors of the healthcare market:
- Firstly, to individuals with acute physical needs, typically brought about by spinal or brain injuries. This is funded through the Continuing Healthcare budgets of the NHS, and currently comprises the majority of the Company’s revenue stream.
- Secondly, to individuals with severe learning disabilities. This is typically funded through the NHS’s Transforming Care Initiative budgets.
Bespoke’s customers are the NHS Clinical Commissioning Groups, responsible for commissioning care packages for patients in their respective regions. The business has built long-term relationships with many CCGs and established a strong reputation for quality of care, particularly at the higher acuity end of the market. Consequently, Bespoke’s portfolio of care packages is geographically diversified across the UK, currently consisting of 137 individual clients spread across 58 CCGs. Bespoke derives long-term recurring revenue from its customer base.
Turnover and EBITDA for the year ended 31 December 2019 were £14.5 million and £2.5 million, respectively. EBITDA for this current year is on track for £3 million (not guaranteed). The business has demonstrated strong growth: revenue has grown at a 3-year CAGR of 25% (FY16-FY19). This was driven not only by an increase in the total number of clients being cared for but also through higher average value of care packages, i.e. by establishing higher care hour requirements, margins and chargeable hourly rates.
The business is regulated by the Care Quality Commission and the last inspection rated it as “Good”. Currently, there are 50 full-time employees and 571 carers.
Bespoke is capital-light and cash generative. The business plans to use follow-on capital to execute the buy and build strategy.
Growth plan – buy and build strategy
WestBridge believes the Company is well placed to achieve further significant growth. It believes the business could scale to £30 million by continuing to grow its existing operations organically, and double this through acquisitions.
The plan is to make up to 4 acquisitions and grow turnover to approximately £60 million and EBITDA to £10 million over the next 5 years. Timeframes and forecasts are not guaranteed.
The findings from commercial due diligence commissioned by WestBridge suggest there are strong fundamental market prospects for both the core Continuing Healthcare (CHC) funded activity (i.e. caring for people with complex health needs in their own homes rather than in hospital) and that of the Learning Disability and Autism (LDA) service of returning people with challenging behaviours from hospital to their own homes under the Transforming Care Initiative (TCI).
This remains a fragmented market, which could support consolidation and a buy and build strategy. Remember, though, it is for experienced investors only and capital is at risk.
Bespoke has demonstrated resilience during the Covid-19 pandemic and is currently on track to achieve its FY20 budget. Trading is tracking £0.4 million and £0.3 million ahead of budget (turnover and EBITDA respectively) for H1 FY20.
WestBridge has been monitoring the effects of the lockdown and virus itself on the business during the pandemic. So far, one service user has passed away as a result of the virus, and a few are self-isolating and refusing treatment. Around 90 (out of Bespoke’s c.500 zero-hour contracted) carers self-isolated during the initial lockdown, but this number has since declined. The impact on the performance of the business to date has been limited, as any lost care hours were replaced by CCGs looking to free up more hospital beds by transferring those who can be cared for at home back into the community with the support of organisations like Bespoke.
WestBridge II (“the Fund”) and co-investors invested £9.6 million to support a £22 million MBO, which completed in late June 2020, following an extensive review covering legal, financial, commercial, management and operational due diligence.
The Fund has committed a further c.£7.9 million of follow-on capital to support a buy and build strategy.
Of the Fund’s invested and committed capital, up to £1.3 million is being made available for co-investment.
Investors capital will be deployed into a mix of interest-bearing loan notes and ordinary shares. Loan note interest of 12.5% gross is expected to be earned on the loan notes. 10% of this will be paid quarterly as soon as bank covenants allow, currently forecast in 2 years’ time but not certain. All unpaid interest will be rolled until exit.
The buy and build investment case suggests returns of 38% IRR and a 3.2x money multiple (assuming no multiple arbitrage), with further potential upside available from the execution of an accelerated buy and build strategy – not guaranteed. The first bolt-on acquisition is currently planned for Q1 2021.
A select group of institutional investors have invested alongside the Fund via a co-investment vehicle. Wealth Club is the only service through which experienced individual investors can access this deal.
Minimum investment through Wealth Club and drawdown
The minimum investment through Wealth Club is £25,000.
Please note: 55% of your total investment will have to be paid on subscription with the remaining 45% paid upon receipt of a series of drawdown notices to fund the anticipated acquisitions.
Drawdown notices will give investors 15 working days to pay the allocated amount. Should an investor fail to make the payment within the timeframe, their shares and loan notes will be transferred to the WestBridge Fund at cost.
Target returns and exit options
If the business can scale and execute its buy and build strategy, it could be highly attractive to a trade or a larger PE buyer. Secondary buyouts are well known in the sector. If it can achieve this, the target returns for investors is 38% IRR, equivalent to a multiple return of 3.2x – not guaranteed.
Exit options, returns and timeframes are not guaranteed.
The core operational management team has considerable depth of experience in the market and together form a strong, coherent and knowledgeable team.
The team is complemented by a high-calibre executive chairman with directly relevant sector experience, having been CEO of Healthcare Australia, a Deutsche Private Equity backed healthcare staffing business, and City and County, a domiciliary and complex care business for Sovereign Capital and Graphite Capital. He also has extensive M&A experience, leading and completing numerous acquisitions while CEO at City and County, and will be key in driving and delivering Bespoke’s buy and build plan.
Since completion, the business has recruited an extremely experienced director to professionalise its operations and make Bespoke acquisition-ready.
The management team and executive chairman have invested in the MBO, aligning their focus towards building a significant business.
The founder will remain in the business and is incentivised by equity growth in the ongoing business as well as satisfying the requirements of the deferred consideration payout.
WestBridge – manager and track record
WestBridge has proven experience of supporting and creating value in small-cap UK buyouts; its four directors have 25 years each in PE – a combined 100 years.
WestBridge invests in B2B companies operating in growing niches – specifically, companies generating £2-5 million profit and led by ambitious management teams.
It has £140 million of capital to invest in small-cap UK buyouts.
The UK small-cap market is a historically successful, yet currently underpenetrated, segment. The UK has over 15,000 SMEs, generating £1–3 million EBITDA per year.
WestBridge believes their target segment benefits from VCTs being prohibited from the MBO market; and successful small-cap incumbents increasing their assets under management (AUM) and vacating the segment.
At Bespoke, WestBridge will hold a Board position and has the normal controls in place expected in a standard MBO transaction.
Risks – important
This, like all investments available through Wealth Club, is only for experienced investors happy to make their own investment decisions without advice.
Private equity investments are high risk so should only form part of a balanced portfolio and you should not invest money you cannot afford to lose. They also tend to be illiquid and hard to sell and value.
Before you invest, please carefully read the full investment information pack, which contains further details on the considerable risks, alongside the Wealth Club Risks and Commitments.
The full investment information pack includes details of the fees payable to the fund and priority of returns, Nominee terms and timing and mechanics of the drawdown notices. It comprises the following documents:
- Pre-completion memo
- June Quarterly report
- Deed and Declaration of Trust (draft final form)
- Application (draft final form)
You must read all the documents carefully and understand your obligations and the consequences of failing to action a drawdown notice before you start your application.
The investment documentation and the private equity style structure of the investment is designed for very experienced investors only. If you are not sure you should seek expert advice.
This is a single company offer – there is no diversification. You could lose the whole amount you invest.
The value of tax benefits depends on circumstances and tax rules can change. The deal should qualify for investor relief but you should take your own advice.
Investors are investing in the company directly via a nominee structure managed by WestBridge.
WestBridge will charge:
- 4% of funds drawn down either at completion or subsequent drawdowns
- 2% of drawn down capital on the earlier of exit, the second anniversary of the capital being drawn from investors. This fee is typically deducted from loan note interest payments.
WestBridge will share these fees with Wealth Club: they will pay 2% of the full investment amount (the fees will be deducted from subscription). There are no other fees paid to Wealth Club.
In addition, Westbridge will charge carried interest on the investment at exit of 20% of the realised gain calculated after deducting of all invested capital and fees.
You should read the full investment information pack for a list of all fees payable to WestBridge.
Investors should note their investment will be made using a nominee structure via WestBridge Nominees.
WestBridge is a leading small-cap buyout firm with a strong track record of driving shareholder value and delivering attractive returns.
Bespoke, the company it has bought out for £22 million, is already profitable and appears to have strong growth potential whilst operating in a market ripe for consolidation.
A private equity deal of this type is usually very difficult for individual investors to access unless they are able to commit significant sums – so this offer represents a rare opportunity, in our view.
Experienced investors should ensure they have read and understood all the documents in the investment pack. They should then start their application online below, and pay 55% of their total investment amount to Capital Law.
To complete the process, Capital Law will send the final form and pre-filled application and deed and declaration of trust to investors, for printing, signing and witnessing, for return to Capital Law. You should be aware the documentation will need to be turned around promptly: the deadline is 24 September 2020.
Read important documents and apply
Wealth Club aims to make it easier for experienced investors to find information on – and apply for – tax-efficient investments. You should base your investment decision on the provider's documents and ensure you have read and fully understand them before investing. This review is a marketing communication. It is not advice or a personal or research recommendation to buy the investment mentioned. It does not satisfy legal requirements promoting investment research independence and is thus not subject to prohibitions on dealing ahead of its dissemination.
- Private equity / MBO
- Target raise
- Minimum investment
- Target IRR
- Final close
- 24 Sep 2020