Bridgepoint seals 2.5x ERM exit

Bridgepoint has more than doubled its investment in consultancy Environmental Resources Management following its sale to private equity peer Charterhouse Capital Partners.

Bridgepoint has sold its 57 percent stake in Environmental Resources Management to Charterhouse in a deal which values the business at $950 million. It purchased the company six years ago from another private equity firm, UK-listed 3i Group.

ERM is a global provider of environmental, health, safety and social consulting services, and employs more than 3,600 staff in 40 countries.

Bridgepoint said its investment in the business has generated a return in excess of 2.5 times. It was the first investment made using capital from Bridgepoint III, the company’s 2005 vintage €2.5 billion buyout fund, and is also the first to be realised, a spokesman said.

The firm had mandated Goldman Sachs to manage an auction of the company, but Charterhouse, which had been eyeing the company for several years, pre-empted that process with an offer for the business, a source close to the process said. Charterhouse declined to comment. Weil Gotshal & Manges, Ernst & Young and LEK Consulting also provided advice to ERM and Bridgepoint on the deal.

The price paid by Charterhouse represents a 12.5 times multiple to the company’s earnings before interest, tax, depreciation and amortisation to March 2011 of $76 million, a source close to the deal said. The multiple obtained was due to the company being a pure-play consultancy with a very specific focus, meaning it was able to command a higher multiple than more generalist consultancies, the source said.

Charterhouse has acquired a 65 percent stake in the business, with Bridgepoint selling its entire 57 percent holding and the company’s partners, who number more than 400, selling some of their stock. Almost all the ERM partners have re-invested in the company as part of the buyout.

ERM has grown to a size and leading market position that makes this the ideal time for Charterhouse to make an investment

Stuart Simpson

Stuart Simpson, a founding and senior partner Charterhouse, said: ‘We have followed the progress of ERM with interest for a number of years. The company has grown to a size and leading market position that makes this the ideal time for Charterhouse to make an investment in the significant growth potential of this world-class business.”
Bridgepoint acquired its stake in the company from 3i in 2005 in a deal valuing the company at $535 million. 3i had invested $98m in ERM in 2001 in a deal valuing the company at $356 million.

In 2005 at the time of the Bridgepoint acquisition, ERM had delivered ebitda of $38 million. Under six years of Bridgepoint ownership, revenues and profits at ERM increased by more than  50% as the company concentrated on core markets including oil & gas, natural resources and power, while also broadening its strategic focus to higher growth sub-segments such as the Asia Pacific region. That region now represents a major part of ERM’s business, with its team there having doubled revenues and quadrupled profits, a source said.