Cairngorm: Brexit drives UK businesses towards PE

The London-based firm has bolstered its investment team with two appointments after opening an Edinburgh office.

UK businesses owners could be more open to private equity ownership amid Brexit concerns.

“Brexit can be an important swing factor in entrepreneurs’ decision to sell a business,” John Naylor-Leyland, managing director of London-based private equity manager Cairngorm Capital, told Private Equity International following the launch of its new Edinburgh office.

“What we are seeing is a gradual shift in the risk appetite of founding entrepreneurs and we look to support transactions to their benefit.”

The firm – which seeks majority positions in industrial businesses such as manufacturing, distribution and services – is ready for such a shift, having bolstered its investment team in January with the appointment of Lucy Graham as investment director and Panita Vongkusolkit as investment manager. Graham most recently served as senior corporate finance partner at Clydesdale Bank and will be based in the Edinburgh office, which opened late last year.

“It’s fair to say the competition [in Scotland] is less intense than some of the regions across England,” Naylor-Leyland noted.

“[However] good businesses have a fair value and we’re not investing in Scotland because it’s cheaper. It represents close to 10 percent of UK GDP and has a rich heritage of industrial and manufacturing, so we believe there are very strong businesses that we can use as a platform to boost their geographic reach or customer proposition.”

Private equity doubled its spending in the UK last year following a post-Brexit referendum lull in deployment. UK private equity-backed buyouts totalled €27.1 billion across 181 transactions in 2017, up from €14.7 billion across 188 completed deals the previous year, according to data from CMBOR at Imperial College Business School, sponsored by Equistone Partners Europe and Investec Specialist Bank.

Cairngorm is investing its second fund, a £107.5 million ($148.2 million; €121.3 million) 2017-vintage that includes commitments from two US endowments, two European institutional investors and the firm’s management, Naylor-Leyland said.

The firm has completed 10 proprietary deals across four portfolio companies since 2015.