Having invested in a purveyor of climbing equipment, perhaps it should come as no surprise that YFM Equity Partners enjoyed success in scaling GO Outdoors to become one of the UK’s largest outdoor retailers. But with an unusually long investment period – 18 years to be precise – the path to success was far from easy.
Although YFM does not claim to be an expert in retail, the firm was drawn to the fledgling GO Outdoors by an impressive management team. In 1998, the firm invested from its British Smaller Companies Venture Capital Trust, a 1996-vintage with a net asset value of £83.7 million ($113 million; €95 million) as of June 2017.
“We thought there was a really good combination here of an entrepreneur and a guy who was actually running the first store and was a real expert on all the retail disciplines of running that store,” says Paul Cannings, director at YFM.
After several years of growth, GO Outdoors opened a new branch through the acquisition of a rival, rather than organic expansion as the company had initially planned. When this store proved the concept could be applied on a wider scale, the business grew dramatically.
An ambitious expansion strategy demanded greater manpower and YFM took pride in its ability to introduce the right people for the job.
The first move was to recruit second-tier management and utilise direct secondment to shed light on financial controls. By the end of its investment in 2016, neither founder was in the same position as when they started – the original chief executive had moved to a procurement role and new finance and operations directors had been added.
“In most of the businesses we back, we’re backing them to at least double or treble in size,” Cannings adds.
“One of the things that brings with it is that their governance systems [and] … the senior team needs to scale up with the business. And so if nothing else there were a lot of new people behind the board over the course of our investment.”
In the years prior to ubiquitous internet capability, capturing consumer data was a difficult task. For GO Outdoors this all changed when YFM’s then-portfolio director returned from a visit to the US with the idea of a store membership card that would entitle customers to discounts and facilitate personalised marketing. The firm later used its connections to introduce David Cox, former chairman of online retailer Wiggle, to the GO Outdoors board in order to help with the firm’s web strategy.
In 2011, the business sought to accelerate its growth. A process run and co-ordinated by YFM delivered an investment from 3i, with all the main shareholders realising a proportion of their equity.
Five years later, an exit to JD Sports was agreed at a 37x multiple. What had started as a modest camping retailer operating from a single branch in Sheffield now had 58 branches, a 30 percent market share of the outdoor clothing market and annual revenues of £250 million.
“[This was] not a straightforward journey but after a … strategy reset, YFM supported the company’s vision to be a game changer in the market for outdoor clothing and equipment,” says judge Katja Salovaara.
Large-cap: The Carlyle Group – Vogue International
Upper mid-market: Cerberus Capital Management – Bowlmor AMF
Lower mid-market: Francisco Partners – Paymetric
Small-cap: The Riverside Company – YourMembership
Upper mid-market: ShawKwei & Partners – YongLe Tape
Lower mid-market: Advantage Partners – Hisense Broadband Multimedia Technologies*
Small-cap: Mekong Capital – Mobile World
*Hisense is not included in the write-ups due to confidentiality issues