Exclusive: Connection nets 8x on fire system manufacturer

The London-based firm has sold its stake for £14.1m, which could increase by another £10m dependent on future earnings.

Connection Capital, a London-based private investment business, has agreed to sell its stake in UK fire systems manufacturer Advanced Electronics to London-listed Halma, PEI has learnt.

Connection has sold its stake for £14.1 million (€17.3 million, $23.6 million), with potential deferred consideration of up to £10.1 million based on earnings growth to March 2015, Connection said in a statement.

The divestment is expected to yield Connection’s investors an 8x return, which could increase if Advanced Electronics shows strong performance. Connection Capital’s LPs also benefitted from the deal being structured under the Enterprise Investment Scheme, which ensured that the proceeds are exempt from capital gains tax.

Connection acquired a sizeable minority stake in Advanced Electronics in 2003 in order to support the company’s international expansion. The business has grown significantly and now has a team of 125 with additional offices in the US, Dubai and India. Projects to date include The Shard, Waterloo, St Pancras & Edinburgh Waverly Stations, Millennium Stadium and Westfield shopping centre. It is now recognised as a global supplier of fire systems including alarm control panels, fire systems, fire paging and suppression and extinguishing control panels which it markets in more than 60 countries.

Under Connection’s ownership, the business has grown its sales to £14.6 million in 2014, from £1.2 million at the time of investment in 2003.

Advanced Electronics was advised by PwC’s corporate finance team in Newcastle, Watson Burton Corporate Law team and KPMG Tax, whilst EMW provided legal advice to Connection Capital and other minority shareholders.

Connection Capital is a private equity investor targeting investments in UK small and medium sized companies. It’s sector-agnostic and usually invests in established businesses which have the ambition to grow. It can invest up to £10 million in each deal, but it typically invests between £2 million and £5 million.

Connection doesn’t have a traditional fund model. Its investors commit capital on a deal by deal basis, via a managed syndicate with LPs being able to invest in units of £25,000. Connection currently has over 750 private investors and family office clients, with a combined net worth of more than £7 billion and more than £150 million of assets under management. Its clients invested over £30 million during 2013 across nine deals including the management buyout of Virgin Wines.