Pantheon, HarbourVest profit from £700m industrial deal

The two investor groups' decision to back an unusual deal set up by a Scotland-based industrial group in 2008 has already paid dividends.

Investor groups Pantheon and HarbourVest Partners have booked a lucrative exit following the £700 million sale of Clydeunion Pumps, a Scottish firm that provides pumps used in oil and gas processing, to US-listed industrial group SPX.

Pantheon's global head of secondaries, Elly Livingstone, described it as a “outstanding exit”, even suggesting that “it may turn out to be one of the deals of the year” – although he declined to specify the firm's exact return.

The two groups provided the bulk of the financing when Scottish group Clyde Blowers bought four business units from US industrial giant Textron for $1 billion back in 2008. One of these businesses, Union Pumps, was then combined with Clyde Blowers's existing pumps business to form ClydeUnion Pumps.
 
The original Textron deal was structured in an unusual way. Clyde Blowers, a team of industrial operators, had identified four units that it wanted to buy from the US group, including Union Pumps. Having originally spoken to Pantheon about a primary investment in a blind pool-type fund, the two sides agreed to treat it instead like a secondary direct deal, based on a known group of assets; this enabled Pantheon to do extensive due diligence on both Clyde Blowers and the units in question. Clyde Blowers then set up a specific fund vehicle to do the deal, for which Pantheon and HarbourVest provided around 80 percent of the equity. With debt, the transaction totalled about $1 billion.
 
Livingstone said the quality of the team had persuaded Pantheon to invest, despite the relatively unusual structure. “We really liked the team – they were genuine industrial operators with years of experience in the area.”

Clyde Blowers was already familiar with the target business, he said, but “saw the opportunity to put more investment into the business and build up some aspects – for example its after-sales capability”. As a result, the combined group has “grown meaningfully” over the last few years; the sale to SPX suggests it is now worth more individually than all four business units put together were worth in 2008.
 
“It's a good example of private equity teaming up with industrial know-how – and utilising British manufacturing expertise and technology – to create a world leader,” said Livingstone. Clyde Blowers will continue to operate and run the three remaining business units.