07 - Exit Notes - ITG
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Creative, constructive, disruption

What was the magic behind Equistone’s big return with marketing technology and services firm Team ITG? It was really just about people, the deal team says.

THE FAST-PACED WORLD of marketing-technology services is undergoing major digital disruption, and in that market, Birmingham-headquartered Team ITG is a true innovator.

After more than four years of investment in its tech suite during Equistone’s ownership, it has been able to enter and successfully prosecute the world’s biggest markets.

It sounds like a classic sector-specialist play, and Equistone’s experiences in the area were certainly additive. But for Paul Harper and team, their real advantage was different.

CLOCKWISE: Chris Candfield, Paul Harper and Richard Briault.

First, a spoiler alert: Equistone acquired the business in a tertiary buyout from Bridgepoint Development Capital, who made a very strong money multiple return. They, in turn, had acquired ITG from primary investors who had also made a very strong return. And in early 2022, Equistone sold the business back to Bridgepoint, providing stellar returns.

So when Equistone’s chance came to acquire the business in 2017, it was only eight years old and had already demonstrated a fantastic track record over a series of owners. Suitors were presented with a broadly fixed price – one that was seen as “relatively aggressive at the time.” But the Equistone team saw it as an opportunity to back “an incredibly successful team, with a strong founder-CEO, Simon Ward, who had a very clear vision and plan.”

Winning hearts and minds

The question that was posed to the ‘bidders’ was effectively: does this opportunity excite you and can you play a supportive role in helping us achieve our aspirations?

The ITG team had been through the private equity cycle twice before, they liked the model and the governance, and at each stage they pushed the equity further down into the business. In an unusual move, during the process, each bidding team was asked to meet with 13 members of the wider management team with the CEO and CFO out of the room.

“They wanted to know if we were going to be aligned to their vision and be a supporter and accelerator of growth.” says Paul. “They wanted us to be a commercial, entrepreneurial, energetic, but very sensible and challenging partner. They wanted to hear that we genuinely wanted to work with them, and when we expressed our excitement and appetite, it had the benefit of being true.”

Equistone did not offer the most attractive management terms, but on the basis of this strong cultural fit, personal affinity and alignment, the deal was theirs, and Equistone invested behind management’s plan. “It does sound a little unlikely,” says Chris Candfield. “But that was honestly the case.”

“Everything else was about the hygiene factors,” says Chris. “They liked our strong Midlands presence and offices in Birmingham and London; they liked our willingness and enthusiasm to do add-ons. But these were secondary to our passion for the business and management’s vision – this was number one.”

Informed judgement

Of course, knowing what good looks like in the first place takes experience and judgement. “The thing about all marketing firms is that they are very good at marketing themselves,” says Paul. “This is a market where everyone can sell the capability to do almost everything!”

To really get underneath ITG’s strengths, the team focused on core fundamentals.

Just a few months earlier, Chris had worked with Tim Swales on a potential acquisition of adm Group, an international marketing services business (a deal consummated four years later). Meanwhile, the German team had backed PIA to roll up Germany’s relatively mature market for online marketing services. These were more than calling cards. The CEO of PIA assisted in reviewing materials and even flew out to Birmingham, helping the team “compartmentalise” what ITG was really good at.

“It’s helpful to have familiarity with your end sector. It improves your level of questioning and can also help you open doors,” says Paul.

But while the deal team will get up to speed quickly, they do not like to profess expertise in other people’s businesses. “The sector experience is important, but for this deal in particular, they could have gone with a very specialised expert that was not aligned with their culture, and the outcome may have been very different.”

Rather than lead with the playbook, the team opted for genuine human connection.

ITG's founder and CEO, Simon Ward

Paul lives close to ITG’s founder-CEO, Simon Ward, and they would often meet for a late-night after-work pint at the Orange Tree, to discuss any issues, the vision, the plan and the way forward.

That plan was three-pronged. The first was to accelerate the shift, which was already underway, from print to digital. The second was to invest in and expand the technology suite. And thirdly, there was an opportunity to internationalise the business, which had just a small US and European presence servicing UK customer overseas at the point Equistone invested.

While the broad thesis held, within a few months Mr Ward uncovered an unexpected acquisition opportunity that, he believed, would “change everything” – and he offered the Equistone team a choice. The company could stick to the plan, and it would hit the plan every year, with its strong customer base and ongoing organic evolution. Or it could accelerate investment into the plan, in particular building out the tech capability and product suite (which became “CanopyCloud”), targeting the same financial destination at the end of the journey, but with a far more exciting trajectory and outlook.

In keeping with its own promises, Paul, Chris and team chose to back the CEO’s exciting vision. Equistone introduced a new chairman from its network, who was an ‘out-and-out’ software executive, to support the change of tack and give more comfort around the transition. But, Paul says, “we were never worried about it, and they delivered on what they promised.”

In fact, the business exceeded its numbers each year, partly assisted by accretive acquisitions.

Amid the tech build-up, ITG’s core business never wavered. “They had a cracking sales engine, there was always a long list of new accounts, and the team was right on the pulse of what marketeers wanted,” says Chris. “Most of this was achieved through internal referencing and word of mouth.” Indeed, prior to Equistone, the company didn’t have an outbound sales team.

Exit optionality

With a strong proprietary software suite, marketed as CanopyCloud, Equistone started looking at exit, and the team kept their options open until a late stage. Several indications of interest were received by trade and financial buyers, but in late 2021 the company began to seriously consider a listing on London’s AIM. However, a late-stage offer from Bridgepoint was enough to convince Equistone and management that a fourth private equity deal was the way to go. 

There is a great buzz around CanopyCloud in the market, but we are just at the beginning of that story.

The various offers and IPO process had given the team a strong understanding of value, so they kept the process close to their chest and, as was the case on the way in, the sellers established a valuation for buyers to meet. The deal completed in Q1 2022.

Paul believes there is much left to play for, and CanopyCloud is being adopted by global blue-chip clients. “There is a great buzz around it in the market, but we are just at the beginning of that story, so there is unfinished business there in seeing it achieve its potential.”

In the old days, that would have been called ‘leaving value on the table’. But as part of the exit, ITG became the first UK investment for Equistone’s Reinvestment Fund, taking a minority stake.

Paul also believes Bridgepoint is well placed to support ITG in taking its world-class offering to the US, a massive market for marketing-technology services. “That will be the next game changer.” 

A full version of this article appeared in PLATFORM 07, Summer 2022