Connection Capital commits £7m to specialist turnaround fund aimed at filling gap in the market to support UK SMEs

News: Investment News | 28 July 2022

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Connection Capital, the specialist private client investment business, has committed £7m to a specialist turnaround fund managed by leading UK turnaround manager Endless LLP.

  • Need for transformational capital on course to rise amid challenging economic headwinds
  • Fund manager Endless LLP’s investment activity has safeguarded over 40,000 jobs since 2005

The fund, called Enact III, seeks to fill a gap in the market to support UK SMEs that are facing challenges by providing fast, innovative capital solutions and hands-on expertise to transform their businesses. Its niche strategy provides funding of £1m-£10m to effect a turnaround or restructuring to either prevent an insolvency or as part of the process of exiting from one.

SMEs requiring transformational capital often find that neither banks nor traditional private equity providers are the solution as these transactions tend to fall outside their funding criteria, and/or they may be unable to meet the need for rapid execution. Deals can take less than six weeks from introduction to completion.

The lower mid-market in which Enact operates is already an under-served segment of the market and the need for turnaround capital is growing as the UK economy emerges from the Covid-19 pandemic, government support schemes end, and inflation rises. UK insolvencies were 79% higher in May than in the same period the previous year1.

As well as being able to move quickly, Endless takes an intensive approach to portfolio management, working in partnership with management teams to create value. This may include deploying Enact team members on site on a full-time basis immediately post-investment to assist with the delivery of the turnaround plan identified as part of the investment appraisal.

Since Endless was established in 2005, its investment activity has safeguarded more than 40,000 jobs, having made more than 90 investments and successfully concluded 68 exits to date. With offices in Leeds, Manchester and London, it is has a cross-industry approach and currently has £1bn of assets under management. It invests in a range of transaction types and circumstances, including turnarounds, financial/operational restructurings, disposal of non-core assets, complex carve-outs and challenging buyouts.

Connection Capital secured an allocation to the Enact III fund through its long-standing relationship with the Endless team. Previous Enact funds have performed strongly - Enact I was fully-realised within four years, generating 4x net returns for investors.

Claire Madden, Managing Partner at Connection Capital, comments, “UK SMEs are facing an extremely challenging landscape. Many banks and private equity houses focus on mature and uncomplicated companies, and there is little appetite there to support SMEs that need capital to overcome operational or strategic challenges.”

“Endless is well-placed to identify opportunities in underperforming but viable companies for the Enact III fund, helping to rebuild those businesses and protect jobs that would otherwise disappear. With corporate distress on the rise, it has the critical ability to transact quickly and the experience and expertise that SMEs urgently need on the ground. It’s this responsible, value-adding approach that has made it one of the UK’s most successful and well-respected investors in its field.”

“Many of our private investor clients are entrepreneurs and businesspeople themselves so we’re seeing a real willingness from them to support small and medium-sized businesses as they navigate the road to recovery. Endless’ excellent reputation and position in the market, formed over 20 years, should ensure a strong pipeline of investments and its track record is second to none.”

About Connection Capital
Connection Capital LLP is a Financial Conduct Authority authorised and regulated, specialist syndicator of investment funds from private professional investors into direct private equity, private debt and commercial property deals, as well as alternative asset funds. It currently has some £400 million of funds under management across a diverse portfolio. Connection Capital provides a specialist managed service to help professional clients build up their own alternative asset portfolios. Private investors self-select which opportunities they want to take a stake in. Opportunities are identified and negotiated by Connection Capital, which also carries out all due diligence and manages the investment from completion through to exit, on its clients’ behalf.

Press enquiries:
Claire Madden
Managing Partner
Connection Capital
020 3696 4010 or 07764 241476

Russell O’Connor
Headlines for Business 07760 282586

1 Source: The Insolvency Service