Investment Completion: Mode Print Solutions
7 August 2018
Fast-growing print services company secures £8.1m from Connection Capital’s private investor clients in £20.5m MBO
Connection Capital clients have put forward £8.1 million in private equity funding to support the £20.5million MBO of a highly profitable managed print services company, in a deal executed and managed by Connection Capital, the specialist private client investment business. Debt facilities of £11m have been provided by Clydesdale Bank.
Hertfordshire-based Mode Print Solutions Ltd provides hardware, software and remote and onsite support for printing needs to SMEs across London and the South East.
The company currently has a diversified client base of around 700 customers on long-term contracts, with a very high retention rate of over 92%, giving it highly reliable income and providing an attractive risk profile for Connection Capital clients.
Connection Capital says its rapid recent and potential future growth were also very appealing from an investor standpoint. Established in 1995, Mode’s business model has been transformed since CEO Robert Clarke joined the business in 2013, with net earnings (EBITDA) increasing from £415,000 five years ago to £3.6m last year.
Several innovations are key factors in this impressive performance:
- Sophisticated sales function – the company has built a market-leading sales process, based around a “Mode Sales Academy” model, which takes school or college leavers with no previous experience and enrols them into a structured training programme with clear career progression opportunities.
- Simple, 5-year contracts - in 2014 Mode launched a pioneering single “Simple” contract which combines both equipment and servicing, replacing the traditional equipment leasing agreement and separate service contract that had previously been standard in the market. These agreements remove the risk of competitors “breaking in” to customer relationships by offering to buy-out equipment leases mid-term.
- Excellent customer service – by focussing on London and the South East area, Mode’s average call-out time is just 71 minutes from call-out to an engineer arriving on site, whereas next-day service level agreements (SLAs) are the industry norm.
At the same time, positive underlying market drivers such as the move towards cloud computing, improvement in quality of printing equipment and the increased ability to remote fix in a networked print environment provide opportunities to further grow both margins and sales.
The existing management team will now be supported by an experienced Non-Executive Chairman (NXC), Richard Cottrell, a Connection Capital investor client. His career includes senior roles at major print services and wider technology businesses and he has led multiple private equity-backed MBOs.
Miles Otway, Partner at Connection Capital comments, “Mode ticks all the boxes we look for in a private equity investment prospect: it’s a fast-growing, high-margin, very well-run business led by an impressive CEO, with real upside potential in a market with strong dynamics. It’s no wonder it was such a hit with our clients.”
“The existing management team has done an excellent job of professionalising the business: winning sales by training its team with rigour, retaining customers through a differentiated and straightforward standard contract, and securing a high proportion of renewals through exceptional customer care.”
“We’re delighted that the team’s drive and expertise will be supplemented by a new value-added Chairman who will bring invaluable insight and experience to strengthen the business even further.”
Robert Clarke, CEO of Mode says, “This is a very exciting moment for us – we have put so much into growing our business over the last five years and with Connection Capital’s backing we have good grounds to achieve our ambitions for the next five and beyond.”
“Having a Chairman of Richard’s calibre on the board will be a vital aid to our progression. Securing private equity investment from Connection Capital gives us access, not just to the finance we need, but to expert guidance and practical support as well to help us succeed.”
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