Portfolio: Private Equity: Exit

Virgin Wines

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In November 2013 our clients made an equity investment to support the MBO of innovative online D2C wine retailer Virgin Wines.

The company achieved significant growth during the investment period and the exit, via IPO in 2021, generated a gross return on investment of 7.6x money.

Investment highlights

  • Date of investment2013
  • SectorOnline retail
  • StatusExited February 2021
  • Return7.6x gross
  • Investment typeMBO
  • Revenue£35m
  • EBITDA£2.5m

The company

Founded in 2000, Virgin Wines has grown to be one of the largest D2C online wine retailers in the UK. It has a reputation for supplying the highest quality product, outstanding levels of customer service and innovative ways of retailing. It is loved by its loyal customer base.

In November 2013, alongside our co-investment partner, we backed the incumbent executive management team led by Jay Wright to buy the business from Direct Wines.

Investment rationale

Virgin Wines offered all the characteristics of a high quality online e-commerce platform with customer schemes that delivered quick ROI, high gross profit margins and strong cash conversion. The management team were exceptionally talented and motivated and we believed there was a significant opportunity for the business to grow market share. The combination of these factors presented an attractive investment opportunity.

The exit was anticipated to be either a secondary financial sponsor, or a strategic acquirer looking to broaden their customer base and add scale, or to a company wanting to add a leading e-commerce platform to get closer to customers.

The exit was anticipated to a either a secondary financial sponsor, or to a strategic acquirer looking to broaden customer base and add scale, or a business looking to add a proven e-commerce channel to enhance customer engagement and grow a larger share of the customer wallet.

Growth strategy

The company grew significantly over the seven year investment period by tactically recruiting customers into lower attrition schemes, and by focusing on core competencies at the heart of the Virgin Wines proposition to deliver industry leading margins.

A focus on deep data analytics across the company played a vital role to ensure wines are carefully curated to match customers’ taste preferences, customer acquisitions costs are kept low, operational excellence is consistently achieved. Emphasis on these core areas were identified as key value drivers and enabled the company to capitalise on trends in e-commerce, subscriptions schemes and drive towards better customer experience, ultimately culminating in market leading growth.

How we worked with management

For the first few years post-investment the business performed well, but below its business plan. By working closely with management over a sustained period, and through open and honest dialogue, a plan was developed to boost the medium term performance. This included some tough decisions involving: key recruitments in second tier management, a change of NXC, and considerable investment in IT/CRM and marketing to deliver a coherent strategy which prioritised the recruitment and retention of customers who would become long term, repeat purchasers.

This additional cost depressed short term profitability, but we stood shoulder to shoulder with management in our joint conviction that the patient approach, working with a management we believed in, would be best for value creation long term in the business. This proved to be the right approach.

Exit

As at February 2021, Virgin Wines had grown from £35m of sales to nearly £70m, tripled EBITDA and was experiencing very positive trading momentum.

It had achieved good growth pre-Covid, driven by investment in web and digital marketing, and the transition of customers into lower attrition schemes. The company then experienced rapid growth during 2020, this led to a significant uplift in trading performance, and a decision was taken by shareholders to seek a realisation.

"They understood what we were trying to achieve, we got on well and believed in their people. We loved their enthusiasm and passion for our business."

Jay Wright, CEO of Virgin Wines

The exit

As at February 2021, Virgin Wines had grown from £35m of sales to nearly £70m and was experiencing very positive trading momentum.   

It had achieved good growth pre-Covid, driven by the investment in web and digital marketing, and the transition of customers into lower attrition schemes. The company then experienced rapid growth during 2020, this led to a significant uplift in trading performance, and a decision was taken by shareholders to seek a realisation. 

The company was successfully listed on AIM on 2nd March 2021, the IPO delivered a full exit for Connection Capital clients and a return multiple of 7.6x. The IPO provides a great platform for Virgin Wines to execute its ambitious growth plans, win more market share and drive shareholder value. 


Virgin Wines Deal Team

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