The EPE Capital business typically invests up to £20m into UK SMEs, partnering with management and entrepreneurs to create value over the long term via its AiM traded private equity investment fund, EPE Special Opportunities plc ("ESO plc"). EPE Capital also seeks to invest in early stage opportunities through its separate strategy, EPIC Adventures.
ESO plc is an AIM-quoted private equity investment company. The Company's objective is to provide long-term return on equity for its shareholders by investing primarily in UK-based SMEs. Since 2001, the Capital division of EPE has made 37 platform investments.
EPE believes in developing certain investments over the very long term in order to maximise value. The quoted structure of the Company facilitates prolonged holding periods. EPE intends to continue to develop ESO plc as a private equity investment company focussed on long-term capital gain. EPE targets growth, buyout, special opportunities and distressed transactions at attractive in-prices. EPE uses proprietary deal sourcing approaches to identify opportunities, as well as actively engaging with the wider advisory community to communicate ESO plc's investment strategy. The Company will continue to target the following types of investments:
Growth, Buyout and Pre-IPO: leveraging EPE's investment experience, contacts and ability. The Company is particularly focused on making investments in sectors where the opportunity exists to create a unique asset via the consolidation of a number of smaller companies, taking advantage of the lack of liquidity in the SME market and the attraction to secondary buyers of larger operations.
- Special Situations: investment opportunities where EPE believes that assets are undervalued due to specific, event-driven circumstances and where asset-backing may be available creating the opportunity for recovery and significant upside. Target companies may or may not be distressed as a result of the situation. EPE will aim to use its restructuring and refinancing expertise to resolve the situation and achieve a controlling position in the target company. ESO plc seeks to acquire distressed debt, undervalued equity or the assets of target businesses in solvent or insolvent situations.
- Private Investment in Public Equities ("PIPE"): ESO plc may consider making investments in smaller quoted companies, primarily those listed on AIM. The Company will either seek to acquire and de-list the target company or take a large minority interest in the target company whilst retaining the listing. ESO plc may offer shares in the Company as all or part of the consideration for such investments.
- Special Purpose Acquisition Companies ("SPAC"): ESO plc may consider making investments in listed companies which have been established to acquire other companies. EPE intends to work with management teams to develop acquisition strategies in advance of the listing of a SPAC, at which point the Company would invest. The subsequent acquisition or acquisitions may be funded through further equity raises directly into the SPAC. The strategy seeks to take advantage of EPE's combination of experience in both the establishment and management of listed companies and private equity investing.
- Secondary portfolios / LP positions (secondary or primary) / EPE Funds: ESO plc has access, via EPE's Placement division, to opportunities to invest as a limited partner in various private funds on preferential terms. On occasion, the Company may seek to take advantage of these opportunities. EPE's experience is well suited to the requirements of co-investing in funds.
ESO plc will consider most industry sectors, including consumer, retail, manufacturing, financial services, healthcare services and media. ESO plc targets companies with strong fundamentals, including defensible competitive positioning and high levels of cash generation, and seeks to partner with outstanding management teams to combine operational and financial expertise in each investment.
ESO plc aims to invest between £2 million and £20 million in each portfolio asset. Investments are structured as both debt and equity instruments to generate returns through yield (targeting 5% to 15% per annum) as well as capital gain. Whilst in general ESO plc aims to take controlling equity positions, it may also decide to develop companies as a minority investor. Occasionally ESO plc may consider investments of less than £2 million. For investments larger than £10 million, the Company may source co-investment from third parties or may raise additional capital via public market fundraisings.
As demonstrated in the past, the portfolio may be concentrated, numbering between two and 10 assets at any one time.
EPE also runs an early-stage growth capital strategy called EPIC Adventures.