US corporates show appetite for Midlands business

By Gareth Iley, partner at Clearwater International

Large US corporates are continuing to invest in Midlands businesses. In a deal advised by Clearwater International, Masonite International acquired premium composite door and windows manufacturer, DW3 Products, for £70m. This provided an exit for NorthEdge Capital who acquired the business in November 2014.

The deal is Masonite’s first acquisition of 2018, its eighth in the last four years and the fourth in the UK during that period following the purchases of Performance Doorset Solutions, Hickman Industries, and Door-Stop International (another deal advised by Clearwater International).

Windows and door manufacturers have experienced considerable growth due to increased residential construction and the continuing spend on home improvements. Businesses such as DW3 are ideally placed given its focus on energy-efficient composite doors, which are also increasingly being installed into new-build properties. Companies with market-leading design capabilities, component supply chains and routes to market are highly attractive to larger international players.

Ending its acquisition hiatus, frozen food giant Nomad Foods announced that it would acquire Goodfella’s Pizza from Birmingham-based food conglomerate Boparan Holdings, for c. £200m. The transaction is subject to regulatory conditions and is expected to close in in the first quarter of 2018.

Gareth Iley, partner at Clearwater International

The frozen pizza sector is the second largest European frozen category after seafood, and one where Nomad’s presence is minimal. The Goodfella’s brand holds the number one and number two market share positions within the frozen pizza category in Ireland and the UK respectively. This will further develop Nomad’s portfolio of iconic and market leading brands which already includes Findus and Birds Eye.

Growth throughout the frozen food industry has accelerated since January 2017, due to an increase in product premiumisation. Retail sales in the UK have grown 5.4% in the past year to reach £6bn for the first time.

Nomad, which was formed in 2014 as a vehicle to consolidate Europe’s slow-growth frozen food market, has recently seen sales in its core business grow after a six-year decline. With c. £540m at its disposal Nomad is well placed to make further acquisitions.

Elsewhere, as consumers are becoming increasingly health-conscious and concerned about weight management and body image, we continue to see activity in this market. This was evidenced by BGF’s recent £10m investment in healthy eating company Muscle Food, based in Nottingham.

Founded in 2013, Muscle Food sells premium lean meats, high-protein food and sports supplements in the UK and across Europe. It attracts a loyal following of both fitness enthusiasts, bodybuilders and athletes, as well as a broader customer base of health and cost-conscious consumers. Muscle Food has seen strong growth in recent years with sales reaching £45m in 2017, up from £14m in 2015. This investment will be used to establish a second base in Europe and develop the group’s online platform to drive further growth.

BGF, is the most active investor in small and medium sized businesses across all sectors and regions in the UK. Its two recent investments in Midlands-based companies, kick started what looks to be a busy year for the investor.

Staying close to the health space, BGF’s second investment was a £10m injection into Sutton Coldfield-based CHS Healthcare (CHS), a leading national provider of specialist services for the NHS.

CHS plays a critical role in reducing delays to hospital discharge, one of the most pressing challenges for the NHS. Delays often occur because although patients are medically fit to leave hospital, they are unable to do so because of delays in choosing a care home or in arranging care in their own home. CHS specialises in arranging packages of care enabling people to return to their own home, as well as supporting people who need to choose and move into a care home.

The company currently contracts with more than 60 NHS hospitals and clinical commissioning groups (CCGs). With the funding CHS will be able to expand its infrastructure and operations, supporting the provision of services to the NHS.

Both companies join BGF’s strong portfolio of Midlands-based companies which includes The Coaching Inn Group, Rutland Cycling, and Sertec to name but a few. BGF recently strengthened its presence in the Midlands with the launch of an office in Nottingham, aiming to invest £100m in East Midlands companies.

Click here for a comprehensive list of West Midlands deals >