How private equity can help family businesses
Inflexion has been supporting family-run businesses for over 20 years, so we know a lot about their unique dynamics – particularly the need for marrying corporate goals with the culture these companies carefully cultivate. We have worked with many family businesses to address succession, support international expansion and acquisitive growth, and implement digital enhancement.
Founded in 2003 in Denmark, Astrak Group was growing impressively, expanding into the UK in 2008 and making its first acquisition in 2010 in Ireland. The undercarriage and construction parts distributor didn’t stop there: in the decade that followed, the family-run business would go on to make further acquisitions and open additional stocking locations in various locales. By 2022 it had grown to seven locations across Europe served by over 100 employees when they sought to allow other family employees to cash out.
The family chose Inflexion as their first institutional partner in March 2022 and are working together to increase Astrak’s share in its current markets whilst expanding more widely across Europe. Ultimately the buyout enabled part of the family consisting of the founding father and two sons to cash in and step back, with the rest of the family keen to drive Astrak further forward invigorated to do so – what CEO Dick Paterson describes as “the best of both worlds”.
“I knew very little about private equity but liked the concept of onboarding investors who were passionate about growing businesses. The more suitors we spoke to, the more attractive private equity became. They are asking incredibly probing and insightful questions to offer real strategic insight,” says Dick. Astrak acquired another company within 100 days of partnering with private equity, with a credit line established by Inflexion making the process a smooth one.
Another case in point is Auxadi, an international accounting, tax and payroll services specialist founded in 1979. Retaining the brand, culture and control of the business the family had meticulously built over four decades was of paramount importance to the founding Salamanca family. “We wanted a partner to financially strengthen the business as well as allow my family to realise the benefits of all my father’s hard work, recalls Victor Salamanca Jr, CEO of Auxadi,
He'd joined the family firm in 1997, when it had just 13 employees. By 2009 Auxadi had grown to 70 staff and Victor, then aged 34, took the helm, with his father becoming Chairman. Today the firm employs 270 people and generates $30 million in turnover, with Inflexion providing minority capital in 2020 to help it to grow faster whilst allowing the family to retain control.
“A private equity fund could help us to avoid problems with succession planning, maintain our heritage, and help us to strengthen our position.” The trick was finding a true minority partner – a real rarity as even the few who provide such backing tend to offer an economic minority but with legal majority rights in the back.
“When you’re trying to enter the share capital of a family-run business, you need to understand the dynamics behind their history. The company is like an additional sibling and you need to make sure you still set the rules in your own house. It’s not just about the money, but about the empathy required for coming into a family business. Ultimately Inflexion allowed us to avoid family issues while growing our business and keeping control.”
Acquisitive growth: Huws Gray
Family-run businesses can undertake transformational M&A with the right support, as Terry Owen of Huws Gray learned.
Huws Gray was established in 1990 on Anglesey, Wales, as a builders merchants on a 1.5 acre site with £200,000 of start-up capital. The firm was founded by Terry Owen and John Llewlyn Jones who grew the business acquisitively to five branches by 2000, at which time another company with five branches was available and so Huws Gray doubled its number of sites. By 2017, Huws Gray had grown to 62 branches, mostly in the North of England.
Realising the business could benefit from some succession planning and with an eye on the ultimate exit, the firm spurned an offer from a national builders merchants and instead sought an investor to help take it to the next level. Management chose Inflexion from a list of 30 investors, citing the backer’s understanding of the business, the advantages of an experienced minority investor, and the comfort given by the individuals they met.
Between the minority capital investment in April 2018 and sale to Blackstone Group in 2021, Huws Gray made over 16 acquisitions across the country, including the transformational acquisition of Ridgeons, an independently owned timber and builders merchants trading from 25 branches in East Anglia. This early acquisition significantly increased Huws Gray’s store base and broadened its national presence, making it the UK’s largest independent builders merchants. The partnership saw the number of shops and employees both double, while EBITDA grew 2.5x.
Succession planning: CTC Aviation
Some businesses can benefit from assistance with succession planning to ensure family businesses remain happily and successfully in the family. Inflexion helped CTC Aviation to do just this.
CTC Aviation was set up by Chris Clarke in 1995 and grew into a business with £7m of profits. In 2012, Chris was looking to realise some value but retain a share and some involvement. His son Rob, then COO, wanted to remain fully involved. The company also needed funding to grow further.
The business partnered with Inflexion, and together created a plan which allowed Chris to transition leadership of the business to the core management team, headed by Rob. Chris retained a stake but stepped back a bit, and the business was able to grow further.
Part of the partnership saw £10m invested by Inflexion to finance new flight simulators in the UK and new Crew Training Centres in the UK and US, facilitating new client wins and growing cadet numbers by 90%. Three years later, in 2015, the business was sold to a Canadian trade buyer, with Rob still at the helm.