Cabot Square Capital exits SME finance provider LDF at 2.8x


Funds managed by Cabot Square Capital, the specialist financial services private equity investor, have successfully completed the sale of small business lender LDF to US-based credit fund manager White Oak Global Advisors. 

The sale, which completed following regulatory approval, represents a 2.8x return on invested capital for Cabot Square Capital. 

Cabot Square Capital acquired LDF from Investec in 2013 and rapidly built the business up as one of the “challenger” lenders designed to fill the gap left by the reduction in lending by high street banks to SMEs. 

LDF has now made over £1bn in loans since it was acquired by Cabot. 

When LDF was bought from Investec it was a small business finance broker – over the past five years LDF has been transformed to become one of the largest non-bank lenders to the SME sector in the UK. 

The sale of LDF continues a string of successful exits by Cabot Square Capital, including:
• Centric, the SME-focused invoice finance business, to challenger bank Shawbrook (2.3x return)
• Compello Group, the debt purchasing and management firm, to major Swedish debt collector Hoist Finance (2x return)
• KRS, the retirement-focused financial services provider, to SME-focused private equity investor Phoenix Equity Partners (5x return)
• Medicx Group, the primary healthcare property investment fund, to investment group Octopus (18.5x return)
• Equitix, an infrastructure investment fund, to Amsterdam-listed alternative investment fund Tetragon Financial Group (12.3x return)
• Storage King, the UK Self Storage business, to Stor-age REIT (3.2x return) 

In 2016, Cabot Square Capital reached final close of its fifth fund, CS Capital Partners V LP, at £304.5m. The fund is continuing to invest in Cabot Square Capital’s target sectors of financial services, infrastructure and property. The fund has made five investments to date including:
• Net Zero Buildings, a design and off-site construction business providing buildings for the education and residential housing sectors
• Public Sector plc, the public sector property asset manager
• Simply Asset Finance, the SME asset finance provider
• SPF Private Clients, the property finance, insurance and wealth management provider
• Moneyfarm, the digital wealth manager 

Cabot Square expects to launch the raising of its sixth fund in Q1 2019. 

Richard McDougall, partner at Cabot Square Capital, said: 

“We are extremely pleased with the transformation that we were able to help LDF achieve.

“LDF, and other lenders like it that Cabot has partnered with, have played an important role in increasing funding to the overlooked SME sector since the credit crunch. SMEs want speed, certainty and, above all, a trusted relationship with their lending partners. LDF’s success to date is built on these attributes. 

“We are very excited about LDF’s future under its new owners. Meanwhile Cabot Square Capital will continue to bring its expertise and capital to bear on developing the next generation of SME and consumer specialist finance companies.”