ThinCats helps fund £1m MBO at Derby manufacturer


ThinCats is helping shake up a Derby-based linear vibratory systems and parts handling business with a £1m loan to fund an MBO. 

Riley Automation designs and manufactures a diverse range of linear vibratory and parts handling systems. The company’s machines are used in a wide variety of food, pharmaceutical, confectionery, packaging, electrical, electronics, and other manufacturing and process industries. 

Riley moves goods – from pills to Pringles – along production lines and can count among its customers the likes of United Biscuits and Boots. 

Saahil Dhanak, ThinCats credit analyst, said:

“Riley has a well-diversified customer base, with the firm’s top ten clients accounting for 48% of business, so there’s no great concentration of risk. 

“The very niche nature of the business is testament to what uber investor Warren Buffett calls investment motes: the industry has both a range of expertise and established contacts that make it difficult for prospective competitors to enter. The market as it stands is divided between Riley and two competitors.“ 

At more than 50 years old, Riley is also a long-standing operation with a well-established process and structure – the borrowers, Mick Sturgess and Andy Hooley, are hugely knowledgeable about the business, having been with it for 25 years each and having worked in virtually every stage of the process at some point in their careers. The pair hold all the key relationships with suppliers and customers. 

As for dealing with ThinCats, “it all went to plan,” said Mick. “We got the funding we needed, when we needed it. It’s a good option for companies trying to raise cash.” 

Saahil, added: 

“When we visited their factory, we were also very impressed with the quality of the machines and the variety of end users that they supplied. 

“There was also a reasonable level of deferred consideration and the borrowers were willing to provide a good level of personal cash and guarantees relative to what they could afford. 

“Historic performance was strong with growth evidenced, and the leverage was less than two times, which made it attractive. 

“Just so long as people want sweets in packets, pills in pots and crisps in tubes, there will be a demand for this industry." 

As to where the business goes in the future, Mick said: 

“It’s a well-established business, and we want to build on that, drawing in new customers and driving growth over the next five to 10 years. We’re also working with people in the robotics industry who require presentation of components to the robot cell. With years of experience building parts handling systems, we can offer a solution to suit their application.” 

Video footage available: