By Shivani Khandekar
Foresight Group, a listed infrastructure and regional private equity investment firm, has divested its stake in Fresh Relevance, netting a 4x return.
Headquartered in Southampton, Fresh Relevance is an email marketing and e-commerce personalisation platform.
The exit has been made to Dotdigital Group, which has paid £25m (c.£18.9m in cash and c.£6.1m by the issue of new ordinary shares) for the acquisition, according to filings on the London Stock Exchange.
The firm initially invested £2.15m in the business back in 2017, and made a follow-on investment of £0.75m in 2021, through its VCT strategy.
During Foresight’s holding period, Fresh Relevance tripled revenues and created close to 40 new jobs, according to a statement by the GP.
Asked how the firm grew the value of the business, Tavia Sparks, senior investment manager, tells Real Deals: "The investment in Fresh Relevance reunited Foresight with several senior executives from its prior successful investees – SmartFocus and Orthoview. We appointed an experienced sector chair who has a good understanding of the marketing technology (martech) environment. Foresight helped to professionalise the business by introducing formal sales and marketing strategies and improved the finance function with the appointment of a formal finance director."
Fresh Relevance's recurring revenue was £1.5m at the time of Foresight's initial investment, which the firm then grew to £6.2m at exit, added Sparks.
The transaction represents the sixth exit by Foresight in 2023, according to the firm.
When it comes to the exit, Sparks says Dotdigital and Fresh Relevance have several mutual customers and had been collaborating for some time to deliver tailored solutions for end clients: “The culture of both businesses aligned and the senior teams had a good relationship. Fresh Relevance received other offers throughout the course of Foresight’s investment, however, the acquisition by Dotdigital represented a good strategic fit for both teams.”
The GP recently sold its stake in Indian restaurant chain Mowgli, achieving a 3.5x return, and R&D tax business GovGrant for a 4.5x return.
Last month, the firm held the third close for its North East Fund on £90m.
FRP served as the corporate finance adviser to Foresight, while Moore Barlow provided legal advice.
European private equity fund Capital D has acquired a “significant” minority stake in Electrify Video Partners (Electrify), a media production company that buys and grows established YouTube channels.
For creators seeking to expand their businesses, Electrify invests alongside them to help them to scale and optimise. While for creators looking to sell their business, Electrify can facilitate an exit. Since it was established in May 2021, Electrify has invested in channels with more than 30 million subscribers in total.
Elaborating on the particulars of the deal, Stephan Lobmeyr, co-founder and partner at Capital D, tells Real Deals: “Electrify consolidates and buys YouTube channels in science, history and other verticals. The money we are putting into the company will be used to acquire new channels.”
London-headquartered Electrify has close to £10m in revenues.
Through this transaction, Capital D has become the first institutional equity investor in Electrify.
While the firm did not disclose the financials of the deal, it did say the investment provides Electrify with the ability to deploy “up to $85m” in high-quality YouTube channels and creator-founded growth businesses, across the new equity commitment and Electrify’s existing debt facility.
When it comes to the timeline of the deal, Lobmeyr says: “We spoke to the company for a year and a half, and when they’d made sufficient acquisitions to be the size that is interesting for Capital D, we were able to agree on a deal.”
In Lobmeyr’s view, the company benefits from certain tailwinds. These include rising demand for social and distributed video, evidenced by increasing global viewership and content consumption, and the resultant rebalancing of media spending towards social media and digital video platforms.
The investment firm observes that the digital video ad market, at c.$58bn, is very large and expected to grow 14% annually by 2024.
“YouTube is a highly robust, stable and creator-friendly platform, given its clear and formulaic revenue-sharing model,” stresses the co-founder.
Capital D believes Electrify is an ahead-of-its-time media company because of the evolving underlying macro and behavioural trend in content consumption, as these companies become owners of increasingly valuable intellectual property, and thus represent a compelling investment proposition.
Capital D describes itself as a “next-generation” private equity fund manager.
Lobmeyr explains: “We are a next-generation fund because we actively try to identify disruptive themes that change the way an industry works. In addition, we're focusing on fast-growing and profitable companies – we acquire companies that have a minimum of 20%, but more typically 50-100% growth rates.”
Lobmeyr adds that they typically do either majority deals or significant minority investments, whereby they can influence the mid-market companies in underperformance or its future exit.
The firm invests at the intersection of macro, technological and behavioural trends, in businesses that it believes to be the winners of the disruption economy. It defines its area of investment as comprising companies with an enterprise value of €30-250m. It invests equity cheques of €20-60m and can write larger ones with co-investors.
Electrify is the second investment from Capital D Fund 2 – the Luxembourg-domiciled vehicle that held its first close last year.
Capital D, which was established in 2017, closed its first maiden fund with commitments of just under £100m.