Milestone’s persistence pays off

Milestone Capital Partners, the UK mid-market buyout firm, has continued its turnaround with its first acquisitions of the year and its fifth exit since jettisoning three partners last year.

European mid-market buyout firm Milestone Capital Partners has carried out three deals, making its first acquisitions of the year as well as winding down a long-term investment.

Milestone bought hygiene and beauty company Cadum from French mid-market firm CDC Capital Investissement and air freshener business Iba from its founder. It also sold its remaining stake in the listed data centre IX Europe to trade buyer Equinix.

The deals round off more positive times for the buyout firm after its problems last year, when it lost three partners, including one of its co-founders, to quell investor unrest by cutting costs.

Milestone’s investment in IX Europe rode out the changing fortunes of the dotcom industry. The mid market firm made a 2.9 times return over eight years on its original investment in IX. The firm sold its remaining 31 percent stake for £79 million ($160 million, €114 million).

The firm originally bought a majority stake in IX in 1999 shortly before the dotcom boom ended. Milestone subsequently partially exited the company in April last year through a listing on AIM at £0.22 per share with a market capitalisation of £40 million. The share price has since increased by six times in less than 18 months.

Erick Rinner, from Milestone Capital Partners, said: “It was a tough investment which nearly went public for £500 million at the height of the dotcom boom, but then came the bust. We had to build up the company slowly and it managed to survive because of its strong EBITDA. It’s rare to have a long term deal like this from the sector. Four or five years later it’s a shame people don’t talk about the ones that survived like this one.” Given the circumstances, Rinner was pleased with the near three times return.

Terms were undisclosed in the Cadum and Iba buyouts, which were the firm’s first acquisitions of the year. Rinner said the two companies would be combined together using Cadum as a platform, as part of the firm’s favoured buy and build strategy.

The firm uses limited leverage in its deals and so it expects to be relatively unaffected by the liquidity crisis in the global credit markets. “We don’t go above 4 to 5 times debt to EBITDA multiples and we often use less leverage,” Rinner said.

The firm has sold four other companies this year returning €330 million ($463 million) to investors.  

This has been perceived as an attempt to appease those limited partners who last year encouraged it to cut costs and wind down its current portfolio, having failed to see any returns from the firm’s third fund, which raised €223.5 million in 2002.

Subsequently, co-founder Robert Mason and two other equity partners left the firm. Stephen Findlay, an investment manager at Milestone, emerged last week as a vice president in the London team of Fidelity Equity Partners.

Co-founder Bill Robinson and Rinner took over as managing partners. The business also changed its name from European Acquisition Capital to Milestone Capital Partners, and started selling its assets.

The firm is in talks with its investors to raise another fund although nothing concrete has been planned, Rinner said.