Nikko acquires Cabot in £275m secondary

European mid-market investor Barclays Private Equity has made an almost 3x multiple on the sale of UK debt business Cabot to Nikko Principal Investments.

Nikko Principal Investments, the European arm of Japanese brokerage Nikko Cordial Corporation, has acquired Cabot Financial Holdings Group, a UK debt purchasing business, for £275 million (€396 million; $480 million).
Barclays Private Equity (BPE), the European mid-market arm of Barclays Bank generated a money multiple of just under 3x and an IRR of 63 percent on its original investment. The firm acquired a majority stake in January 2004 when it backed a £100 million management buyout. 

We were about 18 months ahead of our investment plans. We’re selling at a level of profits we expected to achieve after three or four years.

Owen Clarke, managing director, Barclays Private Equity

Simon Oakland, a principal at Nikko, told PEO the firm will hold just under 69 percent of Cabot following completion of the deal. Oakland said management will own 21 percent of the company and BPE, which has re-invested £25 million into the business alongside Nikko, will hold 10 percent.
London-based Vision Capital, an investor in the 2004 MBO, sold its minority stake in the current sale to Nikko.
Oakland said Nikko had been tracking Cabot since losing out to BPE in the original MBO. The current auction was conducted by Lexicon Partners.
Owen Clarke, managing director at BPE, told PEO the original investment was made from the 2002-vintage €1.25 billion Barclays Private Equity European Fund. The firm is currently investing from its €1.65 billion second vehicle.
Clarke said BPE had exited its investment relatively early due to Cabot having met strategic targets ahead of schedule. “We were about 18 months ahead of our investment plans,” he said. “We’re selling at a level of profits we expected to achieve after three or four years. We decided to reinvest as it’s the best player in the market and we think it will make money for Nikko and us going forward.”
Established in 1998, Cabot buys charged off debts from banks and other major lending companies including credit cards, loans, store finance, current accounts, mortgages and most other forms of available debt. The company has a 15 percent share of the UK debt purchase market and currently owns 1.3 million customer accounts.

Berry: India office to open in next year

Cabot employs over 300 staff across the UK and reported revenues in 2005 of £55 million. According to BPE, Cabot had turnover of £33 million in 2003, its last figures prior to the management buyout.
Brian Berry, chief executive at Nikko, said in an interview that the firm would concentrate on expanding Cabot’s non-UK activities going forward. “UK debt has developed and grown rapidly over the last ten years and this sector presents good opportunities for a potential counter-cyclical business, coupled with the development of a broader European base,” he said.
Nikko’s previous investments in the consumer finance and financial assets sector include Mortgages, Resolution Life and British Credit Trust.
Founded in 1997, Nikko employs 30 investment professionals in its London office, with 25 staff operating out of its Tokyo base. Berry said nine members of staff will work in its newly opened Australia office and that the company plans to open an office in India over the next 12 months.