Case Study | Advent International

Business & Financial Services

Domestic & General

www.domgen.com
Country United Kingdom
Sector Business & Financial Services
Deal type Public-to-private
Investment date December 2007
Status Realized investment
Exit method Sale to CVC Capital Partners (December 2013)

Domestic & General Group plc (D&G) is the United Kingdom’s leading provider of extended warranty plans for household electrical goods—appliances ranging from washing machines and heating systems to televisions and satellite dishes. Founded in 1912, D&G employs about 2,500 staff and markets extended warranties for major manufacturers, including brands such as Electrolux, Hotpoint, Bosch, Sony and Hoover.

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A PARTNER WITH THE RIGHT ‘LONG-TERM VIEW’

Prior to Advent’s investment, D&G was listed on the London Stock Exchange. Our team in London had been in regular contact with the management team when the company received an unsolicited approach from one of its competitors. D&G preferred to remain independent and approached Advent as a potential partner in May 2007.

As John Pearmund, who was CEO of D&G for 10 years before his retirement in April 2014, explained, "We were looking to maximize shareholder value and believed Advent took the right long-term view of what the business could achieve.” D&G’s leadership was attracted to our financial services expertise, strong collaborative approach with management and experience in executing complex transactions. We acquired the company in December 2007 following a successful public offer for its shares.

 

‘TURBOCHARGING’ A SUCCESSFUL BUSINESS

In analyzing this investment, we saw a company that had built itself into the leading player in the UK market. In addition to strong cash generation and high earnings visibility, D&G had an attractive business model, with 60% of UK revenue coming from renewals of existing customer contracts.

“D&G was a real success story in the UK, and we saw an opportunity for significant expansion,” said Kevin Beeston, an Advent Operating Partner who became chairman of D&G. “We took a good business with a good strategy and turbocharged it.”

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Accelerating D&G’s growth included:

  • A rigorous 100-day plan: Together with management, we embarked on a detailed, data-led exercise to assess the full potential of the business and prioritize initiatives. Initial efforts to quickly drive improvements in the core UK business produced EBITDA benefits 83% higher than our target.
  • Better data capture: By improving data capturing techniques the company was able to collect contact details of significantly more customers, D&G increased data capture by more than 50% on appliances sold by the top seven UK manufacturers.
  • Improved salesforce execution: Better training and management of call-center agents led to significant increases in D&G’s conversion rate on sales calls and cross-selling.
  • Higher retention: Driving direct debit payments (rather than one-off payments) by customers increased retention rates and the lifetime value of the customer.
  • International expansion: We worked with D&G to leverage its strong platform beyond the UK, winning several new international retail warranty contracts and rolling out new programs for manufacturers in Germany, Spain and Italy. International sales rose more than fourfold under our ownership.

 

VALUE-CREATION INITIATIVES
DRIVE RESULTS

Pearmund credited “the strategic and operational improvements we made with Advent’s support for the company’s growth momentum and international expansion." Under Advent’s ownership, business expanded both in D&G’s home market and abroad, with the number of covered appliances growing nearly fourfold—from 6 million to 22 million—across the UK, Europe, Australia and New Zealand. Revenue increased 97% from £310 million in fiscal 2008 to £612 million in the fiscal year ended March 2013, while operating profit more than doubled during the same period. UK sales rose 75%, even as the rest of the market contracted, and international sales grew from 10% to 22% of total revenue.

 

POSITIONING D&G
FOR FUTURE GROWTH

After working closely with D&G’s management to capture the opportunities, we began looking for a new partner that could help D&G build on these achievements and set the stage for future growth. In December 2013, we completed the sale of D&G to CVC Capital Partners, in partnership with the existing management team.

Advent Director Bram Grimmelt summed up the mutually beneficial nature of the relationship: “In our six years as an investor, we greatly enjoyed working with the D&G management team to deliver strong performance both at home and abroad and significantly expand the company’s international breadth.” The strategic initiatives undertaken by D&G under our stewardship and the sale to CVC have positioned D&G to maximize its potential in the extended warranty market.

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