Buy and build investor Sovereign Capital has sold LM Funerals, a business which it helped form, to a group of new private equity investors.
A consortium including Duke Street, Babson Capital Europe and Metric Capital Partners has acquired LM Funerals for £37.5 million.
The business, which forms a collection of funeral directors in the UK, has been purchased from Sovereign Capital after nine years as a portfolio company. The deal represents a 3.4x return on Sovereign’s initial investment and is its third exit of the year.
Midlands-based LM Funerals has 60 branches and has grown by both acquisition and organic rollout since it was founded in 2003 on the back of Sovereign Capital’s investment support.
Charlie Troup, partner at Duke Street, tells GrowthBusiness, ‘The reason we looked at the [funeral] sector in the first place is because we felt it was a profitable, stable sector but a fragmented one, in some ways almost a cottage industry.’
Troup adds that 60 per cent of the £1.5 billion funeral services market is run by 2,500 independent operators, giving plenty of opportunity for further consolidation. With a turnover of approximately £20 million, LM Funerals is currently third-placed in the market after the Co-operative Group and Dignity.
Following the deal, LM Funerals’ management team of chief executive Deborah Kemp, finance director Paul Moss, operations director Simon Beaumont and acquisitions director Russell Trenter will remain ‘significant’ shareholders in the company.
LM’s chief executive Kemp comments, ‘We are delighted to be entering the next phase of our strategic growth plan in partnership with Duke Street, who have demonstrated a track record of investing in and growing more than 40 mid-cap businesses over the last 20 years.
‘Their customer-driven and progressive approach to developing businesses in conjunction with management teams fits well with our values and aspirations for the future.’
Duke Street operating partner Johanna Waterous is set to join the board of LM Funerals as non-executive chairman having spent 20 years at McKinsey & Company as co-lead of the firm’s European Retail and Global Consumer Marketing Practices.
Troup says that LM Funerals will continue to adopt a ‘sensitive’ approach to acquired businesses, retaining their traditional branding and aiming to retain the trust of their local clientele.