LDC, the private equity investor which is part of Lloyds Banking Group, has exited its investment in leading cloud and digital services provider Kerv following a transformational growth journey.
During the three-year partnership, Kerv increased revenues five-fold from £20m to £100m, grew EBITDA from £3m to nearly £20m and increased headcount from 100 to 700.
As part of the transaction, Bridgepoint Development Capital has invested in Kerv for a majority shareholding and LDC has reinvested £30m to support the continued growth of the business.
Kerv provides a suite of integrated cloud and digital transformation services to mid-market, enterprise and public sector organisations. The business partners with global technology leaders and tailors its solutions for customers in key industry verticals, including financial services, public sector, retail and the not-for-profit sector. This is delivered in a way that sets the industry benchmark for excellent customer experience and employee engagement.
LDC supported the creation of Kerv in July 2020 when it backed founders Alastair Mills and Mike Ing to merge three highly complementary, cloud-based managed services businesses. LDC invested £22m in the initial transaction and, over the course of the next three and a half years, provided £20m in follow on funding to support complementary acquisitions.
With LDC’s support, Kerv has invested significantly in its technology and team to support sustainable, long-term growth and deliver its market-leading customer experience strategy. Today, Kerv employs approximately 700 people in the UK, Spain, Portugal, France, Switzerland and India, Hong Kong, Singapore and the United States.
With 30% organic growth every year since 2020, the business’ client roster has expanded to include household names such as Standard Chartered, Skipton Building Society, DVSA and Kingfisher Group.
Despite rapid growth, the business has maintained its people-first focus, being named a Great Place to Work-Certified™ organisation in recognition of its successful employee engagement strategy and focus on diversity and inclusion with 35% of new job roles filled by women, surpassing the UK average of 20% for women in technology. Kerv is also on a journey to become a certified B-Corp as it remains steadfast in its mission to improve societal outcomes through technology.
The transaction, led by LDC’s Aylesh Patel and Francesca Speke, generates an IRR of 45% for LDC.
Founders Alastair Mills and Mike Ing, alongside the rest of the Kerv management team, will continue to lead the business in the next phase of its growth journey. Supported by Bridgepoint and LDC, the team plans to continue its organic growth alongside further complementary acquisitions in the UK and overseas.
Alastair Mills, Co-Founder and Executive Chair at Kerv, said: “In 2020 we had an ambition to create a technology business that truly put customers and employees first, recognising this is the key to long-term, sustainable growth, and I’m proud to say we’ve achieved that goal. LDC understood our vision and got behind us from the start. Over the past three and a half years, they’ve provided additional funding to support acquisitions and helped us to scale significantly, all without losing sight of what makes us special – our people. Kerv is still less than four years old and so I’m really excited to see what’s possible with the support of both LDC and Bridgepoint in this next chapter.”
“LDC have been a brilliant supporter on our journey so far. We look forward to a bright future with both LDC and Bridgepoint’s backing. This significant milestone will enable us to continue to deliver on our mission to harness the power of technology for the good of our people, our customers, our society and our planet at even greater scale.” Mike Ing, Co-Founder and Group Managing Director, Kerv
Aylesh Patel, Partner and Head of South at LDC, added: “Alastair, Mike and the team have achieved phenomenal success with Kerv. They brought together three complementary businesses at the height of the Covid-19 pandemic and have created one of the fastest growing cloud and digital services providers in the UK. Their focus on creating a great place to work and delivering exceptional customer service underpins consistently high organic growth and supports the successful integration of acquisitions.
“We first backed the team at a time when many investors had paused activity during the pandemic, and we’ve been there with follow-on funding to support acquisitions as Kerv kept growing. This is a great example of what a private equity partnership can achieve when investors adopt a flexible investment strategy and it’s been a pleasure to support the team over the last few years. I’m looking forward to being part of the next chapter.”
LDC has a successful track record in the ICT sector, having made more than 20 investments into businesses with a total enterprise value of £1.4bn, since 2012. LDC’s current ICT portfolio includes a diverse range of businesses including Scotland’s largest independent IT managed service provide Kick ICT, leading telecoms provider Onecom, the global provider of mobile communications Cellhire, and leading internet service provider Wifinity.
LDC and Kerv were advised by Houlihan Lokey (CF) and Pinsent Masons (Legal), with Management advice also provided to Kerv by Jamieson Corporate Finance, Vendor Due Diligence provided by EY (Financial), Altman Solon (Commercial) and Intechnica (Technical).
Bridgepoint was advised by Lincoln International (CF) and Ropes & Gray (Legal).
Apera provided debt funding to support the transaction.