June 18 (LPC) - Ares has invested in excess of £500m in a mixture of debt and equity instruments in UK-based VetPartners to help further fund its expansion, a source close to the deal said.
The financing is split between unitranche and preference shares and increases a £90m debt position the credit fund held in the vet services company, which it first committed to in 2015.
In exchange, Ares secured a 40% stake in the company, while private equity owners August Equity maintained its controlling stake.
Funding comes from Ares’s European direct lending strategy.
Ares declined to comment.
It’s an unusual move for a debt fund to invest on the equity of a company, but the flexible mandates from investors means managers can opportunistically take a slice of a company’s equity.
Despite interest from private equity in the business its continued growth persuaded August Equity to continue to hold the company, which acquired the company in 2015, and dilute its equity in order to fund its expansion.
“We have approaches all the time but we see significant further growth potential in the business and a market with a very long runway. With high quality earnings, high levels of fragmentation and private pay dynamics, veterinary services is a highly attractive sector for private equity,” said David Lonsdale, partner at August Equity.
August Equity closed a £224m fund in 2017 and had reached a concentration limit that prevented it from further funding the business’s growth prompting Ares’s investment.
Since August Equity’s acquisition the company has expanded beyond its base in north of England to operate nationally, with Ebitda growing from £2m to above £40m in that period.
The UK vet market has seen increasing M&A activity recently. Mars Petcare acquired Linnaeus Group from Sovereign Capital earlier this month and AniCura from Nordic Capital.
EQT-owned vet care group IVC recently turned away from the plans of a potential sale, instead securing £150m add-on financing last month to continue to expand the company. (Editing by Christopher Mangham)