Business Model

 

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How we create value

Bridgepoint delivers returns through a differentiated and proven investment approach, consistently applied across all investment strategies.

 

Bridgepoint believes the middle market is a highly attractive investment proposition for clients given the large number of possible investment opportunities, and the significant potential for hands-on value creation, including through operational improvement and add-on acquisitions.

As the leader in middle market investing, Bridgepoint offers investors a differentiated approach arising from its global reach and ability to deploy capital across multiple middle market strategies.

Attractions of the middle market for clients

  • Scale of opportunity - Contributes €1 trillion to the European economy
  • Number of opportunities - 4.5x more transactions in the middle market than the large buyout market since the beginning of BE IV
  • Ownership - Often outgrowing founder or smaller investor base
  • Capital - Firms require significant investment in people, systems and infrastructure
  • Expertise - Greater scope to drive step-change in growth
  • Consolidation - Substantial opportunity to consolidate fragmented markets via add on acquisitions

 

The Group has one of the best invested private market platforms directed at growth investing.

The local presence provided by the Group’s 10 offices is untypical of middle market firms and drives origination, value creation and fund investor returns. This wide network provides Bridgepoint with “on the ground” local expertise across Europe, which works in conjunction with sector teams to produce material competitive advantage.

 

Both private equity and credit teams are organised into sector teams which operate on an international group-wide basis. The investment strategy focuses on long-term thematic trends which are constantly evolving. For example, within Bridgepoint’s private equity sector, this was illustrated in healthcare by the migration from investing in services businesses to medical technology and pharma.

This thematic approach in combination with industrial relationships developed over years and supported by Bridgepoint’s local office presence contribute to Bridgepoint’s strength in proprietary pre-emptive deal sourcing.

 

Bridgepoint’s private equity business typically focuses on primary transactions and has been successful in sourcing assets in bilateral deals or limited auctions, avoiding full auction processes. Bridgepoint’s strategic origination capabilities allow it to make its investments at competitive entry valuations, with many investments being made at the lower end of long-term valuation ranges of peers with similar geographic and sector exposures.

 

Core to Bridgepoint’s investment performance and its strong positioning with investors is a focus on fundamental metrics for each new investment and careful portfolio construction to generate attractive risk adjusted returns. Potential targets are selected based on criteria such as:

  • Market leadership
  • ESG
  • Exceptional revenue visibility
  • High EBITDA margins
  • Strong cash conversion
  • Platforms for consolidation at accretive valuations
  • Repeatable business models
  • International expansion potential
  • Attractive relative value
  • Clear sector thematics & high growth niches

Every Bridgepoint Fund is deliberately diversified by vintage year, sector, geography and number of investments, with, for example, typically no asset accounting for greater than 10 per cent of a fund’s capital. Combined with prudent opening capital structures and a sensible mix of value and growththemed investing, this diversification strategy leads to funds with a consistent performance profile, high cash generation, average operating margins and revenue visibility, low standard deviation of returns and low loss ratios.

 

Bridgepoint drives value from investment to exit through a toolbox of strategic and operational improvement measures. This typically includes the improvement of systems, organic growth through new product launches or international expansion and the optimisation of costs. Bridgepoint also has a strong focus on delivering value-accretive add-on acquisitions for portfolio companies across its private equity strategies. For example, Bridgepoint Europe V portfolio companies have completed 72 add-on acquisitions as of 31 December 2021.

 

Bridgepoint has embedded ESG criteria across its investment process and portfolio management. We are hands-on in driving improvement in businesses’ ESG performance and aim for constant improvement. Bridgepoint has an institutionalised ESG governance framework that includes an ESG committee and an in-house ESG team. Specific ESG key performance indicators are reported by portfolio companies on a quarterly basis and portfolio companies are expected to meet the criteria set out below:

  • Create New Employment Approximately 22,000 employees in BE V Companies and 12 per cent organic growth in employees
  • Reduce Environmental Impact Portfolio-wide review: aim to reduce energy consumption and cut carbon emissions
  • Promote Diversity and Inclusivity All of BE VI’s companies have incorporated diversity and inclusion into their HR policies
  • Engage with Local Communities Portfolio companies regularly engage in charitable and volunteering initiatives
  • Contribute to Local Economies All portfolio companies are expected to be fair tax payers
  • Ensure Fair Pay and Focus on Welfare Bridgepoint’s policies request portfolio companies to comply with wage regulations and to aim to improve working conditions

 

The Group believes the breadth of data it holds from more than 30 years of investing and a long track record of successful fundraisings is an additional source of potential competitive advantage. Performance information from more than 300 current and historic private equity investments, provide the Group with a deep and continuously growing track record of nearly five million data points of past performance to support decision making. We expect to continue to develop our capabilities in this respect, including by adding additional external data and building more efficient tools for capturing data at the portfolio company level.

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