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The continued organic scaling of existing strategies, product strategy extension and adding a third vertical over time through acquisition-led expansion.
The three pillars of our strategy are focused on growing and diversifying Bridgepoint’s business and creating value for clients and shareholders.
The middle market of the private markets industry has consistently expanded as private markets have grown, with the enterprise value range of targeted assets moving up in size as larger buyout firms have continued to shift their focus to higher enterprise value businesses. This is illustrated by the evolving definition of the middle market. Bridgepoint currently defines the market as being comprised of businesses with an enterprise value of typically up to €1.5 billion. This has increased used in each successive fund raise from 2000 to 2020 as private markets have grown. For example, the size of the middle market was defined as capturing businesses with an enterprise value of typically up to €600 million and €1 billion at the times of raising Bridgepoint Europe V and Bridgepoint Europe VI, respectively. As a result of the growth in private markets and the ability to raise capital to support growth across the life cycle of a company, companies are on average staying private for longer, further adding to the market opportunity.
The combination of market growth and Bridgepoint’s position as the leader in the middle market mean the group is well positioned to scale its existing strategies
Incremental to this is the potential for each of the Group’s core products to expand irrespective of market growth:
Potential exists for new equity and credit products, focusing on those that would complement the current offering. Possible avenues include broadening the Bridgepoint private credit offering to adjacent verticals, such as real estate debt.
Key to any such expansion would be ensuring excellent origination and alignment with Bridgepoint’s expertise, competitive advantage and values.
Bridgepoint’s ability to grow organically was demonstrated by the greenfield launch of Bridgepoint private credit in 2016 (prior to the acceleration of the strategy via acquisition in 2020), comprising successfully building an investment team, raising capital and establishing a track record and further by the development of the Senior Debt strategy directly following the 2020 acquisition.
Bridgepoint has also successfully added multiple complementary ancillary funds within its existing investment strategies. This is illustrated by the sizeable continuation funds raised for flagship Bridgepoint Europe funds and Bridgepoint Development Capital funds which drive further value creation in the assets transferred and create additional value for fund investors. The group sees further accretive growth potential via this channel.
The Directors believe that the Group can continue to significantly scale its strategies organically in the future.
There is scope to significantly enhance Bridgepoint’s middle market positioning and further deepen its market insights and platform synergies with the addition of a third core product strategy alongside private equity and private credit. It is expected that this could be delivered without materially expanding Bridgepoint’s central and platform cost bases.
The Group has a strong track record of successfully acquiring and integrating new businesses alongside organic development in both current verticals. In 2009, the direct investment platform of Hermes Private Equity was acquired, forming the original base for Bridgepoint Development Capital. 2014 saw the acquisition of the management company for two Edmond de Rothschild lower middle market funds in France. In 2020, the acquisition of EQT Credit accelerated Bridgepoint Credit’s growth materially adding multiple new strategies, with the business being integrated into Bridgepoint without any material loss of clients, assets or investment professionals.
Bridgepoint sees scope for similar acquisitions within other private markets asset classes, such as real estate or infrastructure. Also under consideration are other areas where the Group’s well-invested operating platform, capital raising capabilities and reputation would enable acquired businesses to more successfully scale their operations than as a standalone entity.
All potential opportunities are assessed within a structured and consistent framework, that applies the Group’s strong investment discipline and rigor, and focuses on delivering sustainable returns for shareholders.
Both Real Estate and Infrastructure offer the opportunity to create a third leg of global scale and the Group aims to build out one of these strategies to become its third core asset class in the medium-term.
