In summary
Backing a market-leading manufacturer of intelligent control systems to drive growth and innovation.
Deep Sea Electronics designs and manufactures control units for diesel-powered electricity generators (‘genset’), intelligent chargers and control units for ‘off-highway’ machinery such as fire engines, tractors and diggers. The company is based in Hunmanby, Yorkshire, where all manufacturing takes place.
Background
DSE was founded in 1978 and its founder shareholders successfully grew the business over the next 40 years to become a global market leader. In 2018 Caledonia acquired the business based on a strong alignment between Caledonia’s investment approach and what DSE’s founders and the executive management team, led by CEO David Thomson, were looking for:
- commitment and focus on long-term value creation;
- securing the future of the business, its culture and employees;
- capital structure with complete alignment between all shareholders; and
- full flexibility and influence over exit timeframe.
Investment thesis
Our investment thesis was to back DSE, David Thomson and his executive team to:
- maintain and develop DSE’s position in the genset market through product innovation and entering new geographies;
- further penetrate the larger ‘off-highway’ market and explore accretive M&A; and
- enhance operational efficiency with a focus on working capital cycle and productivity.
We supported the business with: (i) the recruitment of a non-executive chair; (ii) investment in the R&D and sales functions to accelerate growth; (iii) improved management information and corporate governance; and (iv) developing a new strategy to take advantage of the transition of energy distribution and development of “micro-grids”.
In early Mar-21 DSE was approached by a North American trade acquiror. Following a highly compelling offer, we aligned with management on progressing an off-market process.
We successfully sold DSE in Jun-21 generating a net IRR of c.36% and 2.2x money for Caledonia.
Under our ownership DSE grew revenue from c.£38m to c.£47m (+24%) and EBITDA from c.£16m to c.£21m (+31%).