Investment Adviser’s report

New investments lay the foundations for future growth

Looking at Oakley’s own recent deal flow and origination funnel, we see plenty of dynamic, ambitious founders looking for the right partner to help them build their businesses into market leaders.”

Steven Tredget Partner at Oakley Capital.

Watch video: Results 2024

Number of new investments

Oakley Capital Private Equity Funds announced or completed eight new portfolio investments in 2024, deploying £214m into new platform deals for the Private Equity Funds.

Number of exits

In 2024 Oakley Capital Private Equity Funds completed three exits with a total value of £159m and achieving a realised gross Money Multiple of 2.3X.

Looking back at shareholder communications these last few years, ‘uncertainty’ is a word that we have used frequently. That’s no surprise given the impact of the COVID-19 pandemic, war in Europe and surging inflation, all of which slowed economic growth and M&A. That’s not to mention geopolitical uncertainty: countries making up over 60% of global economic output and more than 50% of the world’s population went to the polls last year.

Throughout this period including 2024, Oakley’s strategy and active management have sustained double-digit earnings growth and deal-making across the portfolio, with no fewer than eight new investments and three exits in the Private Equity Funds announced or completed this year. Looking ahead, we remain confident that the key drivers of our success – our focus on backing exceptional founders, on investing in profitable, private businesses with recurring revenues, and our ability to help them accelerate growth by leveraging the power of AI, by expanding into new markets such as the US, by leveraging M&A – will generate strong future returns for our investors.

Steven Tredget Partner at Oakley Capital

Net debt/EBITDA ratio

4.1x

At the year end, the average net debt - to EBITDA ratio of the Oakley Funds portfolio, stood at 4.1x (the PE industry average is between 5 and 6x).

Reduced interest costs

£30m

Through 2024, Oakley helped its portfolio companies to secure c.£30 million of annualised interest savings.

Reinforcing resilience in the portfolio

Oakley portfolio companies have characteristics that already make them naturally resilient, such as recurring revenues as well as providing non-discretionary products and services, whether that’s testing and inspection (Phenna Group), website hosting (World Host Group), cybersecurity (I-TRACING), or pharma regulatory compliance ProductLifeGroup (PLG). We are focused on applying additional levers to strengthen their resilience further for the continuing uncertainty ahead. Oakley’s portfolio companies enter 2025 with healthy balance sheets. Thanks to asset-light business models with strong cash generation, the portfolio ended the year with historically low gearing ratios. Average net debt-to-EBITDA stood at 4.1x as at 31 December 2024, continuing a downward trend from 4.3x in 2022, and lower than the private equity (PE) industry-wide average of between 5 and 6x. Meanwhile, average interest cover of 3x provides significant flexibility. Although the pace of central bank interest rate cuts is expected to slow, we are helping portfolio companies to lock in lower borrowing costs now, and have helped them secure more than £30 million of annualised interest savings. Additionally, there are no debt maturities for the two years following the year end. At our recent Chief Financial Officer (CFO) Forum in London, part of Oakley’s ongoing programme of networking events for founders and management teams, Oakley’s Head of Capital Markets, Vivio Berardi, advised finance leaders from across our portfolio companies on what to focus on in an uncertain macro environment, including deploying hedging strategies and better cash flow forecasting: I encourage you to read the Capital Markets excerpt below.

What CFOs should focus on:

Recent history shows it is notoriously difficult to predict the future direction of interest rates as forecasts will change with every new economic report. A top priority for CFOs in this environment is to hedge against interest rate volatility. We also see opportunity to lower debt costs further by introducing ESG ratchets that reward portfolio companies for, say, reducing their carbon and we have already helped several companies achieve this."

Vivio Berardi Capital Markets Director at Oakley Capital

Backing European businesses with international aspirations

To date, Oakley has supported its portfolio companies complete over 250 bolt-on acquisitions. Often this is to help them break into new market verticals; more often than not it is to expand into new geographies. Earlier this year we helped German online fitness platform Gymondo acquire Italian peer Buddyfit to create the leading online physical and mental fitness platform with over 800,000 subscribers in Europe. We previously helped Spanish business software provider Ekon to grow through acquisitions to become Grupo Primavera, Iberia’s largest software platform, before agreeing its combination with France-based software group Cegid to accelerate a global growth strategy. Meanwhile, we have supported Affinitas to add schools in Spain, Italy and Mexico in order to create a global K12 schools group with more than 9,000 students.

Oakley also provides ambitious businesses with a gateway to the world’s largest economy. Eight Oakley portfolio companies, including WebPros, Assured Data Protection and TechInsights, currently generate a double-digit share of total earnings in North America, with four deriving more than 40% of revenues there, providing upside potential if the US economy continues to perform well. Oakley has supported its management teams to build presence and profits there through transformational M&A, for instance vLex’s acquisition of US peer Fastcase has doubled the size of the business, and World Host Group’s more recent purchase of US hosting business A2Hosting, which completed post year-end. Portfolio companies also benefit from our boots on the ground in Silicon Valley via the Oakley Touring Capital team, which brings us invaluable insights and expertise on the challenges and opportunities AI poses. See below, insights on AI investments and developments from Touring Fund's co-founder, Samir Kumar.

‘Oaks and acorns in AI’: the so-called ‘Magnificent Seven’ leading tech stocks still account for almost 40% of the entire S&P 500 market capitalisation even after the corrections we saw earlier in 2025. This demonstrates continuing enthusiasm from investors on the AI opportunity but resulting in enormous concentration risk. There are also concerns about the eye-watering AI capex these companies are incurring: Meta alone spent about $38 billion last year. Touring offers a different way to tap the AI opportunity: we’re backing early-growth, software businesses that are thoughtfully infusing AI into their offerings while building data flywheels. And we’re investing in verticalized plays- including Numa, an AI platform for auto dealerships, or CuspAI, which uses AI to design and develop novel materials. Right now, we see opportunity where AI enables labor and services to turn into software.”

Samir Kumar Oakley Capital

New investments hit the ground running

The fastest growing companies in the portfolio by organic LTM EBITDA growth include Assured Data Protection, vitroconnect and Konzept & Marketing, all new investments in 2024. This supports Oakley’s strategy of re-committing to its best-performing businesses. It also demonstrates our ability to find exceptional founders to back, with fast-growing, profitable businesses that can hit the ground running from day one of our investment, with performance that bodes well for future NAV growth. Of course, earnings growth is even greater when accounting for buy-and-build strategies: WHG, Phenna, Steer Automotive, Affinitas and other portfolio companies together acquired more than 50 businesses in 2024, helping to power total earnings growth to 21% in 2024. Oakley targets for bolt-on acquisitions that can unlock value through multiple arbitrage, increased scale and market leadership. We look forward to seeing the positive impact of this M&A on NAV growth in due course.

Looking ahead, we remain confident that the key drivers of our success will generate strong future returns for our investors.”

Steven Tredget Partner at Oakley Capital

The opportunity in cyber

While European M&A increased 4% in 2024, deal-making remained below the multi-year average. Against this muted backdrop, Oakley backed a record number of new businesses during the period, marking a period of considerable deal-making and demonstrating once again the Firm’s ability to buck the trend and find opportunity during periods of macro and market uncertainty.

They all shared many characteristics of a typical Oakley deal: these are founder-led companies with asset-light business models and high cash flow visibility. The new investments also demonstrate Oakley’s ability to identify new ways of exploiting the long-term megatrends we often talk about, including businesses’ shift to the cloud and the consumer shift to online.

Cybersecurity is one sector that Oakley has long sought to invest in, as working from home and the proliferation of connected devices widens the network perimeter companies need to secure from cyber threats. In the UK alone, cyber attacks have tripled in the last three years and are expected to grow in frequency and severity as criminals leverage AI to sharpen their lines of attack. I-TRACING helps protect some of Europe’s most successful businesses in the enterprise and mid-market sectors. Meanwhile, Assured Data Protection's disruptive business model is enabling it to take market share globally from more established players in the highly lucrative market for ransomware defences. You can read more about some of these new investments in the Strategy in Action section of this report.

Other recent investments also offer opportunities to exploit the long-term trend for consumers and companies to shift online. vitroconnect is helping to accelerate Germany’s transition to fibre broadband, promising faster, better internet speeds for businesses and households. WHG’s servers host over a million websites around the world, and the customer-focused management team see opportunities to increase market share through an ambitious buy-and-build programme, and by offering a better service with cutting-edge infrastructure and security protocols.

Meanwhile, in Spain, our recent investments there demonstrate Oakley’s ability to identify promising tech entrepreneurs to partner with. Alerce’s (investment announced in 2023, completed in 2024) transport and logistics software is a play on the e-commerce explosion under way in Iberia. Even our investment in Horizons Optical leverages the shift to online. Horizons’ medical software is used by opticians to make premium, bespoke spectacle lenses for a growing market: increased screentime is one of the reasons why experts estimate more than half the world’s population will have myopia by 2050.

Current deal origination opportunities

600

Oakley Capital is currently tracking almost 600 potential deals across its four core sectors.

Buy-and-build acquisitions

Oakley's portfolio companies acquired more than 50 bolt-on businesses in 2024, helping to power total earnings growth to 21% in 2024.

Outlook

Oakley’s three disposals during a slower period for M&A demonstrate the attraction of our high-quality portfolio of investments. The realisations of idealista, Schulerhilfe and Ocean Technologies Group at prices at, or close to NAV underscore the integrity of Oakley’s valuations and create optimism for future liquidity. The focus now turns to creating value in our new portfolio companies and originating new investment opportunities. Recent data from Evercore shows just how rich an opportunity this remains, with the vast majority of mid-sized European businesses being privately owned, many of these companies are founder-led. Oakley’s investment in its origination capabilities, in order to tap this rich opportunity, is bearing fruit: we are currently tracking almost 600 potential deals across our four core sectors. A record eight new investments in 2024 is no accident and reflects a marked increase in opportunities coming before Oakley’s Investment Committee. In a recovering M&A market we remain very conscious about maintaining opportunity quality and price discipline.

Touring Capital’s Samir Kumar highlighted an interesting statistic regarding concentration risk in key US equity indices with 40% of the entire S&P capitalisation occupied by the 'Magnificent Seven' when writing in his column quoted above. I will end with another statistic: the so-called 'Magnificent Seven' leading US tech stocks had a combined market value of $16 trillion at year-end, more than the combined GDPs of Europe’s four largest economies. Some might interpret this as demonstrating that Europe is in trouble, lacking the innovation and entrepreneurs to build truly world-beating companies. I would suggest instead this demonstrates the enormous opportunity in Europe. Looking at Oakley’s own recent deal flow and origination funnel, we see plenty of dynamic, ambitious founders looking for the right partner to help them build their businesses into market leaders. Our own ambition- and mission- is to support this ecosystem, simply by continuing to be the partner of choice for exceptional entrepreneurs and management teams and helping them to realise their full potential through our hands-on, active management and support.

Steven Tredget Partner at Oakley Capital
12 March 2025