Family-owned Turner & Co is keenly scouting investment opportunities in the industrials and business-services space as its portfolio management strategy evolves, CEO Craig Campbell said.

The 112-year-old, Glasgow-based investment group has a total capital base of GBP 100m, with more than GBP 50m earmarked for new acquisitions, Campbell said, noting that this year has seen a significant change in its balance sheet following the sale of Turner Aviation in July.

Turner is targeting acquisitions of businesses generating EBITDA of between GBP 2m and GBP 5m, operating in the industrials and business-services space, he said.

Its GBP 50m war chest can be deployed into new platforms, he said, as well as to develop and add bolt-ons to existing portfolio companies, with a particular focus on its tanker rental business TCL Tanker Rental and cold-chain logistics company Blue Cube.

The business expects to announce at least one bolt-on to its existing portfolio and at least one new platform deal in the next 12 months, and is assessing opportunities regularly at an approximate rate of two or three a month, he said.

Turner wants to back ambitious management teams in businesses that can become platforms from which to expand organically and through bolt-on acquisitions, he said.

New platform opportunities will be in the UK, with a particular target focus on the water services and critical safety services segments, Campbell said.

The investment group sees critical safety as attractive because of its past successes in that market, and the long-term market resilience for these services, he said. Targets might be businesses involved in air-quality monitoring, industrial safety services or products, worker safety, or infrastructure and asset safety, he added.

Within the water value chain, targets would include businesses providing design and installation services, he said; Turner’s investment thesis is underpinned by how the UK plans to improve the operation of pipework, drains, sewers, and how to make industrial companies comply with regulations.

The water industry’s latest five-year spend cycle, AMP8, began in April this year and will see GBP 104bn spent on upgrades and maintenance on the UK water network, a 77% increase on AMP7.

A target business needs to demonstrate growth under its existing management, and could typically be a founder-owned company that has brought its management team into the ownership structure, Campbell said.

Turner is a long-term investor and needs to see a management team that wants to grow and develop its business, he said. It could structure deals as MBOs, carve-outs from larger corporates, or management buy-ins where the firm feels it could bring new people into the leadership team, he said.

It has a strong preference for off-market deals and majority ownership, he added.

Ideally, a new portfolio company will be generating at least GBP 3m EBITDA and achieving growth of 10% per annum, which can then be augmented further through bolt-on acquisitions to reach GBP 6m to GBP 7m EBITDA over a three- to five-year period, he said.

Turner provides patient, flexible capital and invests funds entirely from its balance sheet, but structures deals in such a way that bank debt could be deployed on a conservative basis at some point, he said.

This provides the group with a distinct bidding advantage over private equity (PE) and other financial investors as it doesn’t have the complication of significant investment committees, he said.

It is particularly focused on founder-owned opportunities and is a good fit for companies with are succession issues, he said.

“As a family business ourselves, Turner’s founder-led values and heritage resonate well with other such companies, and our network of contact and introductions we have a lot of productive conversations,” Campbell said.

The investor will also assess secondary buyouts from PE firms, though these typically have higher price expectations, he said.

Turner is very relationship-driven and values advisors that are proactive in looking to support it, he said. It appoints external advisors in the conventional way when advancing a transaction, including due diligence, financial advice, in addition to its internal capabilities, he added.

Active portfolio management

Turner, which is now managed by the third and fourth generation of its eponymous founding family, has undergone a significant change in the past five year in how it manages and operates its portfolio companies, Campbell said.

It has moved from a corporate group structure managed centrally as divisions, towards a family investment-office structure that looks after a portfolio of business interests majority-owned by Turner but operated by autonomous management teams, he said.

The investor has maintained its strong industrial heritage but in the last 12 years has moved into markets as wide ranging as refrigeration, facilities management, and offshore vessels, he said.

Turner’s current portfolio includes Mitchell Powersystems, Turner Iceni, Turner Power Generation, Turner Groundscare, Exsel Pumps, Turner Engine Control Solutions (TECS), Blue Cube, TCL Tanker Rental, and its shared ownership of Foster Turner Hydro Limited.

Backing entrepreneurial businesses is at Turner’s heart, and first and foremost its methodology remains to back people with a vision, Campbell said.

Now, with its management team experienced in PE and M&A, Turner is very much looking at what’s new, while retaining the interest and heritage in industrials, Campbell, who spent 15 years at Deloitte Corporate Finance, said.

“To look at the model for future generations for next 100 years, we’ve moved to a model where the family office is still operating like businesspeople with an entrepreneurial spirit, but with a disciplined approached,” he said.

This means that every Turner portfolio company is currently looking at its value creation strategy – it either has a plan or is building the plan – and Turner expects to see fruits of this in the next two to three years, in a similar pattern to Turner Aviation prior to its exit, he said.

The investor is “always open to sales and is regularly approached, but we expect and want to nurture the strategies put in place, and it’s very important to take a view on the future alongside the management of those businesses,” Campell said.

With Turner Aviation, the investor investigated how to develop and create value over the course of 18 months, and through those discussions became aware of the M&A appetite for such businesses, particularly in the US, he said.

The business had been in family ownership for many decades, and the management team had been phenomenally successful in recent years, turning it into a worldwide MRO business generating EBITDA of GBP 6m by the time it was sold this year, he said.

Turner became cognisant of the valuations that were being paid on the sale of these businesses, versus the cost of expanding them through bolt-on acquisitions, he said.

“We saw industry and sector consolidation by those with much larger pockets, and we felt that it gave a better opportunity to our customers and suppliers if Turner Aviation is part of a larger business. The healthy M&A environment then allowed Turner to divest,” he said.