In March 1992, Cinven led the BTG management buyout from the UK Government.
The company, which comprised two former public sector bodies, was established to commercialise technology arising from research carried out by public sector bodies, such as universities and government research establishments. It licensed the use of these technologies in return for royalties. It also invested directly in some of these technologies itself, although this was a minor part of its activities.
The challenge for Cinven and management was to inculcate a private sector business ethos at BTG in order for it to be able to prosper in a competitive private sector environment. The management of the business were scientists by training and had successfully run the business for some time, increasing the revenues by 17% per year for the previous 5 years, but the MBO plan required a sharper focus on profits and cash. They had already expanded the business overseas with operations in the US, Japan and India, and the plan called for profitable growth in these regions. In addition strong emphasis was placed on acquiring new technologies to license to fill the long term income pipeline.
The business progressed well and strong performance together with the need for new capital pointed to an IPO as the way forward both for Cinven’s exit and the future development of the group. In July 1995 BTG was duly listed in London and Cinven’s investors sold their remaining interest in the business a year later, achieving an excellent return on their initial investment.
Multiple returned on investment: 12.6x