In January 1993 Cinven’s investors supported the management buyout of Universal Ceramic Materials (UCM) from Unicorn Industries. UCM was a holding company for a group of companies that produced ceramic powders used in a wide range of basic industries. Its businesses were market leaders in their respective markets.
The business was acquired for Cinven’s investors at a good price which represented a relatively low earnings multiple and a significant discount to net assets. UCM’s management proposed to improve its trading performance by increasing market share in its key markets while reducing its cost base. It had also made substantial investment in new research and development facilities prior to the buyout with the aim of launching a new range of fine ceramic powders for use in high technology applications. This could become profitable in due course.
In June 1994 it was decided to float the business on the London Stock Exchange, providing the opportunity for Cinven’s investors to realise a return on their investment within a short period.
Multiple returned on investment: 3.5x.