In July 1987, Cinven’s investors supported the management buyout of the Contract Services Division of Grand Metropolitan, which was considered non-core by its parent.
The business operated through four service-provider companies: catering for public sector and other organisations; private healthcare facilities; electrical and mechanical contracting in the then booming London construction sector; overseas catering for construction sites in oil producing countries as well as hotel management in Europe and the Far East. The bulk of revenues derived from long-term catering contracts.
Due to privatisation and contracting out of various services by public sector organisations in the UK, Compass forecast excellent growth for its core business. Following the formation of a new management team, the four businesses improved performance and underperforming contracts were terminated. It was anticipated that the growth profile would allow the business to achieve a stock market flotation within three years.
The business progressed better than expected and achieved a full London listing in December 1988. At this point Cinven achieved a significant capital gain on its original investment.
Multiple returned on investment: 2.6x