Investcorp will become SEC Newgate's new majority owner with a roughly 55% stake. The $100 million investment will be available as expansion funds, with a focus on both organic growth and M&A. The firm is currently in talks about at least five potential acquisitions, PRWeek has learned.
News of the investment, which is subject to regulatory approval, comes 16 months after SEC Newgate delisted from the London Stock Exchange and moved to private ownership, with Three Hills Capital Partners taking a minority stake.
Under the new plan, the remaining ownership of SEC Newgate will be held by both Three Hills and the management team. Nicola Ferraris, MD in Investcorp's European Private Equity group, will join the SEC Newgate Board. The deal is expected to complete between Q3 and Q4 2023.
Investcorp, which has 14 offices in the US, UK, Asia and the Middle East, has previously invested in communications businesses including strategic comms advisory firm ICR and digital corporate comms and marketing agency Investis Digital.
SEC Newgate CEO Fiorenzo Tagliabue told PRWeek that SEC Newgate spoke to Investcorp when it sought private equity backing ahead of delisting in 2022. He described the initial meeting as "very positive", although SEC Newgate was deemed too small at the time.
"The situation changed completely after our step on the US market with GSC and later on with [Mexican agency] Another [the agencies were acquired, respectively, in April and November last year]. For this reason, about one year ago we started a new conversation with Investcorp and at the end, they decided to verify that they are in a condition to make an investment in SEC Newgate."
Tagliabue described Investcorp as "one of the most important players in the private equity business at a worldwide level". He said the investment "increases our recognition on the financial market", and hopes SEC Newgate, which employs around 1,200 people in 22 countries, will benefit from Investcorp's network of clients in which it has invested.
Regarding the acquisition plan, Tagliabue said: "We are speaking at the moment with at least five potential targets at different levels of negotiation and of conversation. But potentially all these five targets could be achieved, and it's quite important for us because we want to double our EBITDA in very few years."
EMEA and APAC are the target regions for acquisitions and Tagliabue cited eastern and southern Europe, Scandanavia and Japan as particular areas of focus. He also hopes to "reinforce" SEC Newgate's presence in markets where it already exists, highlighting Singapore and China.
Tagliabue said SEC Newgate would invest in expanding its offer via appointments, with ESG, sustainability, public affairs/government relations and employer branding among the key areas. There are also plans to create a second SEC Academy, focused on staff training, soon after the summer.
The rough $250 million valuation for SEC Newgate suggests Investcorp paid just under 10 times earnings for its stake based on 2022 numbers - the business generated underlying earnings (EBITDA) of €23.7m ($25.9 million) last year.
Ferraris declined to discuss the valuation but said the price "reflects the potential SEC Newgate has to double the business in a short time".
He said SEC Newgate operates in "one of the fastest growing niches and most attractive segments", referring to comms and public affairs. The fact the business is independent and run by the management was also an attraction, Ferraris said, alongside its strong growth and acquisition plan.
Acquisitions helped boost SEC Newgate's global revenue last year by 52% to $160.4 million, according to PRWeek's Agency Business Report table.
Last summer also saw Czech-British PR consultancy Best Communications join the SEC Newgate network in a bid to grow mutual business in the fast-growing Eastern European comms market.
Asked about current trading, Tagliabue said the picture is "quite different from geography to geography".
He described the US market as "excellent", while there are "some difficulties in the UK due to the economic and financial situation of the country". He pointed to the sharp fall in stock market flotations in London, with just five IPOs in the first five months of 2023 versus 45 in 2022 and 119 in 2021.
However, Tagliabue said there will be "opportunity for recovery from now to the end of the year", citing SEC Newgate's ESG practices, for example, which are "performing very well". He also highlighted the opportunities coming from companies looking to be involved in the COP28 climate talks in Dubai in November and December.
Tagliabue added: "As [of] today, we are perfectly in line with our budget as a group so we are very satisfied and we hope to do still better from now to the end of the year."