Deep Sea Electronics

Deep Sea Electronics designs and manufactures control units for diesel-powered electricity generators (‘genset’), intelligent chargers and control units for ‘off-highway’ machinery such as fire engines, tractors and diggers. The company is based in Hunmanby, Yorkshire, where all manufacturing takes place.

Background

DSE was founded in 1978 and its founder shareholders successfully grew the business over the next 40 years to become a global market leader. In 2018 Caledonia acquired the business based on a strong alignment between Caledonia’s investment approach and what DSE’s founders and the executive management team, led by CEO David Thomson, were looking for:

Commitment and focus on long-term value creation;
Securing the future of the business, its culture and employees;
Capital structure with complete alignment between all shareholders; and
Full flexibility and influence over exit timeframe.

Investment thesis

Our investment thesis was to back DSE, David Thomson and his executive team to:

Maintain and develop DSE’s position in the genset market through product innovation and entering new geographies;
Further penetrate the larger ‘off-highway’ market and explore accretive M&A; and
Enhance operational efficiency with a focus on working capital cycle and productivity.

We supported the business with: (i) the recruitment of a non-executive chair; (ii) investment in the R&D and sales functions to accelerate growth; (iii) improved management information and corporate governance; and (iv) developing a new strategy to take advantage of the transition of energy distribution and development of “micro-grids”.

In early Mar-21 DSE was approached by a North American trade acquiror. Following a highly compelling offer, we aligned with management on progressing an off-market process.

We successfully sold DSE in Jun-21 generating a net IRR of c.36% and 2.2x money for Caledonia.

Under our ownership DSE grew revenue from c.£38m to c.£47m (+24%) and EBITDA from c.£16m to c.£21m (+31%).

Investment Date:

October 2018

Investment Status:

Realised: June 2021

Business Description:

Manufacturing

Investment Type:

Primary MBO; majority

Initial equity investment

£117.2m

Caledonia NAV:

Realised proceeds: £259.3m

Caledonia Private Capital Team:

Chris Hodges, Theo Tizard

Related Press Releases:

Caledonia Private Capital acquires DSE

Caledonia Private Capital sells DSE

www.deepseaelectronics.com

CEO Perspective

“Working with Caledonia Private Capital was a pleasure, with the entire team providing an optimal balance of support, challenge and investment. Caledonia has helped me to lay the foundations for DSE’s future growth by strengthening my team, supporting investments in new products and channels to market, and positioning DSE strategically for emerging opportunities in renewable/ distributed power and microgrid generation”

David Thomson, CEO, Jun-21

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