Octopus and Foresight make 4.4x return from outsourcing company

Octopus Private Equity and Foresight Group, the small and medium enterprise investors, have sold their controlling stakes in outsourcing company Covion Holdings with an 84 percent internal rate of return over two and a half years.

Small and medium enterprise investors Octopus Private Equity and Foresight Group have sold outsourcing company Covion Holdings for £33 million (€47 million; $68 million) to engineering and construction group Balfour Beatty.

The small and medium enterprise investors achieved an 84 percent internal rate of return with a 4.4 times return on their investment over two and a half years.

Covion manages facilities for businesses which outsource tasks such as security, catering and cleaning.

Christopher Allner, head of private equity at Octopus, said: “Outsourcing is a big market and Covion is a small player but it was attractive to businesses because its pricing was competitive.”

Allner was critical of the recent government decision to scrap the 10 percent taper relief enjoyed by private equity firms and other businesses on capital gains and replace it with a flat tax rate of 18 percent. He said “I’m hoping there will be enough pressure on the government to bring in changes in the small print as it’s an extraordinary move. It is a shame because we will feel the change in tax.”

Covion had compound profit growth of 112 percent during the last four years making it one of the fastest growing companies in the UK, Octopus said in a statement. By the end of the year it is expected to have a turnover of £33 million.

Foresight invested £2.5 million and Octopus paid £1.3 million for their controlling minority stakes in the company in May 2005 buying out angel investors.

Octopus has exited three companies this year, selling recruitment businesses Hexagon and James Harvard for undisclosed sums. Octopus is investing £110 million across four venture capital trusts.