As an investor in international businesses and from first-hand experience of growing globally at Livingbridge, we recognise the advantages that expanding geographically can bring from both a company and from an investor perspective.
At Livingbridge we spend a lot of time thinking about scalability and growth potential in the companies we partner with, with one indicator of these capabilities being overseas operations. If you can prove the concept for your product or service in a new geographic location there is significant scope to increase your addressable market and evidence a runway of growth to a future investor.
For example, in 2006 we teamed up with Wiggle, an online cycling retailer with revenues of £11m and 2.5% of sales coming from outside of the UK. We could see potential for further international expansion; a vision that saw Wiggle scale to revenues of £87m at the time of our exit in 2011, when more than 50% of sales were generated overseas.
Domestic-only companies looking to maintain growth rates will often expand into adjacent activities or verticals to avoid the natural size limitation that comes with a singular focus in one geographic market. However, going global is an alternative that can allow you to retain your specialism and grow at the same time. Specialist companies exposed to large markets are valued highly by investors.
YSC, a premier leadership consultancy, is a great example of this type of strategy. As a specialist consultancy the company significantly grew during our investment by developing its international client base and, crucially, focusing its efforts on destinations where it felt it could make the most difference. By our exit in 2017 YSC operated from 17 offices in Europe, North America, South Africa and Asia-Pacific.
Targeting overseas growth can provide true diversification. Distinct parts of the world are often growing at different speeds and tapping into higher growth locations is an obvious advantage. The benefits of this can be seen in Frank Recruitment Group’s growth journey. We supported the global staffing and recruitment business to accelerate overseas expansion, particularly in the US, which offered a large and relevant revenue and profit opportunity. This international expansion was a significant driver of value creation, step-changing revenue and profit growth for the business.
Whilst it has many advantages, going global is not without its challenges and risks.
Success is almost always people related. Improving your chances of success overseas will be largely dictated by the people you choose to partner with. Time and time again we see how companies have successfully broken into new markets by partnering with people that they knew well beforehand or by seeding new international offices with trusted employees from ‘the mothership’.
There must be a good level of trust when working with someone in another part of the world. You can’t monitor them all the time, the delegated responsibility is higher, and you need to know that they are maintaining the standards you have set in your home market. Also, the culture of a business cascades from the top, so having someone you know can lead the charge on your behalf and who sets the right behaviours and values is key.
This is what we found when Livingbridge opened an office in Melbourne in 2016 with a view to partnering with ambitious growth companies headquartered in both Australia and New Zealand. Having worked at Livingbridge for seven years in London prior to re-joining the firm in Melbourne in 2016, I knew the level of expectation and what was particularly important to my colleagues in the UK. This has helped me prioritise and think through the relative importance of many key growth initiatives and provided valuable experience as we grow our dedicated investment team in this part of the world. We used this experience to also open a Boston office in 2018 to support our investees internationalise into the US.
Communication can be hard at the best of times, especially when you are grappling with different time zones. Early on it’s advantageous to over-communicate as it reassures your colleagues back at HQ that you are doing the right things. A few years into our Australian journey we make sure we have a number of scheduled and unscheduled discussions each week with our overseas colleagues.
It is not always possible to partner with someone you have previously worked with and for many businesses the best strategy is to pursue strategic acquisitions in key global markets.
For example, we helped Carousel Logistics, a personalised logistics provider, identify an opportunity to merge with a like-minded German company called LSi Logistik. This has enabled the combined Group to significantly increase the scale and quality of its service network across Europe and so offer an even better solution to existing and new prospective clients around the world.
At Livingbridge we have an in-house growth acceleration team who can help portfolio companies identify and source international acquisitions, and we have extensive experience of driving synergies from new mergers and executing successful integration plans. This is key as finding an acquisition is only the start of the story; really driving value from the combined company is what ensures success in a new geographic location whether it’s down the road or on the other side of the world.
We understand that trust and alignment are critical with any business partnership, be that choosing a private equity partner, acquiring a company or setting up a new office organically in a different geography.
Is growing a business overseas a worthwhile initiative? From our own Livingbridge experience in Australia and the experience we have working with many international growth companies, if you take a considered approach successfully addressing the challenges involved, then the answer is yes. It gives businesses the opportunities to reap rewards that go beyond those that exist in a more limited domestic market.
If you’re interested in finding out more about how we help businesses grow internationally please contact investments@livingbridge.com.
