Case study: CTS
Becoming a nationally leading force in materials testing services – Construction Testing Solutions (CTS) is a leading provider of on-site and laboratory testing, geo-environmental and structural assessment services to the UK Infrastructure and Construction industry. The business operates from a network of ten laboratories and six geo-technical and geo-environmental consulting offices, providing full UK coverage.
A shared belief in growth potential – At the time of our investment, the business was part of a larger group called CET, founded in Castle Donnington in 1989. CET Group comprised two distinct companies, Property Assurance (CET) and Infrastructure (CTS).
When we met the team in 2018, we were impressed with how the company had developed under Peter’s stewardship. We saw an excellent opportunity to grow the business through a buy-and-build strategy and accelerate the investment programme through continued technological innovation.
Going for growth with added value
De-merger – The business was part of a larger group when we invested. During the investment, we supported management in formally separating the two companies, enabling us to execute two distinct strategic growth and exit plans. There were no apparent synergies or operational reasons for the businesses to remain together, so we completed a full corporate and operational separation of the company, including building separate management teams.
Performance optimisation – We invested in the design and build of a proprietary IT platform, which enabled real-time resource scheduling and sharing of testing results with customers. We also strengthened the senior management team by recruiting a dedicated CEO (following the de-merger from CET), a CFO, a CTO and a Commercial Director.
Strategic M&A – We assisted with targeted acquisition searches, acquisition diligence, and integration planning throughout the investment. We also introduced and hired an M&A Director to accelerate buy and build activities and coordinate post-deal integration. In 2021, we supported a refinancing process to provide the business with additional acquisition firepower. In total, CTS made nine acquisitions during our investment.
Revenue growth – During the investment, CTS achieved 46% organic revenue growth driven by new customer wins, additional service lines and geographic expansion.
ESG – CTS made an ESG hire, which allocated dedicated resource to progressing ESG performance. An ESG committee was also established, providing opportunities for passionate and talented staff to support the business in this area.
CTS introduced management, leadership, and apprenticeship programmes. A career pathways scheme was also launched to attract new (and returning) talent and increase staff retention.
The business also increased health and safety controls and introduced real-time reporting of hazards, near-misses and accidents to manage and eliminate risks effectively. CTS trained over 40 mental health first aiders and appointed an in-house MHFA instructor.
We completed a carbon footprint calculation, identified emissions hotspots and made site improvements to minimise carbon emissions. Water-saving devices and grey water harvesting were also introduced at several locations.
The results – We exited the business in 2022 in a sale to Oakley Capital. Since its initial investment in 2018, we have grown CTS into a leading business in the UK, with revenues more than doubling in just three years.
We partially exited the business in 2021, with the sale of its insurance claims management division to HomeServe plc for £53m. Together, the transactions represent a return of 5.8x for our investors.