IN a tasteful townhouse in the west end of Glasgow, a private equity firm “with a difference” is carefully investing funds from around the world into firms rich in growth potential across the UK.

Aliter Capital is in the midst of deploying capital under its second investment fund, which launched two years ago and raised £134 million to invest in firms that fall into its sweet-spot of engineering and support services.

That target market speaks directly to the pedigree of Aliter’s founding partners, Billy Allan, Greig Brown, Andy Galloway and London-based Andrew Busby. Mr Allan is the one-time chief executive of Lanarkshire-based Stiell Group, where he led a management buyout before ultimately selling the facilities management business to McAlpine in 2002.

Subsequently, he teamed up with Mr Brown and Mr Galloway to buy and build various businesses before Aliter was founded in 2017.

After raising £92m for its maiden fund, Aliter opened its account in January of that year with an investment in Edwin James Group, a Glasgow-based engineering services firm.

Aliter has since helped boost Edwin James’ organic growth by acquiring five businesses, lifting its turnover to more than £190 million and headcount to in excess of 1,000 staff. Last year, Edwin James was acquired by Aliter’s second fund, Aliter Capital 2, alongside co-investors, to support its continuing growth.

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Now, Aliter’s deployment of capital from its second fund is overlapping with the sale of assets from its first. Overall, fund one built four “significant” businesses through a total of 22 acquisitions under “buy and build strategies”. Three of those “platforms” have now been sold, leaving only Sponge, a digital trading business.

Aliter’s investors are broadly large institutions in the US and Europe, including pension funds, university endowments, and charitable foundations.

Speaking alongside Mr Brown at Aliter’s elegant office near Charing Cross, Mr Allan said: “We don’t disclose the numbers because it is our investors and it is private information, but fund one has been a huge success financially. We have sold three out the four assets, so we have returned a very significant profit to our shareholders, no matter what happens to the fourth asset, whether it is a spectacular success or not.

“They [shareholders] are absolutely delighted and what we are now doing is deploying from fund two. We are two years into five-year deployment period.”

Mr Brown said: “The traction and the success in terms of the value growth in fund one allowed us to then with confidence go and launch fund two. Two years in, we are around about 40% deployed in fund two now. We have created four platforms within fund two and will probably create five or six overall. It’s an important year.”

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He added: “The focus for Aliter is very much on UK-headquartered business and support services. That’s what we know, that’s where we can add value. We very much stick to what we know and where are confident we can be value creators.

“It would be very easy to become distracted and move into other verticals, but we have been quite disciplined over the last seven years [with our] focus on those types of businesses. Most of the deals we do are off-market. We build relationships mainly through our backgrounds. People resonate with the heritage that we have got: we are engineers, we have run businesses, we have been owner-managers, investors. We think that works well.”

In that regard, Mr Allan said that Aliter, while resembling and being regulated like any other private equity firm, is more of a “hybrid” model. “Our operating model reflects our history and careers as engineers,” he said. “We were involved in leverage buyouts.

“Traditional private equity firms are populated and dominated by accountants mostly, sometimes accountants and lawyers, but it is unusual for business people to be at the helm of private equity. They would partner people like us, very much [as] junior partners. We are a practitioner-led investment house with the same financial capability. What is different is we have this operational capability, which is very different.

“I’ve been doing this since 1995. We’re actually some of the oldest private equity investors. Although we weren’t a private equity firm back then, we worked with private equity.”

Mr Brown noted: “The model is very mature. We are more industrial partners, working alongside the businesses. We’re not running the businesses, but we are very much working alongside the businesses to build them out and scale them, ready for the next buyer.”

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He added: “All the stuff that we have learned over the years doesn’t go out of fashion; good old fashioned hard work, profit, cash, growth strategies, good people, good managers, good teams. That never goes out of fashion.

“Our model is different in some respects. We recognise the importance of getting debt into businesses for the model to work. But that’s not what makes the returns for us. It is part of making the returns, but financial engineering is not the primary reason for us getting the returns we have recognised so far.”

With the businesses in the Aliter portfolio spread across the UK, the investment house has established offices in London and Manchester, as well as Glasgow.

Mr Brown said there is no shortage of firms for Aliter to target as it looks to create two further platforms under its second fund, declaring that the possibilities are “vast”.

But Mr Allan emphasised that the size of potential acquisitions was important. He said: “Where are looking for businesses just now, and they would fall into the category of UK support services, anything less than a couple of million EBITDA (earnings before interest, tax, depreciation and amortisation) … will take a lot more time. Given that we are two years into the fund, ideally that would be £3m, £4m, £5m EDITDA. So, they are quite large privately owned companies at that level of profitability.

“They often come with some pivot point in their own development. If they are owner managed, there [may be] no succession planning in place and therefore the family don’t know how to take the business forward, but they want all the culture they have built in, and the systems and processes and people policies to be retained.

“They buy into our vision of that. Sometimes the market has changed for them. Sometimes the business is not in recovery mode, but it’s market has stalled, and they usually need fresh ideas, they have run out of runway. It can be any combination. Very seldom is it a perfect asset with a perfect succession plan in place and a clear strategy. If that’s the case, you don’t need us.”

Q&A

Greig Brown, partner, Aliter Capital

What countries have you most enjoyed travelling to, for business or leisure, and why?

I spend a lot of time in Majorca and love the culture and being able to relax from the minute I arrive. 

When you were a child, what was your ideal job? Why did it appeal? 

Being a footballer was my dream as it was a chance to earn a living from something I enjoyed and was familiar with. Fortunately, the reality of my ability was realised just in time to get a real job! 

What was your biggest break in business? 

Being given the opportunity at a relatively young age to go and start our London regional office. A great experience that ensured I grew quickly as a manager and developed an entrepreneurial mindset. 

What was your worst moment in business? 

Dealing with the impact of a fatality in our business.

Who do you most admire and why? 

I have been very fortunate to work with a number of the highest quality leaders and entrepreneurs that have really shaped my approach and career. 

What book are you reading and what music are you listening to?

Book: Politics on the edge by Rory Stewart

Music: At the moment, Kings of Leon and Foo Fighters

Billy Allan, partner, Aliter Capital

What countries have you most enjoyed travelling to, for business or leisure, and why?

Canada; beautiful country, great culture and people and very straightforward and ethical to do business in.

When you were a child, what was your ideal job? Why did it appeal?

Footballer, as I would only need to work one day a week!

What was your biggest break in business?

Being presented with the opportunity to carry out an MBO in 1995.

What was your worst moment in business?

Dealing with a fatality.

Who do you most admire and why?

My first boss, Ian Wilson, the most selfless man I ever had the privilege to meet, who guided me in the early years of my career.

What book are you reading and what music are you listening to?

Book: The Power of Geography by Tim Marshall

Music: Too numerous and eclectic to define.