Brompton CEO’s Decision to Shun Private Equity Pays Off During Industry Downturn

Brompton CEO’s Decision to Shun Private Equity Pays Off Amid Industry Downturn

In a strategic move that has proven to be a game-changer for Britain’s largest bicycle maker, Brompton chief executive Will Butler-Adams made the bold decision to steer clear of private equity investors during a fundraising round last year. This move has helped the company weather a steep industry downturn and position itself for future growth.

Butler-Adams explained to the Financial Times that the company sought a long-term, stable investor rather than a quick-fix private equity firm. He highlighted the drawbacks of private equity, such as the focus on short-term gains and the pressure to sell off stakes within a few years, which did not align with Brompton’s long product development cycles.

Instead, Brompton opted to raise capital from BGF, a UK investment fund backed by major banks, in exchange for an 8.5% stake in the company. This decision was in stark contrast to the prevailing trend in the UK business landscape, where private equity deals dominate the economy.

The fundraising round, which valued Brompton’s equity at £188.7 million, was a strategic response to a decline in demand for new bikes following the cycling boom during the Covid-19 pandemic. Despite facing challenges in sales and profits in the past year, Butler-Adams remains optimistic about Brompton’s growth prospects, aiming for a 15-20% annual growth rate in the medium term.

The company’s shift towards selling higher-priced bikes, including lightweight and electric models, has contributed to an upward trend in profitability. However, Butler-Adams cautioned that the cycling industry crisis is far from over, with more businesses expected to face difficulties in the coming months.

While Brompton had plans to build a new factory and headquarters in Kent, the economic climate has prompted the company to postpone these developments. Nevertheless, Brompton remains committed to its long-term growth strategy and is navigating the challenges of the industry with resilience and foresight.

As Brompton continues to defy industry trends and chart its own path to success, the company’s decision to eschew private equity in favor of a stable, long-term investor has proven to be a strategic masterstroke in turbulent times.