The Engine Group, owner of PR firm MHP Communications and ad agency WCRS, is set to announce a major investment by Lake Capital by the end of the week.
The London-based company’s 13 agencies provide services including advertising, lobbying and marketing to major brands including Tesco, Coca Cola and Lloyds Banking Group.
MHP also advised Fat Face on its planned flotation, which was pulled in May.
Lake Capital’s investment comes after its current owner, the private equity group HIG, reportedly started talking to interested parties in April about selling down its stake in Engine.
A heads of terms is understood to have been signed by Lake Capital, however people with knowledge of the discussions cautioned that the final terms of the deal had yet to be signed. HIG first invested in Engine in 2010 in a deal that was seen at the time as a rare move by a private equity firm into the advertising agency world.
It agreed a total £62.5m investment to help Engine expand into new markets including the US and China, with an initial investment of £32.5m and a further £30m in 2012, which gave HIG a 40 per cent stake.
At the time of the investment Engine’s group chief executive Peter Scott said it hoped to build revenues to $1bn in three to five years. Engine’s most recent set of accounts at Companies House show revenue grew 10 per cent to £91.2m during 2012, although margins appear thin. Profits rose to £0.7m compared to a £3.2m loss the year before. While its US business outperformed, earnings before interest, tax, depreciation and amortisation (EBITDA) across the company’s UK agencies reportedly fell 14 per cent to £10.7m,
Engine declined to comment.
Oliver Smith, Kasmira Jefford