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sectors
At ISIS, we focus our business investment activity in five sectors where we have developed a deep understanding and strong networks. This allows us to identify excellent investment opportunities and provide investees with the right support to help them prosper.
Business Services
Consumer Markets
Financial Services
Healthcare & Education
IT & Media
Business Services
The diversity of business services means there are always excellent investment opportunities even when certain sub-sectors are under pressure. In recent years many openings in this sector have resulted from the trend for companies to outsource non-core activities to specialists. This will continue as outsourcing becomes more strategic and is no longer driven purely by cost savings. Niche players who add significant value to processes can build sizeable businesses with high barriers to entry and strong customer loyalty.
New opportunities are also being created by the trend in the public sector to buy in services from the private sector, in areas ranging from the maintenance of social housing to IT provision. Furthermore, the government's targeting of efficiency gains in public sector back-office spend will increasingly provide attractive opportunities for those businesses providing consultancy, change management and strategic planning services.
To discuss this sector in further detail, please contact Simon Ward or Paul Morris
Consumer Markets
Consumer markets comprises three distinct areas: retail, consumer products and leisure.
All three benefit from attractive investment dynamics:
- a dynamic environment in which customer tastes evolve rapidly, creating opportunities for businesses with clear market and brand strategies; and
- industry fragmentation, providing ample scope for both acquisitive growth and the realisation of investments.
- growth driven by levels of disposable income and a greater propensity to spend;
Retail investments offer scaleable models that support rapid growth once a business has established the right template. Small niche players in this sector can exploit their relative nimbleness, flexibility and customer intimacy to take market share from legacy retailers. Mature retail estates are also great cash-generators, allowing investors to recoup their investment or to invest in further growth.
In consumer products there are excellent opportunities to exploit differentiated brand and sourcing strategies. Well-managed niche brands speak strongly to consumers and can achieve significant top line growth by displacing existing suppliers and driving the growth of their own sub-sectors. Margin gains can be made through leveraging in-house design and new supply sources.
The leisure sub-sector is benefiting from the trend for consumers to maintain spending even when household budgets are tight. In parallel, traditional industry structures are breaking down as a result of increasing customer sophistication and new distribution channels. This combination of growing consumer confidence and disintermediation provides openings for small, specialist players. As with retail, many types of multi-site leisure businesses also offer highly scalable models and strong cash generation.
To discuss this sector in further detail, please contact Mark Advani and Daniel Smith
Financial Services
While many investors are deterred by the highly regulated nature of the financial services sector, there are excellent opportunities for those who understand these complexities and can find the right business and a management team with the entrepreneurial skills often lacking in large financial institutions.
The splitting of capital from distribution presents opportunities to build scalable distribution networks that leverage off capital provided by others. While many financial services products are becoming commoditised and are being distributed direct to consumers, there are excellent openings in niche markets where more complex sub-prime and near-prime risks do not lend themselves to disintermediation. In these niches, companies that provide a high level of service to both consumers and providers of capital can generate strong margins even when the overall economic environment is unfavourable.
To discuss this sector in further detail, please contact Andrew Garside or James Titmuss
Healthcare & Education
The healthcare and education sectors offer attractive opportunities for both service and product-based businesses with high-quality, differentiated offerings.
In recent years, governments of all political persuasions have been encouraging the public sector to embrace the private sector as partners in the delivery of a wide range of services. Over the same period the public has adopted a more consumer-based approach to public sector services. These trends have led to excellent opportunities for niche businesses. With constant evolution in patient and parent needs and models of service delivery combined with growth in public spending running ahead of inflation, we expect this very positive investment outlook to continue.
While many investors find the highly regulated nature of the healthcare and education sectors off-putting, regulation provides significant opportunities for well-invested, well-managed providers to develop leading positions in fragmented markets. Growth models can be both organic and through the acquisition of smaller players who struggle with the burden of regulation. While the barriers to entry can be high, those businesses that are able to establish both the right reputation and scale will benefit from customer loyalty, good margins and strong cashflow.
To discuss this sector in further detail, please contact Matt Caffrey and Liz Jones
IT & Media
The IT sector is a dynamic one in which the constant evolution of technology provides a ready source of new opportunities and makes it relatively easy for businesses to enter the market. Moreover, because supply and demand are often out of balance as new applications take off, businesses in this sector with the right capabilities can grow rapidly. This dynamism is underpinned by a range of business models, from licensing and support to outsourcing and managed services. These models can be highly scalable and deliver strong and predictable cash generation for companies that successfully build up broad customer bases.
The fragmented nature of the sector and significant consolidation activity provide opportunities for both acquisitive growth and the realisation of investments. Large players in the sector often seek to sustain their own growth by acquiring niche players rather than developing products themselves, so there are always good opportunities for exit. In addition, there is strong potential for roll-up strategies involving acquisition of solutions with complementary customer bases, perhaps on legacy technologies, that provide opportunities for cross-selling and migration.
While technical superiority is important, the most successful businesses in this sector are those whose management teams combine sales and marketing vision with highly effective execution. Businesses able to demonstrate how they add value to customers' operations, and which have demonstrable expertise and a strong focus in sectors which are heavy users of IT - such as retail, finance and the public sector - will thrive.
Structural changes in the media sector are generating exciting opportunities in the value chain of creating, distributing and consuming content. For example, regulation of the broadcast sector has favoured independent programme makers; and new media, such as the internet, have provided fresh routes for both the distribution and marketing of content traditionally supplied through print media.
Highly professional management teams who look past the glamorous aura traditionally associated with working in this sector can build market-leading businesses by exploiting these niches, which are not subject to the vagaries of cycles in advertising spend. More than in most other sectors, it is essential for businesses to position themselves in the value chain and then execute effectively on that proposition. Companies that can do so successfully can provide high levels of service and command significant margins.
To discuss this sector in further detail, please contact Andy Gregory
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