Overview
We initially invested in Letts in 2000 when we supported the £17 million MBO led by Managing Director, Gordon Presly and Finance Director, Gordon Raw. When the management team at Letts diaries approached us they knew they had a great opportunity to buy their own business but they also knew it was going to be difficult to achieve. They were brought in late in the auction process and were left with only three weeks to find potential funders and put in an indicative bid. This was in the face of fierce competition from trade and other financial buyers. Less than a year later we supported the team in their acquisition of Filofax for £14.5 million recognising that consolidation of the Letts and Filofax brands would bring attractive synergies. The business was sold in March 2006 for £45 million to Phoenix Equity Partners in a secondary management buyout, returning a six times money multiple and a 52% IRR over five years.

Deal Features
When the management team of Letts decided to submit an indicative bid to buy their own business they approached us as a potential funder. We were able to act quickly to assemble due diligence and banking partners and to make the initial commitment to the Letts management team.

We were attracted by the strong brand and market presence (particularly in the UK) of the Letts business, the innovative plans of the management team for growth in overseas markets and the opportunity for Letts to grow through consolidation in the time-products market.

Barely a month after the Letts deal was completed, the first such consolidation opportunity became 'live'. Negotiations started with the then owners of Filofax, the US corporate, DayRunner Inc. Once again, in competition with trade and financial bidders, the Letts team was able to move quickly with our support to assemble an experienced diligence team and submit a successful bid. The transaction proved to be complex and at times frustrating - Filofax was ultimately bought from a syndicate of banks that were creditors of DayRunner. However, teamwork and understanding between the Dunedin and Letts teams delivered an additional global brand to the Letts stable at a very attractive price.

Since the original MBO, the combined business of Filofax and Letts has seen annual profits grow by over 70% and the strong cash generation has allowed Filofax and Letts to de-gear completely within five years of the buyout.

Towards the end of the investment period, the shareholders undertook a strategic review of the business and its growth prospects. After considering a range of alternative strategies, it was agreed that a secondary management buyout, together with additional investment in the group's brands, would be the preferred way forward. The group was sold to Phoenix Equity Partners in March 2006.

Business Description
Based in Dalkeith, near Edinburgh, the Letts Filofax Group manufactures and sells diaries, organisers and other time management products including over 22 million diaries. It is firmly established as the market leader supplying more than 40 per cent of all branded diaries in the UK and exporting to over 75 countries around the world.

The Letts brand is the UK market leader in the design, manufacture and distribution of branded and retail own-label diary products. It also produces the FT and Economist ranges of desk and pocket diaries. Filofax is the global brand leader in the sale of desk and pocket organisers.

The combined group has overseas subsidiaries in Canada, France, Germany, Italy, Sweden, Denmark, Hong Kong and the USA. It has turnover of £55 million, employs nearly 500 people and exports to over 30 countries worldwide.

Letts Filofax's perspective
"Dunedin recognised the potential of our business and were quick to support us in our management buyout. They showed great confidence in us by backing a transforming acquisition within a year of the buyout and continued that support all the way through to exit." Gordon Presly, Group Managing Director, Letts Filofax