IC Memo: Cavendish Coatings

Investment memo deck

A committee paper, not a pitch. Meridian Capital is an invented fund and Cavendish Coatings is an invented industrial coatings business, and this is the twelve slide version of the memo that decides whether the deal happens. It opens with the recommendation and the price, spends a whole slide on the four ways the investment fails, and ends with what the fund makes in three cases rather than with a thank you.

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MERIDIAN CAPITAL · IC PAPER 41

CIRCULATED 9 SEPTEMBER 2026

Cavendish. Coatings. Invest.

THE RECOMMENDATION

We recommend a £14M primary investment in Cavendish Coatings at a £47M pre-money equity value, for 23 percent of the company. This paper sets out the thesis, the numbers we verified, the four ways it fails, and the return under three cases.

A growth investment in a mid market industrial coatings applicator

Rosalind Ekwueme

Partner, Meridian Capital

Slide 1 · cover · A memo cover: what it is, who wrote it, and the recommendation in the margin.

RECOMMENDATION

Invest £14M for 23 percent of Cavendish Coatings at a £47M pre-money equity value, implying 9.0 times FY26 EBITDA on an enterprise value of £55M.

Proposed to the investment committee, 16 September 2026

02

Slide 2 · takeaway · Puts the recommendation and the price on their own slide, before any argument is made.

Why we think this works

Five reasons, in the order we would defend them.

The asset is hard to rebuild

Three lines with automated pre treatment and a 12 metre oven. A new entrant needs about £9M and two years of permitting to match the Cannock site alone.

The contracts are long

Sixty one percent of FY26 revenue sat under agreements with two or more years to run. Coating is specified into a part drawing, so switching means requalification.

Mix is moving to better margin

Rail and defence work carries 24 percent gross margin against 16 for construction products, and it grew from 9 to 22 percent of revenue in four years.

There is obvious operating slack

Rotherham runs one shift. Adding a second lifts group EBITDA by roughly £1.9M on capex under £600K, and the management team has costed it.

The succession is already solved

The founder is 63 and hired a managing director in 2025 rather than waiting for us to. That is the single most common failure in this segment and it is behind them.

03

Slide 3 · checklist · The thesis as five numbered reasons, each one falsifiable rather than descriptive.

THE COMPANY

Cavendish since 1994

01

1994

Alan Cavendish opens one line in a rented unit in Cannock, coating shopfitting components for two customers.

02

2008

Loses 40 percent of revenue in eight months when construction stops. Survives by taking on agricultural work at low margin.

03

2016

Buys the Rotherham site out of administration for £1.4M. First move outside the Midlands and the first automated line.

04

2022

Builds Bridgend to serve one rail customer under a seven year agreement. First purpose built site rather than a bought one.

05

2026

Three sites, 211 staff, £38.4M of revenue and £6.1M of EBITDA. Hires a managing director and approaches the market.

04

Slide 4 · timeline · The company in five dated periods, which is how a committee checks whether growth is durable.

The market

UK industrial coating applied on subcontract is worth about £1.9B a year, of which powder coating on metal is roughly £640M. Cavendish competes for the £310M applied by firms with more than £5M of revenue, because below that scale the work is single line, local and unaccredited. That £310M is spread across 41 firms, the largest of which holds 8 percent. We have not found a consolidator with more than three sites in the segment, which is the whole reason this paper exists.

£640M

UK powder coating on metal

£310M

Applied by firms above £5M

41

Firms competing for it

05

Slide 5 · metrics · The market, sized to the part Cavendish can actually reach rather than to the category.

Where the value sits

Cavendish owns one step, and it is the step that carries the warranty.

Steel supply

Commodity

Sheet and section bought on index pricing. No margin, no differentiation, and the customer usually buys it themselves.

Fabrication

Fragmented

Thousands of small fabricators cutting, folding and welding to drawing. Highly competitive and priced per hour.

Coating

Cavendish

Pre treatment, powder application and cure. Specified into the drawing, warranted for 25 years, and requalification takes six months.

Assembly

The customer

Our customers assemble and install. They buy coating on lead time and rework rate rather than on price alone.

End market

Rail, defence, build

Network operators, defence primes and construction product makers. The specification, and therefore the warranty, sits with them.

06

Slide 6 · process · Where Cavendish sits in the chain, which is what determines who it can raise prices on.

Revenue and EBITDA

Figures in millions of pounds, audited to FY26. Margin moved with the mix, not with price.

FY21
FY22
FY23
FY24
FY25
FY26
0M10M20M30M40M
Revenue
EBITDA

07

Slide 7 · metrics · Six years of revenue and EBITDA together, so the committee can see whether margin followed growth.

COMPETITION

Who else can take this work

Narrow
Breadth of Offering
Broad
Deep
Depth of Expertise
Shallow
Specialists
  • Thurlow Finishing, defence only
  • Kell & Rowe, rail bogies
  • Anstey Metal, marine
Leaders
  • Cavendish Coatings, three sites
  • Marchwood Group, four sites
  • Pentland Surface, two sites
Laggards
  • About 30 single line firms
  • Manual pre treatment
  • No accreditation to Sector 1
Generalists
  • In house lines at three primes
  • Fabricators with a spray booth
  • Wet paint contractors

08

Slide 8 · comparison · The competitive map, with Cavendish placed on it rather than described as different.

FINANCIALS

Audited and adjusted

Line item
FY24
FY25
FY26
FY27E
Revenue
£31.9M
£35.0M
£38.4M
£43.1M
Gross profit
£6.1M
£7.0M
£8.1M
£9.6M
Gross margin
19.1%
20.0%
21.1%
22.3%
Reported EBITDA
£4.1M
£4.9M
£5.6M
£7.0M
Owner adjustment
£0.3M
£0.3M
£0.5M
Nil
Adjusted EBITDA
£4.4M
£5.2M
£6.1M
£7.0M
Capex
£1.2M
£1.6M
£2.1M
£2.4M
Net debt at year end
£9.4M
£8.9M
£8.0M
£6.2M
Owner adjustment is a property lease with a related party and two vehicles, all removed at completion. Verified by Aldergate diligence, August 2026.

09

Slide 9 · metrics · The financials as filed, with the one adjustment we made and why.

The deal

Primary money into the balance sheet. No secondary and no leverage added at completion.

£14M

for 23 percent, all primary

Enterprise value

£55.0M

9.0 times FY26 adjusted EBITDA of £6.1M.

Less net debt

£8.0M

Existing facilities refinanced at completion, not repaid.

Pre-money equity

£47.0M

Held 71 percent by Alan Cavendish and 29 percent by six managers.

Our investment

£14.0M

Primary. £9M funds Rotherham shift two and heat recovery.

Post-money stake

23.0%

One board seat, consent rights over capex above £1M and any sale.

Founder rollover

54.7%

Alan rolls his entire holding. Earn out ties him to March 2029.

10

Slide 10 · investment · The deal itself, because in a memo the terms are the subject rather than the footer.

Ways this can fail

The four risks we would underwrite, and what sits against each one.

THE RISK

WHAT WE HAVE

Customer concentration

The top three customers are 41 percent of revenue. Losing the rail account alone removes about £1.6M of EBITDA.

Gas price

Curing ovens are gas fired and energy is 9 percent of cost. A doubling takes 1.4 points off group margin.

Founder dependency

Alan Cavendish is 63 and personally holds the two largest customer relationships, both of them since 2011.

Construction cycle

Thirty eight percent of revenue is construction products, which fell 40 percent inside eight months in 2008.

Seven year agreement

The rail account runs to 2029 and Bridgend was built for it, so exit means rebuilding a qualified line elsewhere.

Hedged and recoverable

Gas is hedged to March 2029 and £1.1M of the investment funds heat recovery that cuts consumption 22 percent.

MD already hired

A managing director joined in 2025 and now owns both accounts jointly. Alan earns out to March 2029.

Mix already shifting

Rail and defence went from 9 to 22 percent of revenue in four years and are the destination for the new capacity.

11

Slide 11 · comparison · The four ways this fails, each paired with what we would already have in place.

What we make

Revenue indexed to 100 at FY26, held to FY31.

FY26
FY27
FY28
FY29
FY30
FY31
060120180240
Base
Upside
Downside

Key Takeaway

Base case: £13.5M of EBITDA at 10 times, with £4M of net cash at exit.

2.3x

Upside: shift two at both sites and one bolt on. £18M EBITDA at 11 times.

3.4x

Downside: construction repeats 2008. £8M EBITDA at 8 times and £10M of debt.

0.9x

The annual return in the base case. That is the number we would underwrite to.

18%

12

Slide 12 · metrics · The return under three cases, which is the section that has no equivalent in a pitch deck.

The structure

What each slide is doing, so you can reuse the order even with different content.

Slide 1cover
A memo cover: what it is, who wrote it, and the recommendation in the margin.
Slide 2takeaway
Puts the recommendation and the price on their own slide, before any argument is made.
Slide 3checklist
The thesis as five numbered reasons, each one falsifiable rather than descriptive.
Slide 4timeline
The company in five dated periods, which is how a committee checks whether growth is durable.
Slide 5metrics
The market, sized to the part Cavendish can actually reach rather than to the category.
Slide 6process
Where Cavendish sits in the chain, which is what determines who it can raise prices on.
Slide 7metrics
Six years of revenue and EBITDA together, so the committee can see whether margin followed growth.
Slide 8comparison
The competitive map, with Cavendish placed on it rather than described as different.
Slide 9metrics
The financials as filed, with the one adjustment we made and why.
Slide 10investment
The deal itself, because in a memo the terms are the subject rather than the footer.
Slide 11comparison
The four ways this fails, each paired with what we would already have in place.
Slide 12metrics
The return under three cases, which is the section that has no equivalent in a pitch deck.

What makes this deck work

The conclusion comes first

Slide two is the amount, the stake and the multiple. A memo is read alone by people hunting for the hole in it, so burying the recommendation on the last slide only wastes their first two minutes.

The risks get equal billing

Four named ways this fails, each paired with what already sits against it. A published Bessemer memo calls this section ways this can fail, and a paper without one reads as advocacy rather than analysis.

It underwrites a return, not a story

Base, upside and downside with the multiple and the exit assumption written out. Nothing in a fundraising deck does this, because the founder is not the one who has to defend the number afterwards.

Questions people ask

What is an investment memo?

The document an investor writes to argue a deal to their own committee or partnership. It states the recommendation and the price, sets out the thesis, names the risks, and models the return. It gets filed and re-read at the next round.

How is it different from a pitch deck?

A pitch deck sells and ends on an ask. A memo decides and opens on the recommendation. It adds risks, deal terms and scenario returns, and it is written to be attacked rather than to be liked.

How long should an investment memo be?

About a page at seed and three to five pages at Series A for the written form. As a deck, ten to twenty body slides with an appendix that is often larger than the body itself.

Can a founder write one?

Yes, and many do during diligence, alongside the deck. The standing line is that the deck wins the meeting and the memo wins the cheque, because the memo is what the partner circulates when you are not in the room.

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