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A smart exit, worth a smile – How Smile Invest won Best Mid Cap Private Equity Exit 2024

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A smart exit, worth a smile – How Smile Invest won Best Mid Cap Private Equity Exit 2024
16 January 2025
Smile Invest - Smart SD

Source: M&A - Caylynne Fourie - 09/01/2025

 

Under Smile Invest’s ownership, SmartSD experienced significant growth and value creation.

Smile Invest has sold its very first investment deal, SmartSD, to Belgium private equity company Cobepa, further positioning it as a leading, tech-enabled B2B distributor across Benelux, France, and beyond.

Rapid technological advancements and growing demand for integrated safety solutions have created a dynamic environment for the B2B security solutions market in Europe. This has presented an opportunity for innovative and adaptable players to take the industry to the next level – which is exactly what SmartSD has done.

Founded in Breda in the Netherlands in 2008, today it is the largest and fastest-growing B2B distributor of security and fire safety solutions in the Benelux. The company differentiated itself with a digital “marketplace” for installers, offering them access to cutting-edge technology coupled with expert technical assistance. SmartSD employs over 100 security professionals, has approximately 6,000 professional installers and represents more than 100 premium brands.

SmartSD’s significant growth was driven by Belgian investment company Smile Invest, which helped transform it into one of the top security system distributors in Belgium and the Netherlands and France. SmartSD’s differentiation strategy resulted in the company delivering around 20 percent annual growth and tripling its EBITDA to approximately 21 million euros on 140 million euros in sales. Its strong financial performance and return on investment include a money multiple of 8x and an IRR of around 49 percent.

Earlier this year, Cobepa, a Belgian private equity company, acquired a controlling interest in SmartSD, while Smile Invest, the management, and founders remain shareholders. Cobepa has extensive experience in the French market, and together with the shareholders, intends to drive SmartSD’s continued disruption and expand its presence throughout Europe. Additionally, by pursuing select M&As, Cobepa believes this could potentially catalyse the company into becoming the pan-European category champion.

Smile Invest’s exit from SmartSD has also been recognised as the Best Mid Cap Private Equity Exit at the 2024 M&A Awards. “It was an exceptional deal within the Belgian private equity space with regard to growth and excellent returns, and the award is a welcome recognition”, says Bart Cauberghe, Smile Invest managing partner and co-founder and former chairman of SmartSD.

 

Acquiring and growing a market disruptor

Smile Invest was launched in 2017 by entrepreneurs for entrepreneurs and stands for Smart Money for Innovation Leaders. The investor is a provider of both capital and entrepreneurial expertise to the businesses they bring into the fold. “We are not a traditional fund. We raised money, we buy companies, we sell them, and when we achieve a good exit, we give back part of the money we made as a dividend. But most of the money comes back to Smile Invest to reinvest in new companies to support their growth”, Cauberghe says.

SmartSD was their first deal. “In 2018, SmartSD’s founder-managers from Belgium and the Netherlands were seeking a professional investor so that they could expand further and be supported in their ambition to enter the French market”, explains Cauberghe. “We proactively approached them and acquired a majority stake.”

Smile Invest’s ownership period focused on investment in SmartSD’s strong USPs to increase its competitive edge and market share. The intention was to further differentiate the company with an advanced digital platform and a model that would be operationally scalable. The service was improved in several ways, from simplifying the order process to including a commercial quoting engine and API connections to the ERP systems of its customers. Funding also ensured top-notch technical support and expanded the product portfolio with new suppliers, while Smile Invest stimulated the SmartSD team to keep on developing new features.

The transformation of SmartSD was underpinned by an ideal partnership, according to Smile Invest’s managing partner, giving the founders the freedom to innovate and grow, while receiving support in specific areas like M&A, for example. “It was a strong, transparent and trusted partnership that was nurtured for five years.”

An early recap, which optimised the financing structure, combined with strong growth, led to an exceptional return on investment and culminated in the competitive process of selling a majority stake to a top investor.

 

How SmartSD revolutionised the market

While the global physical security market is expected to grow at 6.7 percent from 2024 to 2023 and reach nearly 193.70 billion dollars, in some parts of Europe it has been traditionally old-fashioned, Bart Cauberghe points out. “It’s been a reseller's market with distributors and collection points. An installer goes through a physical catalogue, orders the stock by phone, collects his order and does the installation. If he encounters an issue, he has to look at the manual and try to figure out how to fix it. It’s very old-fashioned considering how the world has moved online. So the founders of Smart SD created a new and innovative model.”

Describing how it works, Cauberghe explains it’s like Amazon, but for the B2B installers, making the company unique. “The installer visits the portal, compares brands and decides which products he wants. At the same time, he has access to the technical specs and manuals in his own language, plus the latest software versions and updates of the firmware on the equipment. He orders and the next day it's delivered to him by courier, saving a lot of time. The platform is fully integrated with CRM, PDB, ERP and APIs and connected to installers’ ERP systems, so should the installer run into problems, the call centre is manned by technical engineers who support him by linking to the app on his laptop. It’s a service SmartSD delivers to customers free of charge.”

To date, the technical experts handle 100,000 support calls per annum, while the company has included many added-value technical features on its digital portal, such as track and trace of orders, product pricing by SKU by customer, a client configurable online commercial catalogue, depending on the level of sophistication of the customer.

 

The entry into France

The French expansion happened soon after Smile Invest took ownership, Cauberghe shares. “The French market is twice the size of the Benelux market but at the time, there were still many traditional distributors and physical outlets. We identified the potential to innovate in France with digital sales and a support model and while initially we looked at acquiring a French company, we opted for establishing a greenfield team and Paris office.

“Our physical location was not intended to sell products but to give demonstrations and training to installers, so they could learn about new technologies. For example, the demo room has all the equipment installed to show how different pieces of technology work together in one solution. We set out to partner with the local installers, as we do in the Benelux region, to help them upskill, work more efficiently and be able to secure more jobs.”

Initially, Cauberghe says they had to convince their suppliers to give them distribution rights for the French market. “But we based it on SmartSD’s track record in the Benelux region where they were very satisfied with the growth and technical support that the company was delivering to the professional installer community”, he adds.

Within three years, SmartSD had grown substantially and achieved around 20 million sales in France. It acquired two small local distributors, one in Paris and one in the south of France, both of which were easy to integrate under the SmartSD operating model. “Today, it operates as one integrated company and the French market continues to offer huge potential.”

 

Drilling down into the Cobepa deal

Explaining the rationale behind the exit deal, Bart Cauberghe says Smile Invest felt the timing was right. SmartSD had become a market leader in Belgium and the Netherlands and was strong in France. “We had about 30 percent market share in the Benelux and had proven that the digital platform we’d developed was working well across three countries. So it was time to accelerate and also to consolidate the fragmented distribution and installer market. In France, for example, there are many small players, some of which have difficulty keeping up with new technologies. It made sense to pursue small acquisitions there and perhaps acquire bigger companies in Spain or Italy, but to do so, we needed a stronger and larger fund to come on board.”

In 2023, Smile Invest decided to look for a new majority owner to take the company to the next level. Together with Rothschild & Co, 10 leading private equity players were selected. “It was not a very difficult deal to secure as it received a lot of attention and interest”, says Cauberghe. “But we were highly selective, inviting only 10 parties, and stated upfront that we wanted to reinvest. So we didn't consider it a traditional exit.”

A major challenge emerged, however, as the process was about to be launched. SmartSD needed to switch logistics providers, as their current warehouse was unable to accommodate their growth. This massive undertaking required a customised process to minimise the impact. Smile Invest, management and Rothschild & Co. had to delay the launch from September to November. “This was to ensure sufficient visibility into the recovery process of temporarily lost sales”, explains Cauberghe. “Despite this unexpected and complex hurdle and delay, all our advisors worked together which resulted in a fluid and highly competitive process with a great outcome. All 10 parties made an offer, but one party accelerated during the process and made us a really good offer a week before the deadline.”

Cauberghe says among the key factors in choosing Cobepa was “the good fit with the founder-managers. I would say this was the most important factor and their attitude of partnership towards us as a future minority shareholder.”

Cobepa also stood out for their experience in the pan-European buy-and-build sector and the French market, their understanding of the challenge with a change of logistics provider, which they had experienced themselves with one of their portfolio companies, as well as their experience with value-added distribution and fast and pragmatic due diligence.

Cobepa, in turn, valued SmartSD’s track record and USP, regarding the company as the best value-added B2B distribution platform for security and fire safety equipment in the Benelux region and France. The investor recognised the potential to more than double the business organically in its current core regions over the next five years.

 

From regional to global

The Cobepa acquisition showcases how Smile Invest’s impact transforms regional companies into international players. “Private equity can offer much value,” says Cauberghe. “It brings a fully aligned partner on board with new insights, a wide network and a wealth of experience for the founders, allowing them to accelerate their growth and de-risk their initial investments. During our ownership, the most impactful change we brought to SmartSD was taking on the risk to enter the French market and investing in building up the local team and executing their first smaller acquisitions.”

With the Benelux region comprising relatively small countries, Bart Cauberghe points out that when entrepreneurs build a business there, they can easily reach the limits of their local markets. “For example, the Netherlands has 20 million people and Belgium has 10 million, so you need to think internationally. Large companies like to acquire companies here as they already have an international mindset. The benefit for entrepreneurs is that instead of selling their companies when they reach a ceiling, a private equity investor allows them to monetise the hard work they’ve put into their companies.”

Bart Cauberghe confirms that SmartSD’s stakeholders are committed to the next growth phase alongside Cobepa, and will continue to provide their customers with superior products and services. “The continued support of SmartSD’s vendor partners has been key to its growth while the trust of customers has been integral to its success”, he says. “Ultimately, in our business, it's all about the people and having the right chemistry, because you can have a great company and a good market, but if you don't have the right management or there isn’t a good fit between the investor and the managers, trust will be lacking and it won’t work.”

 

Future value creation for SmartSD

Going forward, the company will focus on winning market share with its 100 percent digital, asset-light and strong technical support business model. “It has a proven blueprint that can be expanded to other countries and there are many opportunities now to accelerate growth through M&A. Additionally, SmartSD has a strong financial profile with a track record of high, double-digit organic growth, positive operating leverage supporting superior and growing margins and high free cash flow conversion”, Cauberghe says.

“We reinvested as a minority investor because we still see huge potential. The increasing complexity of technology and products and the pace of innovation, such as integrating multiple products from different providers into one seamless solution, plays in SmartSD’s favour, as this requires deep technical knowledge. There’s also an opportunity to grow the European market as it has what I call ‘white space’ when you compare it to the US or UK because the continent is still considered quite safe. Many European buildings lack security systems or have outdated ones and perhaps one out of five homes has a security system. We believe in a focused approach of building critical mass - first expanding in regions where a product portfolio fits best. So, the current focus is on France and Southern Europe, with the DACH or another region potentially a target for the mid-term.”

Smile Invest - SmartSD