Mark Freer, Investment Director in Birmingham, addresses some commonly asked questions about The Business Growth Fund.
How would you differentiate BGF from other private equity firms?
BGF was set-up to provide growing companies with a new funding option, one that differed from traditional private equity in a number of ways:
- We see ourselves as a supportive partner and therefore we make investments in return for a minority stake – so that the management team remain in control.
- Our balance sheet funding and less geared funding structures means we are able to make long-term investments – this means that there is less pressure on the management team to deliver aggressive forecasts over a short timeframe in anticipation of an early exit.
- Our flexible funding structures can provide further liquidity to shareholders during the investment period.
Whose money are you investing?
We have capital of up to £2.5bn to invest, provided by our shareholder banks – Barclays, HSBC, Lloyds, RBS and Standard Chartered. We are managed completely autonomously from our shareholders.
What are the key things you look for in any new investment opportunity?
The integrity and capabilities of the CEO and management team are critical. We look for teams that have a strong track record, are passionate and ambitious about their business and with whom we can align our interests.
Growth potential is also an important ingredient and we work with businesses to identify ways that we can unlock this, either organically or through acquisition.
How much can you invest over the lifetime of an investment?
Our minimum investment is £2m, with no restriction on how much we can invest over the lifetime of our investment. Our largest investment today is £22m.
How many deals have you done in the last 12 months and how much money have you invested?
Over the past 12 months, the Midlands team has completed 20 deals – including new and follow-on investments – and invested a total of more than £80m in Midlands-based businesses. 2015 was a record year for us, and we have had a strong start to 2016, with the completion of 5 new investments. Across the UK, BGF has backed over 120 businesses and invested close to £800m in new and follow-on investments.
Have you had any exits yet and how do you help your investee companies prepare for exit?
We have completed 7 exits across the BGF national portfolio, with each making a good return for all shareholders. These exits came along earlier than we might have anticipated, and while BGF would have been happy to continue to back these businesses, the management teams were keen to seek an exit.
Preparation for sale is an important area where BGF can add value to our investee companies. We see our role as helping the management team bring focus to their business, in particular improving the Management Information in the business, so that we can demonstrate to a potential buyer that the business is valuable as well as profitable.
A trusted and experienced adviser can be invaluable in supporting this process, and achieve an excellent outcome for all shareholders.