Posted on Monday 12 March 2012 by Symon Ross

Business Growth Fund wants to hear from Northern Irish firms

More fast growing Northern Irish companies should apply for investment from the UK-wide Business Growth Fund, according to one of the fund’s senior managers.

BGF was established last year on the recommendation of the Business Finance Taskforce to help Britain’s fast growing smaller and medium sized businesses by providing long-term equity investment for businesses that don’t have enough access to this source of capital.

Andy Gregory, Regional Director for the North of England and Northern Ireland, says the fund could provide an attractive option in the province – a market he believes has been underserved in terms of private equity and venture capital.

“We want to make sure we get the message out in Northern Ireland about what we can do and what we can offer,” he told Ulster Business.

“BGF provides long term, genuine, flexible capital,” added Mr Gregory. “We’re not coming in from day one saying we want to exit in three or four years. If that is what management want to happen that’s fine, but that’s not critical from our perspective.”

BGF is an independent company with capital of up to £2.5bn, backed by five of the UK’s main banking groups – Barclays, HSBC, Lloyds, RBS, and Standard Chartered.

While this relationship can often help BGF to unlock bank debt for companies, Gregory is keen to stress that the fund is managed completely autonomously by an independent management team.

“They provide the capital, which is fantastic, but we have been set up as entirely an autonomous operation independent of both government and our banks,” he said.

The Business Growth Fund opened for business in May 2011 and Gregory joined in September last year.

Previously an Investment Partner with Key Capital Partners in Manchester, he notes that cities such as Manchester and Leeds have larger and more established corporate finance communities, but that the fund is now actively engaging with other centres such as Hull, Newcastle and Belfast.

The fund has made four investments so far and Gregory says it expects to do a few more deals by the close of the first quarter. None of the transactions so far have been in Northern Ireland.

“It is not for the lack of trying. We have had a few approaches which we’ve put a long time into from a couple of companies based in Belfast, but for different reasons they haven’t progressed,” he explains.

“But the quality of advisers on the ground is excellent, we’ve a very positive response from all of the people we’ve met so far and they see the potential for what we could achieve. There certainly are companies out there in Northern Ireland who fit with what we want to do.”

The BGF invests in all sectors of the economy with the exception of financial services and property, with the key criteria for its investments being the potential for growth. Its pipeline includes companies in sectors such as IT, healthcare and manufacturing.
The fund typically invests in companies with turnover of £5m to £10m.

“Unlike most funds we have a broad remit. We can invest between £2m and £10m for as much as 40 per cent or as little as 10 per cent. That means we could be investing in companies with a £4m or £5m valuation all the way up to a £100m valuation,” said Gregory.

“It is much more about the growth opportunity and targeting those companies with good management teams, who are well positioned, and who have scalable businesses.”

Recognising companies need more than just money to succeed the fund provides practical and strategic support through its investment team and wider BGF infrastructure, through non-executive involvement at board level, and through access to its broader networks, which often adds confidence and capabilities.

Gregory believes BGF’s partnership approach, and the fact it takes a minority stake in its investments, should play well in Northern Ireland, where entrepreneurs are notoriously reluctant to sell equity in their companies.

“The economics are important, but our ethos is just as important,” he said. “Unlike the majority of private equity players who come in to buy businesses, we are not of that mindset. We come in as a junior funding partner to support management. That gets a much warmer reception from management, who sense we are less of a threat.”

Andy Gregory will be one of the speakers at the Northern Ireland Business of Finance Conference 2012, which takes place at the Europa Hotel on March 29.

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