Fund enjoys best ever quarter
BGF says demand growing for capital as milestone reached
Chief executive Stephen Welton (left) says it has defied those who said there was no demand for long term finance among these companies, adding that the fund is now invested in some of the “great British companies of the future”.
The BGF provided £71m of equity capital in the first three months of this year and says underlying demand and momentum is growing with the fund now accounting for one in three of every investment made in its sector of the market.
The latest quarter has seen it pass £500m invested in British firms since its launch in 2011, of which £100m has helped finance 16 businesses in Scotland.
It was set up by five of the biggest high street banks to fill a funding gap for Britain’s growing SMEs. It has invested in a diverse portfolio of almost 100 companies including manufacturers, restaurants, retailers and technology providers.
BGF works similarly to a private equity firm, making initial investments of between £2m and £10m and can provide additional funding to support further growth. It takes a minority equity stake and a seat on the board for a BGF director. It is an independent company with capital of up to £2.5 billion and is backed by Barclays, HSBC, Lloyds, RBS and Standard Chartered. BGF is managed autonomously with an independent management team.
Capital is provided to finance projects such as the purchase of new machinery, expansion into new markets, fund acquisitions and recruit staff.
Nationwide, BGF committed £250 million in the last year alone through its network of eight offices.
Mr Welton said the BGF was helping create a German-style Mittelstand – a community of smaller and medium sized enterprises providing the engine of growth.
Recent research from accountancy and business management firm BDO shows there are now more than 35,000 medium-sized firms in the UK, up from 20,000 in the last five years. These mid-sized companies are now generating more sales than in Germany.
They now employ 9.3m people in the UK, compared to just under 9.2m in Germany, 3.8m people in Italy and almost 2.5m in France.
Mr Welton said: “BGF is proud to work with some of Britain’s most exciting and ambitious entrepreneurs. When BGF launched in 2011, smaller and mid-sized companies were largely overlooked by equity investors, access to long-term capital was scarce, and the perception was that demand was non-existent.
“That was completely wrong and we have seen dramatic change over the last three years. The £500m that BGF has rapidly invested would not have been provided without us. That has driven not only investment, but created thousands more jobs in our portfolio companies and unlocked tens of millions of additional debt capacity.”
“I have no doubt that many of the great British companies of the future are already in our portfolio and we have only just begun.”
The Scottish firms backed by the BGF include Duncan & Todd which has grown to become one of Scotland’s largest independent optical chains. BGF invested £5.6m in December 2013 taking a minority stake.
Since then, the business has acquired Gunn & Galbraith, an independent optical store in Dunfermline in May 2014 and 20:20 Opticians, a six branch retail group, consisting of four sites in Edinburgh and two in Glasgow. In addition, the business has recently completed a £1m upgrade of its manufacturing facility in Aberdeen, doubling the groups manufacturing capacity.
Another beneficiary was M Squared based at the West of Scotland Science Park in Glasgow. It explores, develops, and manufactures next-generation lasers and photonic instruments. In April 2012 BGF invested £3.85m of growth capital in the business, and added a further £750,000 of funding in February this year.
Mr Munro said: “Businesses that we have already backed are growing fast, gaining market share and demonstrating that they are capable of competing on a national and international stage, given the right backing and support.”
Alongside investment BGF also provides portfolio businesses with practical and strategic support directly through the investment team and BGF’s Talent Network, comprising nearly 3,000 senior business leaders. To date, nearly 70 people from BGF’s Talent Network have been appointed by portfolio companies.