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16/05/2012 - Business Growth Fund Steps Up Investment Plans

It has been announced that the Business Growth Fund (BGF) aims to make in the region of 25 investments this year, confirmed in a statement by the Fund's Chief Executive made the announcement.

The BGF is a £2.5 billion, government sponsored equity investment programme established to meet the growth finance needs of UK companies. Investments are made in small and medium-sized UK businesses, offering a collaborative approach to financing growth and working closely with the companies in which it invests.

In summary, the BGF will:

• invest between £2 million and £10 million in return for an equity stake of between 10% and 50% in the business and a seat on the board;
• invest in established UK companies with sales of approximately £5 million up to £100 million per annum;
• have enough capital and resources at hand to move very quickly for the right opportunities;
• offer longer-term funding over five to seven years or more, investing off its own balance sheet;
• develop a partnership approach with investee businesses, agreeing shared goals and objectives from the outset;
• look for businesses with evidence of a strong track record and demonstrable growth potential;
• carry out targeted due diligence in a cost-effective and timely manner; and
• consider investment opportunities and businesses in all sectors, apart from financial services and real estate.

The main focus of the Fund will be areas of the economy that have significant long-term potential for growth. Eligible sectors will include high-tech manufacturing, software and electronics, leisure and tourism, renewable energy and cleantech, healthcare and life sciences, industrial and business services, outsourcing, and digital businesses. However, the BGF will also support businesses with strong credentials in other sectors.

The minimum qualifying turnover criterion for applicant businesses is £5 million.

The Fund made its first investments in October last year, and has already put money into six companies since the start of 2012.

Chief Executive Stephen Welton hopes to hit around 40 investments a year as soon as possible, predicting the fund could be putting 350 million pounds to work annually.

"If the demand is there, we can expand and if we can prove it works, other people will start looking at this market," he told Reuters in an interview.

BGF-commissioned research found there were 25,000 companies in the UK in its 2.5-million to 100-million-pound annual turnover target group, 4,000 of which also met its criteria of growth of more than 10 percent for two of the last three years.

"There is no structural source of capital to address that market," said Welton. "Everyone (who used to provide capital) moved upscale, and the bottom end of the market, the less sexy end, became disenfranchised."

"The question is can you convert that potential demand into actual investment," said Welton. "Then it is how do we start to manage the risk, how do you manage a portfolio of 100-200 companies. That is the big risk, the big challenge."

"There is no reason why we can't generate multiple-times returns over a long period," he said.

Applications may be submitted at any time.

Click here for more details about the programme (opens in new window).

Source: uk.news.yahoo.com, 16/05/2012

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