THE Business Growth Fund, backed by the big five banks, is looking to almost double its team of Scottish investment managers in a sign that companies are showing a greater appetite for equity to finance their plans.
Simon Munro, Scottish director, wants to add four to his current complement of five across its Aberdeen and Edinburgh offices.
The fund, launched by the UK government last year to take equity stakes in growing companies, has already invested £100 million in 18 deals across Britain.
“That is not bad going from a standing start,” said Munro, who joined the BGF after a career spent mainly in private equity and corporate finance.
“It is just the beginning. A lot of companies have come out of the credit crunch in good shape.”
Chief executive Stephen Welton said the fund was quickly establishing its worth. “That is £100m that would not have gone into the economy,” he told those attending a reception in Edinburgh last week.
“Our goal is to invest £200m to £300m a year. We believe we have a compelling proposition as a long-term provider of capital and I am convinced we are on the right track.”
In exchange for an equity stake of at least 10 per cent and a seat on the board, the fund will pump between £2m and £10m into fast-growing companies. It was set up by Barclays, HSBC, Lloyds Banking Group, Royal Bank of Scotland and Standard Chartered, who have provided £2.5 billion to invest in businesses that turn over between £5m and £50m a year.
Munro said the outlook was reasonably positive, but he needed to raise the profile of the BGF to prospective clients. Audrey Baxter, of the eponymous food group, was appointed a non-executive director to the UK board last August.
“We provide alternative funding and we are willing to be a long-term investor for up to ten years if that is what companies want and what is deemed appropriate,” said Munro, who has been signing up partners including Scottish Enterprise and Scottish Equity Partners (SEP).
BGF teamed up with SEP to invest in cloud computing firm SkyDox and has also provided funding to AFG Media, maker of Morphsuits, to help it expand overseas.
The Scottish team held a strategy meeting last week to consider what the market requires, he said. “I think we will see a much busier market over the next 12 months.”
Welton said the fund was receiving huge support from the banks. “It is easy to criticise the bank, but they have provided the capital for us,” he said. He was optimistic about the opportunities that the BGF would face in spite of the downturn in the economy. “There is no shortage of entrepreneurial talent in the UK,” he said.
He added that Scottish interest in the BGF’s services meant that other offices could be added to the existing two locations.