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Building British Business Review 2011/12


Contents 01

Bridging the Equity Gaps

This is still a new venture, with minimal track record and little profit. But if the company is growing, a significant capital injection may be required. The second equity gap. Angel investors and smaller venture capital funds are best placed to meet this need and provide the support the business requires.

6

An established trading record can also mean that alternative asset-backed sources of finance such as invoice discounting and factoring become available.

The company should by now have a strong relationship with its bank, and longer-term debt finance will be available. But: • it will not be limitless, and it may not be enough to fund growth plans; • debt alone may not be the most appropriate funding for the next stage of the company’s development; • a fledgling business needs to be adequately capitalised as the future is not always predictable.

Nearly all successful entrepreneurs understand the importance of seeking external guidance. A mentor can add great value at this early stage.

Turnover <500K Employees 3–15 Profit Break even Turnover 0 Employees 1–2 Profit 0

Invest

5

With stronger revenues and an established customer base, some bank debt should become available, again often with additional security required.

Inform

3

A relationship with a bank starts to develop. As revenues become predictable a commercial overdraft should become available, but a lender will probably require security and a personal guarantee.

4

02

Chairman’s Foreword: Welcome to BGF’s first Annual Review.

04

BGF facts & figures: The UK has a strong base of successful SMEs but they need more long-term capital and greater support.

06

CEO’s Review: Our first year – building a team, setting up a nationwide infrastructure and making our first investments.

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14

The Conversation: BGF’s Head of Investments, Richard Bishop and Sir Richard Lambert discuss the realities of investing in British SMEs.

15

Our investments: BGF’s investment process – how we invest and our portfolio to date.

Case Studies: Six of our early investments.

20 Who we have been working with:

Inspire

2

The first equity gap. There are a few specific start-up funds and government-backed initiatives but for many new entrepreneurs the most flexible and realistic sources of funding will be savings, friends and family, overdrafts and credit cards.

Grow

1

Building British Business Review 2011/12

24 The big question: What drives British businesses? The founders of some of BGF’s portfolio companies and BGF’s own non-executive directors discuss what inspired them, and the advice they would give to today’s entrepreneurs.

30 More than just money: How BGF provides more than just capital to help grow successful British businesses.

32 The Board: Ensuring that BGF has effective infrastructure, strong internal governance and appropriate investment strategies.


Bridging the Equity Gaps Management information demands are growing and strong systems will be needed if the company is to continue growing. Now is the time to appoint a dedicated finance director if you don’t have one already.

1 2 3

The first equity gap. There are a few specific start-up funds and government-backed initiatives but for many new entrepreneurs the most flexible and realistic sources of funding will be savings, friends and family, overdrafts and credit cards. A relationship with a bank starts to develop. As revenues become predictable a commercial overdraft should become available, but a lender will probably require security and a personal guarantee.

This is still a new venture, with minimal track record and little profit. But if the company is growing, a significant capital injection may be required. The second equity gap. Angel investors and smaller venture capital funds are best placed to meet this need and provide the support the business requires.

4

With stronger revenues and an established customer base, some bank debt should become available, again often with additional security required.

5

An established trading record can also mean that alternative asset-backed sources of finance such as invoice discounting and factoring become available.

6

The company should by now have a strong relationship with its bank, and longer-term debt finance will be available. But: • it will not be limitless, and it may not be enough to fund growth plans; • debt alone may not be the most appropriate funding for the next stage of the company’s development; • a fledgling business needs to be adequately capitalised as the future is not always predictable.

Accountants, lawyers and bankers can help with much more than simple transactions. Now is the time to start making more use of the strategic advice they can offer.

Turnover +/- > £100m Employees 150+ Profit Great

A stock-market listing, a private equity buy-out, a trade sale, or continued life as a large, successful privately owned company. Great companies take many forms, but they have all made this journey, taken risks and seized opportunities. They have bridged the equity gaps.

Turnover £5m+ Employees 25–150 Profit £500k+

Nearly all successful entrepreneurs understand the importance of seeking external guidance. A mentor can add great value at this early stage.

Turnover £2–5m Employees 20–80 Profit Still small

Turnover <500K Employees 3–15 Profit Break even Turnover 0 Employees 1–2 Profit 0

This is a critical time. The entrepreneur has achieved early success. But the company has the potential to continue growing – making bigger profits, employing more people, making a greater contribution. This is the greatest equity gap. This is where BGF, as a junior partner, can provide the patient capital, active support and the confidence all entrepreneurs need to bridge the gap and make sure their company achieves its full potential.


Chairman’s Foreword 03

A hypothetical question: What would you do if somebody offered to invest millions in your company, provide access to their business expertise and network but leave you in control?

Not a hypothetical question: What would you do if somebody offered to invest millions in your company, provide access to their business expertise and network but leave you in control?

Any more questions? 0845 266 8860 bgf.co.uk

“The ambition of the companies we are talking to across the whole of the UK is undoubted,” says chairman, Sir Nigel Rudd. “These are British businesses that can grow rapidly and are the dynamic heartbeat of the economy.” During the past twenty years equity investment fell out of fashion for the owners of most small and medium sized businesses. This was perfectly understandable. Lenders were falling over themselves to provide debt. Borrowing money was easy. New finance was quick to secure and the entrepreneur could get on with running their business. There is no denying that these were easier times to raise money for speculative ventures, but I would argue that during this time too many companies began to lose perspective on one of the most important elements of business – understanding risk. When you really understand the risk involved in a project it becomes much easier to identify and secure the most appropriate funding. If the project is relatively safe, the resultant cash flows are predictable and the returns consistent, then traditional bank debt or asset-backed lending may well be ideal. But that is not

always the case and so in other scenarios an equity partner can often play a valuable role. I had been conscious that there was a shortage of capital for small and medium sized businesses for a number of years, and that major institutional investors had moved out of this space with no one new coming in to fill the gap. I was one of a number of business people who talked to politicians across all parties, and to anyone else who would listen, arguing that a new institution was needed, one with a national profile but strong regional presence, with deep pockets and an appetite to make a real difference. When five of the largest banks came together, sharing this vision, and asked me to become chairman of this new institution I jumped at the opportunity. BGF was first mentioned as a recommendation in the report of the Business Finance Taskforce in October 2010. I officially joined in February 2011,

and just three months later we launched. I would like to pay my thanks to everyone involved in setting up this new financial institution from scratch, in such a short period of time; it really was a truly impressive achievement. Alongside building the infrastructure, securing regulatory approvals, hiring over 60 people and opening six offices across the UK, we also needed to get the offering right. One of the side effects of equity’s loss of profile has been that a number of commonly held myths and misconceptions have emerged. Equity investment is typically seen as too expensive and too onerous. Entrepreneurs assume that they will lose control of their business. And it is sometimes seen as short-term, driving a business to the timetable of external investors not to that of the management’s strategy. The truth is that it rarely is, and certainly doesn’t have to be, any of these things. BGF only ever takes a minority stake. Our investment is the strongest vote of confidence a management team could receive. We invest directly from our own balance sheet, so there is no external timetable. We provide long-term capital, we are happy to invest for seven-to-ten years. And we are working extremely hard to make the investment process as simple and efficient as possible. We believe that BGF’s approach is exactly what many entrepreneurs are looking for and the evidence so far backs this up. Over the past few months we have been seeing a real demand for growth capital among the UK’s high growth, smaller and medium sized businesses. The ambition of the companies we are talking to across the whole of the UK is undoubted. These are British businesses that can grow rapidly and are the dynamic heartbeat of the economy. They actively need, and deserve, the full and vocal support of everyone with a stake in the success of the British economy. BGF is already making an impact and, with continued encouragement and active support from the business community and beyond, we believe that we can grow to become a significant and lasting investor in UK companies. I


04

Facts & Figures 05



“If the UK could narrow the gap so that there are both more “gazelles,” but also so that more slow-growing firms reach steady state growth rather than stagnating, they could add up to £50bn to the economy by 2020” CBI, 2011

The UK has a strong base of successful small and medium-sized companies... Sectoral distribution of high growth companies Retail

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Manufacturing

The High Growth Companies Barometer

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Ser ns Co

Fewer than first round growth capital investments of £2m–£10m made in either 2010 or 2011. Over 45 different organisations investing. This demonstrates the need for more capital and a new substantial and structural approach to the problem.

Regional distribution of high growth companies South East

25,000 20,000

Ea

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15,000

An

6%

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ia

Wal es

10,000

Propert

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BGF has been working with Experian pH to identify and analyse the UK’s universe of high growth companies. Specifically we have sought to find companies with a turnover between £2.5m and £100m, and with reported growth of 10% per annum. We believe that the number and distribution of these companies is a strong indicator of the current economic strength and future success of the UK economy. These businesses will help drive the economy.

West M id

lands

5,000

60%

The 6% of fastest growing medium-sized businesses (MSBs) account for over 60% of new job creation among all MSBs.

London

nds

la East Mid

I No. of companies with turnover of £2.5m – £100m I No. of those companies reporting growth of 33%+ over previous three years

The number of high growth companies has fallen from 6,559 to 3,945 since 2008. We need to urgently arrest this decline.

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est South W

2010

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09

ast Scotla nd

08

th E

07

Nor

06

W es

05

rth

04

No

03

BGF provides the scale and longterm commitment to really make a difference. We have the capital to dramatically expand the market and investment options, to the benefit of all SMEs.

50

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Wh

25,000 companies with a turnover of £2.5m–£100m 4,000 companies growing by 33% in 3 years and at least 10% in two of those 3 years 400+ looking for significant finance for growth each year

... but these companies have suffered from a lack of significant growth capital provision.

Mid-sized companies represent less than 1% of all firms BUT account for 22% of all economic revenue and 16% of total employment.

11 investments made by BGF since October 2011. With 9 so far in 2012.

11

6 BGF offices across the UK. 35 experienced investors recruited to BGF’s regional teams. £2.5bn committed by BGF’s shareholders to fund investments.

x35



£2.5bn

BGF’s investment pace is increasing to an average of two deals per month. The current platform will be able to make up to 40 initial investments each year. When follow-on funding is included, BGF could be investing £300–400m annually in fast growing UK companies.


06

CEO’s Review 07

Building British Business Our first year Stephen Welton The idea that there is a general lack of funding for fast growing, profitable small companies was first identified over 80 years ago. Famously the Macmillan Report of 1931 found, “a chronic shortage of long-term investment capital for small and medium-sized enterprises”, which quickly became known as the “Macmillan Gap”. Numerous public and private sector initiatives have come and gone since then with varying degrees of effectiveness. For a period of time ICFC and its successor 3i, provided an institutional answer. Later the availability of cheap and plentiful debt, often lent against what would be regarded today as a project with an equity risk profile, filled, or at least masked, the need. But today, once again, there is in Britain a real need for sources of long-term, patient capital for growing small and medium-sized businesses. This is the need that BGF is seeking to meet. These businesses have enjoyed an unprecedented amount of attention in recent years. About time too, many people would say. From research undertaken by NESTA we know that growing SMEs are among the most important and effective job creators in the UK economy. Analysis by Experian has shown that a great many SMEs have high growth potential but never go on to fulfil it. And a recent report by the CBI suggested that if we could get more SMEs to grow, and more to grow faster, they could add up to £50bn to the economy by 2020. Our own commissioned research indicates that there are in the region of 4,000 – 7,000 British companies with more than ten employees, and a turnover between £2.5m and £100m, that are growing at ten per cent or more year-on-year. Not all of these companies are looking for capital today,

but a good number are. And more significantly there are many that could be, and need to be, if the UK economy is going to return to long-term, sustainable growth. What is certainly true is that all these companies would benefit from, and deserve, more recognition and support. Over the past 10–20 years these companies have been let down. Whilst it is true that some great new companies have emerged, in general there has been too little focus on what these businesses actually need. What is stopping good local firms from becoming big national success stories? Access to finance provides one answer but this isn’t the whole story. There are many additional reasons. The first is that there are too many “good” excuses for deferring investment. The state of the global economy, another eurozone crisis or fears for domestic inflation, can all provide a reason to wait another year. But history shows that many great companies were created in downturns and that there is never a perfect time to invest. Secondly, many business owners simply don’t like the idea of increasing debt. Why take the risk? Which leads to my third reason: stalled ambition. Too many British business owners are happy to settle for ‘good’ and don’t see the need to push on to become ‘great’. But just as we shouldn’t solely blame the banks, we shouldn’t lay all the responsibility at the feet of the entrepreneurs. Taking a company to the next stage can be daunting. At the very least, running a bigger company requires more resources and support. Knowing where to turn and who to trust are critical. This is BGF’s mission. We want to help businesses focus on what is within their control and help



Our ambition is to see our investee companies grow and prosper.

them find the most appropriate way to fund their future growth. I want securing investment from BGF to be about more than just money. So, in addition to longterm capital investment, we offer companies the opportunity to meet and be guided by some of the most experienced businessmen and women and investment experts in the UK. The feedback we are getting from entrepreneurs suggests that our partnership approach and sharing of expertise, guidance and contacts is almost as valuable as the capital we inject into their businesses. We started investing last October and as of May 2012 BGF has made eleven investments and has committed over £55m of new money to fund the expansion of fast growing British firms. We are currently averaging two investments a month. BGF’s ambition, in the first instance, is to be capable of making 40 initial investments a year, investing around £240m per annum. Together with follow-on capital for existing investee companies, the annual level of investment could reach £300–400 million. To put this in context, in 2011 fewer than 50 first round, growth capital investments were made in companies within BGF’s target market. Even more tellingly over the past two years whilst more than 45 different entities have made growth capital investments of between £2m and £10m, only five have made more than three such investments. There simply hasn’t been enough capacity to create profile and momentum for minority equity providers, and therefore, to see the market expand. This is why, from the outset, we have sought to create a long-term structural solution to what is most definitely a long- term structural problem. When you add in the related debt

funding this unlocks, the impact on the UK economy will be meaningful. We need to provide capital in an attractive way that works for ambitious business owners. That is why we only ever take a minority stake; we are building, not buying, businesses. The entrepreneur stays in control; BGF is the junior partner. We can be flexible in how we structure our investments and because we are funding from our own balance sheet we can invest for the long-term. We genuinely believe that this is the patient capital that fast growing companies have been looking for. The second element has been to build a network from which we can grow, and from which we can support the companies we invest in. We believe that small and medium-sized businesses need their sources of finance to operate as locally as possible but to think globally. We have built an initial team of 35 experienced investors, based in six offices across the UK (Birmingham, Bristol, Edinburgh, London, Manchester and Aberdeen). This team gives us the ability to find new investment opportunities and to forge long-term supportive relationships with companies and with the strong financial advisory communities that exist in all our major cities. However, we know that stand-alone regional players can find it difficult to provide the national, and often international, perspective and network that a growing company requires. Nearly every company that we invest in will have international ambitions, and none will be content solely operating in their immediate local market. These companies need a partner with national presence and international understanding. BGF is that too. The UK’s heritage as a trading nation, which is open and outward looking, is one

we want to harness. The final element is to collaborate closely with others. This too is central to our philosophy. We want to ensure that funding is more generally available where it is most needed. Two good examples of this: Firstly, whilst BGF does not fund start-ups, we do believe that the creation of brand new businesses is where it all begins. That is why we have committed, as a key sponsor, to work with the BBAA to build the ecosystem for start-ups, helping to bring together Angel Investors with entrepreneurs, supported by government tax policy. Secondly, we have a very practical approach, to working with our shareholders and banks to unlock the debt potential of SMEs on the back of our longterm capital investment. With a stronger balance sheet, enhanced board and greater governance, the companies we back are more creditworthy. This creates a virtuous equity cycle that both funds growth and unlocks more debt capacity at the same time. Our challenge is significant, but the prize is greater still. BGF wants and needs to be a champion for UK SMEs. They are both the lifeblood and future of a vibrant economy. So this review is about our mission: how and who we invest in; how we work with companies to help them grow; our broader ambitions to inspire today’s entrepreneurs to achieve more and tomorrow’s business owners to take their first steps; and the role we are looking to play as a trusted source of information to educate and inform both business owners and the wider economy about the importance and the needs of fast growing SMEs. We are Building British Business. Stephen Welton


08

09

We provide long-term capital of £2m–£10m for ambitious, small and medium-sized companies looking to grow.


10

Invest 11

Sir Richard Lambert

Richard Bishop – BGF Head of Investments

Sir Richard Lambert has held some of the highest roles in the media, business and public policy. He served as Director General of the CBI, from 2006–2011, following three years as an external member of the Bank of England’s Monetary Policy Committee. Prior to this Sir Richard spent over 30 years with the Financial Times culminating with a decade as the paper’s editor. He currently sits on the board of Business in the Community, and is the Chancellor of the University of Warwick.

Richard Bishop joined BGF in June 2011 after 21 years with 3i where he was a founding partner of the global growth capital business. He has been on the boards of many of the companies 3i has invested in over the years, and has vast experience of helping companies to achieve their growth potential. Richard is based in BGF’s Birmingham office.

The Conversation: Sir Richard Lambert and Richard Bishop talk business RB: I think there are two types of SMEs. There are those that start small, stay small, and are very happy being small. They might employ somewhere between one and ten people and effectively it’s a way of creating an income for the owner, and enabling them to control their own destiny; the definition of working for yourself. These companies generally don’t want or need our investment. The difference between those and the businesses that we are looking to back is probably ambition. RL: NESTA did a memorable study a few years back that showed that it is just six per cent of companies that have created 60% of the jobs in the last ten years. That is why those high growth companies are so critical, and so important now.

RB: The people that we are looking to back have a burning ambition to run their business. By the time that we get to them they’re probably turning over close to £5m and they have already decided that they want a bigger business. So we are looking, over the next ten years, to build businesses of real scale, some of which I expect will become household names over that period. RL: That’s interesting. Of course there are many medium-sized companies out there that are never going to change or grow very much. They are perfectly happy just ticking along. Then there are others that grow very rapidly from, say, 100 employees to 300. That’s really exciting. Presumably these are the companies you’re seeing.

RB: Yes it is. One of the most recent businesses that we invested in is making around £10m in profit, so it’s a significant business but it’s still founder-run and founder-owned. He was looking for capital but he also felt that if he was going to increase profit to £20m or more there was a lot more that he needed, such as a proper chairman, good governance, and access to more IT resources, that would enable him to build a business that can scale, safely and profitably, rather than overtrade ... We often see businesses that are successfully growing the top line but haven’t grown their infrastructure quickly enough to be able to go on to the next stage.

RL: Another thing that I think is interesting is that studies looking for trends among these companies have rarely found any common characteristics, apart from their entrepreneurial leadership. But they have found these entrepreneurs in every sector and every part of the country. I think that politicians often get it wrong when they assume that it's going to be high tech and slick service companies that grow rapidly and are successful but actually entrepreneurs and innovation can turn cement companies into spaceships. RB: Yes, the high growth firms tend to be the ones that are more innovative and disruptive in their markets. But those markets can be anywhere. For example, look at the new brands that have emerged from a supposedly commodity market

such as soft drinks. This has been a very staid sector for years and years, but then someone has a vision of how can they can do things differently. RL: So if you put a young, fast growing business that may be turning over a few tens of millions up against some very big competitors, that is not necessarily a bad place for that business to be. They are up against competitors that have been doing the same thing for many, many years in the same way and that are very corporate. Bigger companies are rarely as fleet of foot. They don’t have that burning ambition that an entrepreneur has. RB: The vision, strategy and ability to implement must be there too. We look for a clear strategy. Can they continue to

drive top line growth? And can they do it profitably and sustainably? That requires mobility to keep evolving the management team, not just bringing new people in and it also means working out when it’s the right time for other people to move on. This can sometimes be the founding members that helped get the business going initially. A business of £30m is very different to a business of £5m, and one of £60m is different again. So the ability to keep evolving the business, to recruit talent and to nurture it in the business is very, very important. RL: My sense is that businesses like these haven’t been well served by the capital markets over recent years. And I think that the private equity industry has not served these companies well either. There has


12

The Conversation:

been a move away from growth capital towards doing buy-outs, and from smaller buy-outs to larger buy-outs. And before the crash, increasing levels of leverage drove returns, rather than using minority stakes to fuel growth. RB: Yes. And I can understand why that is. It is easier to buy a business than it is to invest in one. RL: So are the transaction costs of what you’re doing, quite high? RB: They have the risk of being high but we are focused on driving them down. And we are saying that this is a lower risk way of investing, because the founder is not taking all his money away but keeping the majority of cash in the business. This demonstrates the scale of his commitment. RL: Is this one of the conditions that you require? How strongly do you insist on this? RB: It is fundamental. When you’re a minority shareholder, alignment of interest is everything. We all sweat over the legal documents in the run up to completing an investment, but unless you are aligned on the way in, and you stay aligned until the day it’s the right time to get out, then it won’t work.

Invest 13





RL: …the lessons for the UK are as much about nurturing a culture of long-term entrepreneurship and business building, as they are about finding structural and institutional solutions.

RL: And you have a person on the board as well? RB: Yes, we always have a BGF employee on the board, usually one of our senior investors. And we usually look to appoint an external non-executive as well, who can bring sector credibility or some experience in building a business in some of the areas where the entrepreneur is looking to do so. Already some of the chairmen that we are working with are of the highest calibre and it’s no great chore to sell these ideas and these people to the entrepreneurs, because even if they are reticent before they meet them, once they’ve met the sort of people we can introduce then they are usually hugely enthusiastic about working with them. RL: And presumably they need the money, when they need the money. I mean you need to be fairly agile in that sense? There is no point in saying in three years’ time you can ... RB: That’s right, and what we’re saying to people is look, within four-to-six weeks of agreeing the terms of a deal we aim to provide the capital. RL: A lot of policy people are focusing on Germany at the moment because it is a widely held belief in the UK that Germany looks after their SMEs and mid-sized companies much better than we do. They

have more banks, their banking system is more local, and above all else the thinking is much longer term. RB: I worked in Germany for a couple of years. I think that it’s as much to do with the culture of building businesses rather than selling businesses. So there are many, many businesses of real scale in Germany that are still entirely privately owned. In the UK these businesses would have either been sold or floated. Germany has much more of a culture of building a businesses for the longer term and consequently the financing industry has had to learn to sit longer term with them. RL: Right ... so the egg comes before the chicken. And that means the lessons for the UK are as much about nurturing a culture of long-term entrepreneurship and business building, as they are about finding structural and institutional solutions. RB: I met a lot of German entrepreneurs who were second or third generation. They had no intention of selling their businesses in the foreseeable period, because they were very confident in what they were doing and they wanted to keep building it. That is why I think BGF is so well placed. We’re happy to invest on a much longer-term basis than conventional investors. We have the great benefit of investing from our own balance sheet,

RB: …we can and will invest for five-toten years, rather than on a short-term basis. And that really resonates with entrepreneurs because most of them don’t know when will be the right time to sell up.

with the capital that we draw down from our shareholders. So we can invest for five-to-ten years, rather than on a shortterm basis. And that really resonates with entrepreneurs because most of them don’t know when will be the right time to sell up. Our ability to provide additional capital in later years as well, is also really attractive because at the moment people are assuming that for the next two or three years the market is going to be tough. So they don’t want to take capital now, thinking that they might have to sell in 2015, potentially before there sector has seen any real recovery. In some ways these follow-on investments are the easiest you ever make because it’s an absolutely known entity. You know the management, you know you can work together and you know the growth story. RL: You are also going to create a new club of entrepreneurs and that will surely become aspirational for other entrepreneurs to join because of the networks they can build amongst each other. RB: We are already seeing opportunities for businesses that we are talking to, to trade with each other and support each other. Our mission here is to support the best and most ambitious businesses, but then to help them support each other in a big culture of entrepreneurship.

RL: I’m an optimist naturally. And when I was at the CBI the thing that I really took comfort from when travelling around the country was that there are actually a lot of companies, mainly private companies, that you have never heard about, companies that the Department of Business don’t know exist, and that are doing really exciting stuff. You’ve got a great job. RB: It’s the best job in the world, I think, and the most exciting part of it is meeting these fantastic businesses. RL: And what is it like now, while business conditions are pretty uncertain? Companies are pretty risk averse at the moment, so how does it feel when you’re out and about? RB: We are getting a very good response at the moment. There are lots of businesses that set aside what they see in the media. They are saying “I know I can grow. I can see where my next customer is coming from. I can see where my next market is going to be”. At a micro level – they see growth. There are strong pockets of growth across the economy. And it’s going to be these innovative and ambitious entrepreneurs that are going to find them, because that’s why they get up every morning. That is why they spend 15 hours a day in their businesses. So although there is a lot of doom and gloom

at a macro level, at an individual company level there are some fantastic stories. RL: If you read the early history of ICFC, which, sadly, I have, one of the things that comes across is that they felt they had more than just a kind of economic purpose. They felt that they were doing a public good of some sort ... RB: That resonates very strongly in our business. We were launched in May 2011 with a handful of people and now we’ve got over 60. It is not only the committed capital and the opportunity to invest that has attracted people. It is also the fact that building UK businesses is great fun and has a great purpose to it. A lot of people that I’ve interviewed have said “I really like what BGF is trying to do and I want to be a part of it”. RL: Yes, yes ... and the fact it sounds a bit like a Roald Dahl children’s story? RB: Yes, The Big Friendly Giant. It’s a source of constant amusement to people that we meet but I take the view that we’re stuck with it and it’s an ice-breaker. RL: Yes, maybe it’s not so bad. I


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Invest 15

Investing in your success I We are looking for ambitious management teams with a good track record and a proven business model. I We invest £2m–10m of growth capital for a minority equity stake and a board seat, in privately owned, profitable SMEs typically with a turnover of £5m–100m. I We offer long-term funding of 5–10 years. We want to develop a meaningful partnership, agreeing shared goals and objectives from the outset. I We invest in all business sectors with the exception of financial services and property development. I With £2.5bn of committed capital we work hard to move very quickly for the right opportunities. I We have a strong local approach. With six offices across the UK, we strive to be close and relevant to the businesses we invest in.

Our investment process I We seek to provide early feedback on all applications and make practical suggestions for alternative options if we cannot invest ourselves.

Some of our early investments Benefex INVESTMENT DATE

TURNOVER

October 2011

£5–10m

INVESTMENT

NUMBER OF EMPLOYEES

£4.2m

60

SECTOR

BGF INVESTORS

I We will undertake due diligence on all investments and make this as streamlined and focused as we can.

Software

I We have the flexibility to structure investments to meet individual needs; from ordinary shares to loan stock.

Southampton

Paul Oldham, Erin Hallock, Rodney Appiah

COMPANY LOCATION

“We welcome approaches from companies early on in their planning for growth. As a partnership investor, we like to get to know the companies and people we invest in.”

Statesman Travel Benefex Statesman Travel Unruly Media*

INVESTMENT

BGF REGION

October 2011 October 2011 December 2011

£4,200,000 £4,250,000 £4,000,000

South West & South Wales London & South East London & South East

Q1 2012

GCI Com WOW! Stuff STATS Group Barburrito*

INVESTMENT DATE

INVESTMENT

BGF REGION

February 2012 March 2012 March 2012 March 2012

£10,000,000 £4,800,000 £7,800,000 £3,250,000

Midlands Midlands Scotland North, North Wales & NI

INVESTMENT DATE

INVESTMENT

BGF REGION

April 2012 May 2012 May 2012 June 2012

£3,850,000 £8,000,000 £4,000,000 £3,000,000

Scotland North, North West & NI South West & South Wales South West & South Wales

Q2 2012 … so far (1 April – 31 May)

M Squared Lasers Wear Inns Primrose Cennox * Total investment committed

I Opportunities to expand into the US with existing customers. I New pensions auto-enrolment product to be launched in 2012. I Continued investment in people and infrastructure needed to meet proven demand.

“We are entrepreneurial and ambitious, and we recognised that the business had reached the point where we needed external capital to take it to the next level and invest in key areas. Having grown the business from startup, it was critical for us to find the right partner. We chose to work with BGF because we felt that they shared our enthusiasm and ambition and offered more than just money. Advice, guidance and contacts will be invaluable.” Matt Waller, CEO Benefex

Our investments so far INVESTMENT DATE

Why BGF invested:



I We anticipate a three-month process from the first conversation with a company with a business plan and looking for capital. This equates to about four-to-six weeks from agreeing heads of terms.

Q4 2011

Benefex is software company providing online employee reward and benefit schemes that enable organisations to tailor their offer packages to individual employees, communicate effectively online with staff, and outsource administration and support. With over 50% growth year-on-year, Benefex continues to expand rapidly with turnover approaching £10m in 2012. The company currently provides services to over 500 clients, including the AA, Coca Cola and Bank of America, and manages online benefits schemes for over one million employees in more than 40 countries.

INVESTMENT DATE

TURNOVER

October 2011

£90–100m

INVESTMENT

NUMBER OF EMPLOYEES

£4.25m

145

SECTOR

BGF INVESTORS

Travel Management

Raf Goovaerts, William Gresty

COMPANY LOCATION

London

Statesman was acquired in 2007 by its current management team. Joint Managing Directors Mervyn Williamson and Jon Langley, have significant experience in the travel sector and led the management buy-out of Phoenix Travel Group, together with its subsequent sale to TQ3 Travel Solutions in 2003. Since acquiring Statesman they have grown revenues significantly and built a reputation for high levels of service and for seeking out and applying innovative solutions to set new industry standards. The BGF investment, together with additional funds from existing shareholders and support from Lloyds Banking Group, enabled the strategic acquisition of Commodore Travel and put the combined entity among the top ten UK travel management companies.

Why BGF invested: I Dynamic management team with proven track record of managing acquisitions. I Opportunity to leverage scale of the combined group to generate client acquisitions. I Potential for diversification of customer base.



“BGF has a compelling offering that will enable us to take our business to the next level. We wanted an investor that would not only provide growth capital but that would work alongside us as a partner over the long term” Mervyn Williamson, Joint MD


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Our early investments Continued Unruly Media INVESTMENT DATE

TURNOVER

December 2011

£10–20m

INVESTMENT

NUMBER OF EMPLOYEES

£4m

100

SECTOR

BGF INVESTORS

Digital Video Advertising

Marion Bernard, Chris Hodges, Rodney Appiah

COMPANY LOCATION

London

GCI Com INVESTMENT DATE

SECTOR

January 2012

Communications & Data Services

INVESTMENT

£10m

NUMBER OF EMPLOYEES

COMPANY LOCATION

220

Lincoln

BGF INVESTORS

TURNOVER

Tim Whittard, Gurinder Sunner

£45–50m

Wow! Stuff INVESTMENT DATE

TURNOVER

March 2012

£10–20m

INVESTMENT

NUMBER OF EMPLOYEES

£4.8m

100

SECTOR

BGF INVESTORS

Consumer Goods

Alistair Brew, Erin Hallock, Gurinder Sunner, Will Gresty

COMPANY LOCATION

Wolverhampton

STATS INVESTMENT DATE

TURNOVER

March 2012

£20–25m

INVESTMENT

NUMBER OF EMPLOYEES

£7.8m

135

SECTOR

BGF INVESTORS

Oil & Gas Manufacturing

Simon Munro, Mike Sibson, Richard Pugh

COMPANY LOCATION

Aberdeen

 

Unruly connects highly creative, impactful video advertising content with consumers. The success of social video campaigns for global brands including Evian’s “Roller Babies” and T-Mobile’s “Life’s for Sharing”, has demonstrated Unruly’s ability to deliver to a network of over 10,000 publisher websites, platforms such as YouTube, Twitter and Facebook, influential blogs and mobile applications. Content distributed by Unruly currently reaches 725m unique users each month. With 2011 revenues of £15m, and having been profitable since 2009, Unruly has 100 staff across nine offices and has doubled in size each year.

“Five years ago we set out to help brands capture the massive opportunity in social video and we’re delighted that such a distinguished group of investors shares our conviction. We welcome BGF to team Unruly” Scott Button, CEO

STATS is an oilfield service sector business based in Kintore, near Aberdeen. Founded by Peter Duguid and Lorraine Porter in 1998, it is an engineering-led business that provides isolation services for onshore and offshore oil and gas pipelines. Its proprietary tools, manufactured in-house, are used to plug and isolate ‘live’ sections of pipelines to enable safe pump and valve replacement and general repair and maintenance work. The ability to repair a pipeline without a shutdown and without evacuation can save tens of millions of pounds of lost production. The company employs 130 people and has grown organically and through acquisition. Its 2011 revenues of £14m are set to grow by over 75% in 2012, with much of that growth forecast in the Middle East. BGF’s investment will fund further recruitment, build out the fleet of proprietary isolation devices, and allow the business to expand its international footprint.

I Digital video advertising is one of the fastest growing categories in strategic brand development, with social video proven to be particularly effective. I High calibre team with demonsatrable ability to capture market share and grow profitably. I Proprietary IT infrastructure that enables it to target branded video content at consumers, and to measure its clients’ return on investment in brand development. I Over 220 agency clients representing over 360 brands ... well positioned to pursue an international expansion strategy.

GCI is an independent communications and data services provider. Headquartered in Lincoln, GCI has a turnover approaching £50m and employs 220 staff across nine UK offices. The group was formed in 2000 and has since grown rapidly, through a mix of organic growth and 19 strategic acquisitions. Today, it is one of the fastest growing managed communication providers in the UK with a 68% compound annual growth rate over the last two years. The company serves the rapidly expanding and converging data services and communications markets. It provides inbound and outbound telephony and data services to medium-sized corporates and smaller enterprise customers on a national basis. Its high quality, blue chip customer base includes a diverse mix of companies from a wide range of sectors, including construction, industrials, media, retail and distribution.

“In the past we have relied on bank debt or company cash reserves to finance our growth. The thought of private equity backing had not particularly appealed. BGF made us think differently. I haven’t ceded control of my business, but am in a stronger position, because of their involvement as a partner and long-term equity investor, to realise the ambitions that I have for it” Wayne Martin, Founder and CEO of GCI Com

Wow! Stuff is the leading UK toy development company behind blockbuster toys such as the Air Swimmers and My Keepon. Both of these were named in Hamley’s Top 5 toys for Christmas 2011 and Toys R Us’ USA Fab 15 list for 2011. Founded by Richard North in 2006, together with scientists Kenny McAndrew and Dr. Graeme Taylor, in five years it has developed revenues of nearly £20m and a pipeline of innovative toys. Wow! Stuff is now achieving a compound annual growth rate of 42%, with more than 50% of sales generated overseas. BGF’s investment will enable the company to bring new and revolutionary products to market, develop future innovations and expand into the US, where significant growth opportunities exist.

Why BGF invested:

Why BGF invested: I Proven track record of finding and exploiting blockbuster toys like Air Swimmers, My Keepon. I Very strong pipeline of new products and established relationships with leading inventors and engineers. I Enormous potential for international growth.



Why BGF invested: I Successful, entrepreneurial and ambitious management team, led by founder and CEO. I Expanding customer base with high degree of contracted revenue will continue to benefit from GCI’s growing suite of services and assets. I Strong sector growth from accelerating convergence of IT and telecoms industries and resulting move towards mobile solutions, cloud computing and unified communications.



“BGF’s investment is great news for us. Their financing and the additional expertise they bring to us as a partner investor will help us to turbo charge our ambitions and maintain our position as one of the fastest growing privately owned British companies. We would love to think of ourselves as the Dyson of the toy world.” Richard North, founder and CEO of Wow! Stuff

“We had reached a critical juncture in the development of the business. We have a leading position in our niche market, which in turn has enabled us to establish a foothold outside our home North Sea market. After weathering some tough economic conditions we had come out the other end in great shape and with more growth opportunities than we could afford to pursue. To take the business to the next level and capitalise on these opportunities, we realised that we needed an extra boost. That boost has come in the form of an equity investment and the active support of BGF, whose experience and contacts will help us to make the transition from a successful UK firm to an international business of scale operating across multiple regions.” Peter Duguid, CEO and founder of STATS

Why BGF invested: I Managing the integrity of assets is one of the fastest growing sectors of the oil and gas market. I Strong presence with a range of blue chip customers, developed on the back of market leading products, engineering expertise and customer service. I A high calibre team with proven ability to grow market share both in the UK and internationally.


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Our early investments Continued Barburrito INVESTMENT DATE

TURNOVER

March 2012

£5–10m

INVESTMENT

NUMBER OF EMPLOYEES

£3.25m

100

SECTOR

BGF INVESTORS

Leisure & Hospitality

Andy Gregory, Neil Inskip

COMPANY LOCATION

Manchester

M Squared Lasers INVESTMENT DATE

TURNOVER

April 2012

£5–10m

INVESTMENT

NUMBER OF EMPLOYEES

£3.85m

25

SECTOR

BGF INVESTORS

Design & Manufacturing

Duncan Macrae, Mark Bryant, Chris Hodges, Patrick Graham

COMPANY LOCATION

Glasgow

Wear Inns INVESTMENT DATE

TURNOVER

May 2012

£5–10m

INVESTMENT

NUMBER OF EMPLOYEES

£8m

175

SECTOR

BGF INVESTORS

Leisure & Hospitality

David Colclough, Loren Holland

COMPANY LOCATION

Billingham, County Durham



“We’ve made great progress since starting as a single site in 2005. In the last two years we have opened three new stores and doubled the size of the business. The time is right to roll out our award winning formula to a national customer base and we needed additional funding to achieve this. It was important for us to find the right partner, an investor that is able to offer more than just money. BGF has demonstrated that they not only share our enthusiasm for the sector but can bring valuable advice, expertise and high level contacts to the table.” Morgan Davies, joint MD and founder of Barburrito



“Gareth and I have built a laser manufacturing business in the past and we therefore understand the benefit that an equity injection can bring. We looked at a number of options and then approached BGF directly. Having spent time talking to them over the last 6 months, we feel confident that they are the right fit for us.” Dr Graeme Malcolm, co-founder and CEO of M Squared Lasers

Founded in 2006 by local entrepreneurs John Weir and John Sands, Wear Inns focuses on the acquisition and management of freehold community pubs across the North East and Yorkshire. NVM backed Wear Inns from start-up and has seen the company build an estate through regional and national acquisitions. On average, Wear Inns has succeeded in improving the turnover of its pubs by c90% within six months of their acquisition and refurbishment. In the last three years, Wear Inns has trebled its sales with net revenues now totalling £7.3m and has achieved like for like sales growth of 7.2%. The estate currently comprises 15 sites and employs 175 people. BGF has invested £8m and NVM a further £2m, to enable Wear Inns to acquire further sites and create new jobs in the coming months.

Founded in 2005 by Manchester based entrepreneurs, Morgan Davies and Paul Kilpatrick, award-winning Barburrito is a chain of fast-casual Mexican restaurants that offer healthy food to eat in or take away. Having started as a single unit in Manchester and the UK’s first ever burrito bar, the business now operates from six sites in Manchester, Liverpool and Leeds and employs over 100 people. Net revenues for FY 2012 hit £4 million and like-for-like net sales are up 20% on last year. Over the last two years the business has invested heavily in operations, branding and its supply chain to enable rapid expansion. Barburrito’s rapidly growing popularity with consumers is due to it consistency in serving fast, fresh and healthy Mexican food. BGF’s £3.25 million equity investment will fund an active rollout programme with the business planning to triple its number of restaurants to c18 sites over the next four years. The bulk of the new restaurants will be in prime locations in London, and as a result of this expansion, Barburrito expects to create approximately 250 new jobs.

Why BGF invested:

M Squared Lasers designs and manufactures lasers and photonic optical instruments for applications in frontier science, bio-photonics, defence, microscopy, spectroscopy and metrology, and remote sensing. M Squared’s laser based systems can remotely detect and image gas leaks and perform environmental monitoring; for example, identifying the extent and location of a methane leak in the oil and gas industry, and the detection of explosives, chemicals or pollutants. Founded seven years ago by Dr Graeme Malcolm and Dr Gareth Maker, M Squared Lasers already has an impressive blue chip customer base, including some of the world’s most respected research institutes and largest hi-tech manufacturers. The company sells lasers to and collaborates with a range of blue chip partners and research institutions across Europe, North America and Asia, including Thales, Philips, Osram, Stanford University and the Max Planck Institute. BGF’s investment will fund further R&D as well as sales and marketing. Specifically it will help accelerate the full commercial launch of Firefly, M Squared’s latest product and a unique laser for remote sensing using midinfrared and TerraHertz radiation where there are few if any real alternatives. The potential uses are as varied as detecting improvised explosive devices, leakages in oil and gas pipes, and even detecting the “angel share” of whisky lost to leakage in traditional Scottish barrels.

Why BGF invested:



“Since starting the business six years ago, we have built an estate of great community pubs offering good value and good quality across the North of England. We have now reached a point where we want to take that approach a step further with the goal of growing our estate over the next few years. Any acquisition programme requires a level of financial flexibility. So we set out to find an additional partner who could support us in funding further acquisitions. We were also keen to work with like-minded people with a commitment to this region. BGF fits the bill and it’s great to be working with them, as well as our existing backers NVM.” John Weir, co-founder and CEO of Wear Inns

I Mexican food is one of the fastest growing sectors in fast casual dining sector, and Barburrito is a proven hit with customers in Manchester and Leeds. I A vibrant brand backed by an excellent operational platform provides strong foundations for growth and the rollout of new restaurants. I Highly experienced executive and non-exec management team.

I Genuine technology product breakthrough – faster and easier to operate, at lower cost. I Strong existing customer base, with huge potential for further international sales. I Proven and ambitious management team.

Why BGF invested: I Experienced management team with a clear roadmap for expansion through further acquisition. I Proven ability to identify and acquire underperforming businesses with great potential. I A winning formula for creating great community pubs.


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We want to inspire todayâ&#x20AC;&#x2122;s entrepreneurs to achieve more, and tomorrowâ&#x20AC;&#x2122;s business owners to take their first steps.


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Inform 23

THE ALCHEMISTS

INTELLECT BRITISH PLASTICS FEDERATION

BUSINESS BOOST NORTHERN IRELAND

PRO MANCHESTER

INSITITUTE OF DIRECTORS (IOD)

THE LONDON SMALL BUSINESSES ENTREPRENEURIAL EXCHANGE SOUTHAMPTON CORPORATE FINANCE WARWICKSHIRE CORPORATE FINANCE

Business networks ENTREPRENEURIAL EXCHANGE

ICAS

BRITISH BUSINESS ANGELS ASSOCIATION (BBAA) BRITISH CHAMBERS GMTA OF COMMERCE

CAPTIAL FOR ENTERPRISE THE QUOTED COMPANIES ALLIANCE

FEDERATION OF

YORKSHIRE MAFIA

MOTORSPORT INDUSTRY ASSOCIATION

BRITISH VENTURE CAPITAL ASSOCIATION (BVCA)

SOCIETY OF MOTOR MANUFACTURERS AND TRADERS

ICAEW

CBI

Trade associations

EEF

GROWTH COMPANIES ASSOCIATION

ANNUAL LABORATORY SUPPLIERS CONFERENCE

HENLEY BUSINESS SCHOOL

SANTANDER HANDELSBANKEN

NORTHERN IRELAND BUSINESS OF FINANCE

CRANFIELD UNIVERSITY

BARCLAYS

BIRMINGHAM UNIVERSITY

SCOTTISH VENTURE FUND LEICESTER & LEICESTERSHIRE LEP

LLOYDS BANKING GROUP

STAFFORDSHIRE LEP SCOTTISH ENTERPRISE HM TREASURY SCOTTISH GOVERNMENT

LOCATE IN KENT

CASS BUSINESS SCHOOL

BIS

SOUTH WEST ANGEL AND INVESTOR NETWORK WALES BUSINESS ANGEL NETWORK

HSBC

RBS

Government Banks bodies Universities & Business Schools CENTRAL ENGLAND BUSINESS ANGELS

BRITISH BANKERS ASSOCIATION (BBA)

THE QUINN PARTNERSHIP

EMW LAW

FWB

RITSON SMITH JOHNSTON CARMICHAEL

WRAGGES MAZARS DIRECTORBANK

GELDARDS

CLYDESDALE

STANDARD CHARTERED

CO-OPERATIVE BANK

CA MAGAZINE

ENGINEERING AND MACHINERY BUSINESS DESK ALLIANCE (EAMA) SCOTTISH ENGINEERING

ENGINEERING INDUSTRIES ASSOCIATION FORUM OF PRIVATE BUSINESSES BRITISH BANKERS ASSOCIATION (BBA)

GAMBICA ACG

ADVANTAGE BUSINESS ANGELS

SOUTHALL

INSIDER

RUSHLIGHT CLEAN TECHNOLOGIES SHOW

UKTI

BOWLINE CAPITAL PARTNERS

INTUITUS

SHROPSHIRE LEP

DLA

STRATEGIC RESOURCE

ALLEN & OVERY MACFARLANES

RSM TENON

SHOOSMITHS SPECTRUM VISTAGE PUNTER DILIGENCIA PINSENTS

CIL CATALYSIS

DELOITTE ENERGY VENTURES

OSBORNE CLARKE

RPL

SCOTLAND OFFICE WELSH GOVERNMENT KENT LEP

BAKER TILLY

META CORPORATE FINANCE

Events organised by media group

Together we are working to help provide the knowledge and tools that companies need to make good decisions. Increasing the awareness of growth capital should be a key priority for all those keen to expand the UK economy.

BRITISH MARINE FEDERATION (BMF)

SMITH & WILLIAMSON

Intermediaries

MINERVA BUSINESS ANGEL NETWORK SCOTTISH INVESTMENT BANK

TELEGRAPH GROUP

SNR DENTON COOPER PARRY SMITH COOPER CAPRICORN THE WILKES PARTNERSHIP

PWC

ERNST & YOUNG GRANT THORNTON

We are working hard across the business community with banks, advisers, business networks, business schools and universities, the media and government to make the case for equity as an driver of growth and an essential element of any well capitalised enterprise.

HEALTH INVESTOR

SPRINGBOARD HAMILTON BRADSHAW CAPITAL PARTNERS JUDD CF CLEARWATER FRANCIS CLARKE BDO PERA MUCKLE CALASH

A2B BRODIES UNW

PMSI

SIMMONS & CO

HBJ GATELEY

MEANWHILE KPMG ORBIS CF

Who we’re working with so far…

TRANSACTION SERVICES

Growth capital is not a new idea, but for many entrepreneurs who have started companies in the last few years it has been increasingly hard to come by. Familiarity and understanding has fallen away; a number of common myths and misconceptions have emerged.


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We bring insight and analysis to help entrepreneurs overcome the challenges that face them and seize their opportunities to forge fast-growing businesses.


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Inspire 27

MERVYN WILLIAMSON STATESMAN TRAVEL MANAGEMENT

STEPHEN WELTON

AUDREY BAXTER

SCOTT BUTTON UNRULY MEDIA

RICHARD NORTH WOW! STUFF

NEIL JOHNSON

NIGEL RUDD

STEPHEN MURPHY

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M

M

M

M

M

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The big question What drives British businesses? Are entrepreneurs made or born? The founders of BGF’s first investee companies and some of BGF’s own nonexecutive directors talk about what and who got them started, and the advice that they would give to anyone who wants to follow them.

STARTING OUT Scott Button I think proximity to success is really important. When I was in my midtwenties I happened to come in to contact with a couple of self-made billionaires and that made me think, “Well, if they can do it, anyone can do it – why not?” Then, it is probably a bit of naivety, inexperience and may be stupidity? One does difficult things because one is overconfident, I suppose. That is a quality that it’s important to try and keep and maintain. Richard North In my case it wasn’t something in my mind that said I could be an entrepreneur, but that there was nothing in my mind that said I couldn’t. I was trained as an accountant and worked in industry for a while but I always felt that my talents would be better used striking out on my own. I was never very good at being part of a big organisation; certainly in those days anyway. I felt that I could make my way by starting my own business. I had the self-confidence of a young person, I suppose. Stephen Murphy I think some people are put off by what they think is the challenge of business. They’re wrong. People often have much more ability than they believe. There is no reason why people can’t go into business even with a small idea and as I can attest, many small ideas can become very large ideas.

Mervyn Williamson There is clearly a risk to working for yourself, or running your own company, as opposed to working for an organisation. You don’t really shut off. It is 24/7 and 365 days a year. If you go on holiday your laptop goes with you. It is a downside, but there is also an excitement that goes with it. You don’t let go of what you are doing and you are always monitoring what is going on. Richard North People see brick walls and ceilings and feel that they are insurmountable. Entrepreneurs look at those brick walls and ceilings and they think that there is a way to crash through them. MAKING IT HAPPEN Stephen Murphy I don’t think that there is a special ingredient for success in business. But I do think that if you’ve got enthusiasm, application, understanding and the ability to work with people, then you can be successful. Neil Johnson Can you motivate the people around you? Not just the people who work with you but your customers, your staff and even family sometimes. If you can do that I believe you will get there. Stephen Welton Some people say they are not lucky and that’s the reason they have not achieved their ambitions. In my


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Scott: In some ways you never feel successful ... and that is why you keep driving on.

mind a “lucky entrepreneur” is the person who, when presented with an opportunity, seizes it and makes it happen rather than waiting for someone else to prove it first. Scott Button Luck is critical. I think you need a fair amount of luck and a fair amount of being in the right place at the right time. In addition to luck, just a sense of ambition and trying to build something big, of trying to have an impact and frankly of not knowing when to stop. Audrey Baxter I was lucky enough to be born into a successful family business started four generations ago. Certainly part of what motivated me was a sense of loyalty to the brand that had been part of my family for so long and was known and loved across the UK. However, I was also inspired by how much more we could achieve by growing the business and the brand internationally. That was a big driver for me. Mervyn Williamson For me, you’ve got to have the ideas in the first place, but you

SUCCESS Richard North There have been a few points along the way when I’ve looked, not just at my own bank account but the company’s balance sheet, and I have been able to think “now it’s solid and it can stand on its own two feet.” I think it’s at that point you feel like you’re arriving. Not yet arrived, but arriving. Scott Button In some ways you never feel successful of course ... and that is why you keep driving on. But at Unruly, I think the first time that we hit a million in revenue was a big moment. Stephen Murphy I believe it is important to set goals. I remember feeling successful quite early on. I never had the plan to get to

have also got to have the right people to deliver what you are trying to sell. Scott Button Ideas are often the easy bit. There are lots of people with ideas and lots more people will tell you that it was their idea, someone else just did it first. So execution, actually just doing the damn stuff and doing it well, with a real focus on operational excellence and on trying to be better than anyone else – that is where success comes from. Sir Nigel Rudd I think that people also underestimate the amount of hard work that needs to go in. You simply can’t be 9–5 if you run your own business

Nigel: The best bit of advice I was given is to really try and understand risk.

risk. People sometimes do things without understanding the risks that they are taking. Though of course to make a profit in any business you’ve got to take risks, but you’ve got to quantify that risk.

the top of the organisation and I just really enjoyed what I did. I enjoyed business. I had some success in my early career and when I look back on that I see each of those as a positive step in the right direction. ADVICE Richard North The best piece of advice I have ever been given is never, ever, ever give up. Neil Johnson As you succeed, always be very careful to look after the people around you because ultimately they have helped you to succeed and get where you’ve got to. Don’t make the mistake of thinking that you’ve done it all on your own. Stephen Welton You really are only as good as the team around you. They need to share the same sense of ambition, have clarity about their objectives and be empowered to deliver. No business can ever achieve real scale without great teamwork. Sir Nigel Rudd The best bit of advice I was given is to really try and understand

Audrey Baxter Don’t just accept the status quo. Don’t be afraid to raise the bar on your ambitions. In many ways it would have been easy for me to sit tight and enjoy running what was already a much-loved UK company. Why take the risk with what my family had worked so hard to establish? If I had taken that approach and not pushed to keep pace with a changing business environment, Baxters wouldn’t be the company it is today. Stephen Murphy Build a team and work with people. The further up in business you

get, the less you can do yourself. I had to get other people to do things within a plan and I think that being able to work with them and inspire them and to help them and coach them became very, very important. Mervyn Williamson I’m an accountant, so you’re going to get a financial answer. Know your numbers, know your costs. Know your costs more than your income stream. When you’re income stream is not there you’ve got to make sure that your costs are right. Scott Button I will give you some advice, which is that advice is overrated. What I mean is, whilst it’s really important to be open and open minded to other people that have been successful, it’s really important to keep some perspective. You will come across lots of successful people who have done something one way and assume that that is the only way to do it. So knowing what to keep and what to reject I think is really important. I


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To succeed companies need more than just capital. We also bring our networks, experience and expertise to help businesses grow.


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More than just money BGF – Excellence for entrepreneurs MARION BERNARD, REGIONAL DIRECTOR (LONDON & SOUTH EAST)

“Successful entrepreneur seeks long-term investment partner... with more than just money to bring to the table.” Although at first sight this may look like an entry in a corporate lonely heart’s column, it highlights a serious and significant challenge that every entrepreneur is likely to face. Entrepreneurs need an absolute and single-minded focus on their business and an unshakeable determination to succeed. Entrepreneurs need the freedom to run their businesses in the way that they want to but it can be a lonely and isolating experience. How much time is there to truly assess the competition, form valuable business connections or share experiences with other entrepreneurs? BGF recognises this need and we’ve made it a central tenet of what we offer investee companies. The feedback that we are getting from entrepreneurs suggests that our partnership approach, sharing of expertise, guidance and contacts, is just as valuable to them as the capital that we inject into their businesses. For Matt Waller, the young entrepreneur who founded online employee benefits business Benefex, and the first CEO to be backed by BGF, this was the deal clincher: “We had taken the decision that we needed the additional experience of an external investor, as well as the capital that they could offer. BGF offered the whole package – their team really took time to understand us and one of their experienced investors now sits on our board. They provide the “turbo charge” that we need to scale up the business on an international level, but still allow us to remain in the driving seat.” That balance is a key part of BGF’s approach. While we may be a junior partner we are not passive. We set out to make a real difference to the businesses that we back. After all, our interests are wholly aligned with the management team

Would you like to work with some of the most ambitious businesses in Britain today? BGF is actively seeking experienced business leaders. To you, we say, “Take this opportunity to work with some of the fastest growing and most ambitious businesses in Britain today, some of which will be the household names of tomorrow”. We are looking for strong track records of growing small and medium-sized enterprises as Chairman or CEO, or as an entrepreneur who has been there and done it before. The job requires collaboration, energy, inspiration and a dynamic approach. If your ambitions match ours, we’d like to hear from you. The level of commitment required is flexible. It could involve joining the board of one of our investee companies or spending a small amount of high value time providing industry insight, making introductions or acting as an ambassador for a business. Being part of the network will also provide opportunities to invest alongside BGF in some of the most exciting businesses in the UK today. The important thing is that, by investing together, our interests are fully aligned with the management teams and our common goal is growth. We are offering something different. The opportunities that we see are not those that will readily come to the attention of headhunters, banks or professional networks. Our resources, including a team of over 60 people, six regional offices and a fund of up to £2.5bn, are entirely dedicated to finding the best young businesses that the UK has to offer. This is a unique opportunity to join a business at an early, and often transformational stage, and to help build fantastic management teams. To find out more and get involved please contact Cate Poulson, Head of BGF Talent Network.

and our return will be determined by their success. But, we don’t expect to take the wheel – they occupy the driving seat. To double or triple profits, you may need some help and it is important to recognise that can mean growing the infrastructure of a business as well as the top line. So what does BGF bring to the partnership? First and foremost, we offer companies the opportunity to meet and be guided by some of the most experienced businessmen and women in the UK. We are building an external Talent Network specifically to develop relationships with a broad range of experienced business leaders from across the corporate spectrum, who can offer valuable executive and non-executive support. Their common purpose is a commitment and drive to encourage and help ambitious small and medium-sized businesses to grow. BGF boasts an impressive list of non-executive directors on its own Board including amongst others, Audrey Baxter, the CEO of Baxters Food Group and Stephen Murphy, the former Group CEO of Richard Branson’s Virgin group of companies. Equally the Boards of our investee companies have also benefitted, with Keith Pacey, former CEO of Maplin Electronics recently appointed Chairman of Wow! Stuff; David Scowsill, serial Chairman and current President of The World Travel & Tourism Council joining the Board of Statesmen Travel and Graeme Coutts, former CEO of Expro appointed Chairman of STATS. By forging these relationships, we can give our investee companies unique access to a pool of expert and inspirational talent, which is unlikely to be have been available to them before. In our experience, this additional insight and leadership is critical for developing businesses. Entrepreneurs tell us that it is not accountants with a head for figures that are at the top of their wish list. It is instead real life experience from someone who has been there and know



Grow 33

We set out to make a real difference to the businesses that we back.

what it is like to run a business. The injection of external advice is not just about putting someone on the board of a company. BGF has also hired specialist professionals of its own in key areas such as manufacturing, HR and IT to offer investee companies big company expertise and hands-on mentoring. This approach is unusual at this end of the market and offers smaller growing companies real operational support as they move to the next level of their development. Lastly, BGF offers strength in depth. Investee companies will together form a new “club” of entrepreneurs. This club will provide the forum and opportunity for experiences and ideas to be shared, and commercial opportunities to be developed. Be it guidance on employee benefits and rewards from Benefex; access to competitive corporate travel arrangements through Statesman; or cutting edge insight on the fast moving world of digital video advertising from Unruly Media; our companies have a lot to offer each other. As BGF’s portfolio of investee companies grows, so will the benefits that it will bring. Entrepreneurs are generally people who are able to explain to anyone who will listen, just why their businesses are so good. The BGF investee community or “club” is such an audience and the forum for genuine dialogue. I

JENNY CHANDLER HEAD OF HR

JOHN EGGLESTON, DIRECTOR OF IT

I mentor our investee companies so they can get the best from their current team and put plans in place that will support their future development. HR is one of the critical elements that we review with companies from the pre-investment stage; and post investment we look to provide HR support as an important part of our 100 day plan. For example, at one of the companies we have invested in, we have been working closely with a new HR Director to develop a set of staffing policies, as well as to plan a professional development course for the management team. Our investees are not large corporate entities and, following BGF investment, they enter a highly transformational stage. Many do not yet have their own dedicated HR management in place and so our role is to lend some practical support, to assist management in identifying the gaps and to find the right people to fill them. Having been in the HR market for many years, I can use my connections to introduce compatible HR professionals and I can also access relevant networks where there is a trading opportunity. Benefex is a good example of a company that is actively targeting HR directors with their employee benefits and rewards capability. Our challenge for the longer term is to scale up our approach so that support can be provided to a wide range of companies in the most effective way possible. We are addressing this now and our ideas include establishing a hub or portal where information can be readily accessible, as well as hosting regular HR forums where our companies can discuss key issues, share ideas and hear from other experts in the field. We are practical in our approach, keen to find solutions that really can work for SMEs. I

Our advisory role begins before our investment is formalised. We contribute to the due diligence process and we look to ensure that the findings are maximised within the initial 100 day plan for each investee company. However perhaps more significantly, our offer to investees is very much about the wider contribution that we make beyond the financial commitment. At the earliest stage we want to demonstrate this and show how it can apply to their business in real terms. So pre investment we will review IT strategy, capability, online presence, security and business continuity and we make recommendations about how these areas can be strengthened and scaled up as the business grows. Post investment, we work with management to make this happen – as we have done with our investments to date. Our contacts are all important. We know the IT and telecoms market and can make helpful introductions to service providers and suppliers where they are needed. Our contacts also represent commercial opportunities. For example, corporate travel provider Statesman is currently talking to BGF’s own network of six regional offices and a number of our investee companies; as is GCI Com, which offers telephony and cloud computing support. Our role is to recognise these synergies and make the connections. Our portfolio is likely to triple in size over the course of the next year alone. As this happens, we will be able to do more to share best practice across the group and we are currently looking at the creation of a regular IT Directors forum. We will also develop significant buying power and we are looking at how we can harness this for the benefit of our investee companies. Technology will be a major enabler and competitive advantage for smaller companies. I


34

Grow 35

BGF is governed by a Main Board comprising senior representatives of our five shareholding banks, four independent nonexecutive directors and a Chairman.

This Board does not take investment or operational decisions, but ensures we operate to the high standards expected of a major financial institution.

Led by our Chairman Sir Nigel Rudd, the Board ensures we have an effective infrastructure, strong internal governance and appropriate overall investment strategies.

The Board NIGEL RUDD CHAIRMAN > SIR NIGEL RUDD: Sir Nigel is one of the most well known businessmen in the country. As founder of Williams plc in 1982, he created one of the largest industrial holding companies in the United Kingdom until its demerger in November 2000, creating Chubb plc and Kidde plc. He is presently Chairman of BAA and the technology company Invensys plc. Sir Nigel was knighted in 1996 for services to manufacturing. He has a long record as an active angel investor in small and medium-sized businesses, and has been Chairman of some of the largest companies in the UK, including Pilkington, Alliance Boots and the UK’s largest car retailer, Pendragon, the company he founded with one dealership in 1982. He was a Director of Barclays PLC for 13 years, latterly as Deputy Chairman. Sir Nigel became Chairman of BGF in February 2011. CEO > STEPHEN WELTON: Stephen chairs BGF’s Investment Committee. He has over 20 years’ experience in the private equity and growth capital industry. He joined BGF after 10 years with CCMP Capital (formerly JP Morgan Partners) a global private equity firm. He has extensive experience as an investor working with private companies, most recently as non-executive Chairman of Edwards, the global engineering group headquartered in the UK. Before this, he was Chairman and CEO of TV Travel Shop prior to its successful sale to a global media group. He also has 10 years of UK private equity and development capital experience as Managing Director of Barclays Private Equity and at Henderson Ventures, which he

STEPHEN WELTON

AUDREY BAXTER

co-founded. He started his career in banking and is a qualified Barrister-at-Law. Stephen became Chief Executive of BGF in May 2011.

INDEPENDENT NON-EXECUTIVE DIRECTORS AUDREY BAXTER: Following a successful early career as a merchant banker in London, Audrey returned to the family business, Baxters, in 1988. She became Chairman and CEO in 2000. Baxters was founded in 1868 and Audrey is the fourth generation of the family to run and expand the business into new markets. Today, Baxters is a global company, with operations in Eastern Europe, Australia, South Africa, and North America. Since becoming CEO Audrey has grown the business by more than 50 per cent, and annual turnover currently exceeds £150m. Audrey is also a member of the Court of Aberdeen University. JOHN BURGESS: John has had a long and distinguished career as a private equity investor, during which he was a NonExecutive Director of a number of UK and European-based businesses, both large and small. He is currently Chairman of the External Investment Committee of Partners Capital, a wealth management firm, and a Non-Executive Director of C&C Group, which owns the Magners and Gaymers cider brands and Tennent’s beer. He was a co-founder and Managing Partner of BC Partners until he retired in 2005. BC Partners is a leading European private equity firm that has played a major role in

JOHN BURGESS

NEIL JOHNSON

the development of the large buy-out market in Europe over the last 25 years. Prior to BC Partners, John developed his private equity experience with Candover Investments and F&C Ventures, following eight years with the Boston Consulting Group in Paris and London. NEIL JOHNSON: Neil is currently Chairman of Umeco plc, an aerospace and defence advanced composites engineering company, and Chairman of international model and toy manufacturer, Hornby plc. He also chairs Motability Operations plc, a major finance and leasing company owned by the UK banks. Neil was formerly CEO of the RAC, and chaired telematics company Cybit Plc through IPO and ultimate sale to a US Private Equity house in 2010. After directing the European automotive interests of British Aerospace, he served a term as Director General of the Engineers Employers Federation and later set up a transatlantic trade and business promotion body, BritishAmerican Business Inc. Following an early career in the Army he began his business career with a series of roles within Lex Service Group, British Leyland, Jaguar and Land Rover. Neil also sits on a Ministry of Defence Advisory Board and is an Independent Member of the Metropolitan Police Authority. STEPHEN MURPHY: Stephen currently serves as Principal of his own advisory business and as an adviser to Ashcombe Advisers, a boutique corporate finance house. Previously Stephen was Group CEO of Virgin Group from 2005-2011 having succeeded the founder, Sir Richard

STEPHEN MURPHY

TIM BOAG

Branson. Stephen joined the Virgin Group in 1994 with a remit from Richard Branson to rationalise and restructure the business following the sale of Virgin Music. In 2000 he briefly left the Group to become CEO of IP Powerhouse, but rejoined Virgin in 2001 to take responsibility for all of Virgin’s aviation and rail interests. Stephen oversaw the creation of many new Virgin businesses including Virgin Blue in Australia and Virgin America in the US. Stephen has extensive experience of working with entrepreneurs across a variety of sectors. Stephen qualified as a chartered management accountant and spent his early career in FMCG and retail with roles at Unilever, Mars Group, Burton Group and Quaker Oats.

SHAREHOLDER DIRECTORS TIM BOAG (RBS): Tim is responsible for the UK lending activities of RBS in areas such as acquisition finance, energy, infrastructure and public sector. Tim began his career as a graduate with NatWest and has fulfilled a number of roles within RBS Group, including for Risk, Relationship Management and more recently Financing across a broad range of sectors. He has worked in both the Corporate and Investment Banking areas, and was Finance Director of the Global Structured Finance Business in 2005/6. Tim is actively involved in a number of panRBS and divisional initiatives, including the development of professional standards and supporting enterprise. He is a NonExecutive Director of Lombard.

JAMES CHEW

TIM HINTON

JAMES CHEW (HSBC): James is Group Head, Regulatory Policy & Development in the Financial Services Policy Unit at HSBC Holdings plc. He considers key regulatory policy developments which will affect the Group across the world. After joining the HSBC Group in 1993 James worked in joint ventures, including with BSkyB for the launch of digital television in the UK. James has been both Group Head of Planning and Group Head of Acquisitions and Disposals. Amongst other transactions, he was a key player in HSBC’s disposal of the French Regional Banks in 2008 for $3.2bn. As part of the Business Finance Taskforce in the UK, James was the interim CEO responsible for the establishment of BGF. TIM HINTON (Standard Chartered): Tim is Global Head of Small and Medium Enterprise Banking (SME), based in Singapore. He is responsible for strategy and driving sustainable growth of the Bank’s SME business in 30 countries across Asia, Africa and the Middle East. Tim joined Standard Chartered in 1986 as a graduate trainee and has worked in a number of diverse roles and markets across the bank, including in Singapore, Hong Kong, Korea, India, the UAE and UK. Prior to his current role he was Head of Private Banking, UK and Jersey but during his career has worked mainly in Wholesale Banking (WB) and client coverage. From 2005-10, Tim led one of the bank’s largest and fastest-growing businesses, the Local Corporate client segment within WB, and in 2008 he took on the added responsibility for the Commodity Traders and Agribusiness portfolio.

JOHN KELTING

JOHN WATSON

JOHN KELTING (Barclays): John Kelting is responsible for the revenue of Barclays Corporate globally, across all products that the Corporate Bank provides to its customers. He is a member of the Executive Committee of the Corporate Bank and the Group Credit Committee of Barclays Bank. He was formerly Co-Head of Global Finance EMEA at Barclays Capital. In this role he was jointly responsible for Equity Capital Markets, Debt Capital Markets, Leveraged Finance, Loan Origination and the Financial Institutions Group. Prior to joining Barclays in 1998, he held a number of roles in debt and equity financing with institutions including HSBC and 3i. JOHN WATSON (Lloyds Banking Group): John trained with PricewaterhouseCoopers as a Chartered Accountant specialising in Corporate Finance. Following time as an Investment Manager at 3i and Finance Director of Craneware Limited (now PLC), he worked on large buyout equity transactions before moving to senior executive roles within the bank. John was a founder member of the BGF Board in his role as Portfolio Director of Lloyds Banking Group (LBG) Commercial, where he was responsible for managing the risk of the Bank’s lending to small and medium sized businesses. John is also a Non-Executive Director of Northface Ventures Ltd. In early 2012 John left LBG to take up a role with Dalnair Investments and a new Lloyds Director will shortly be appointed. I


Think of us as the Junior Partner. But one with a phenomenal network of connections. An in-depth knowledge of business and finance. A wealth of strategic and operational expertise. Years of experience in your sector. And up to £10 million to invest in your business. Today.

Any more questions? 0845 266 8860 bgf.co.uk

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GET IN TOUCH Business Growth Fund has been established to help Britain’s fast growing, smaller and medium sized businesses. Growth potential is the key criterion. BGF will invest between £2m and £10m per business in return for a minority equity stake and a seat on the board for a BGF director. BGF has up to £2.5bn with which to make long-term equity investments in growing companies across the UK that today do not have access to this source of capital. BGF is an independent company, backed by five of the UK’s main banking groups – Barclays, HSBC, Lloyds, RBS and Standard Chartered. BGF also works closely with other key business organisations. BGF has specifically been set up on a local basis to be close to the businesses we invest in. If you want to understand more about BGF or talk about how we might support your business, or your clients, please get in touch with us.  TELEPHONE

WEBSITE

Birmingham 0845 266 8862 Bristol 0845 266 8864 Edinburgh 0845 266 8863 London 0845 266 8860 Manchester 0845 266 8861

www.bgf.co.uk EMAIL

enquiries@bgf.co.uk TWITTER

Twitter @bgf_team

BGF is one of a range of initiatives designed to forge better, more effective relationships between the banking sector and UK businesses. BGF works in close collaboration with the British Bankers’ Association as well as with other key business organisations and government across the UK. BGF is authorised and regulated by the Financial Services Authority.


BGF Review 2012  

BGF is an investment firm that provides growth capital to ambitious entrepreneurs running growing UK companies

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