The Business Growth Fund (BGF), which claims to be the largest long-term equity investment company in the UK, is marking its first anniversary with a call to domestic plastics companies looking for growth funds to ‘get in touch’.
Created by a number of the UK’s leading banks last May in the wake of a report on business funding commissioned by the Labour government, the BGF is looking to invest anywhere between £2m and £10m in high-growth SMEs, said business director Mark Bryant in an interview with PRW.
Bryant, who had worked in manufacturing for 30 years prior to joining the BGF – including a stint running Suffolk-based packaging outfit M&H Plastics – said the fund was looking to plug a gap in the equity market and was working with a variety of trade bodies, including the British Plastics Federation, to highlight its offer.
“We have a total fund of £2.5bn to invest in growth companies which have gone beyond the start-up stage and are at the point of looking for more financial support to realise their potential,” he added.
The fund has made seven investments in its first year, including monies to a software firm, a corporate travel company and a toy manufacturer.
Bryant said the BGF had seen “half a dozen” plastics companies in the UK, but had yet to lend to a company in the sector.
Suitable firms for investment were those with annual sales of between £5m and £100m, said Bryant, “plus a good management team in place; a core product that differentiated itself from the rest of the market and which wasn’t fighting on price. And a business that we can be confident will grow”.
The process to secure investment lasts between three and four months and the fund requires a minority stake in the business of anywhere between 10% and 40% in return for its financial support.
Unlike traditional private equity investors the BGF was "a long-term lender", said Bryant.
And while it would not seek to control a company it had invested in, Bryant said it would require that two members of the BGF team sit on a firm’s board, including a non-executive chairman.
“Someone of that level of experience can add a lot of value to a company and can help accelerate the existing management’s ambition for the business,” he added.
The BGF had yet to invest in a plastics company and Bryant admitted that manufacturers tended to be more cautious about looking to the fund for resources.
“Some are focused on running their businesses day-to-day, while others might be suspicious [of our motives],” he said. “Some people don’t like the idea of giving up some of their equity in a business.
“But ask a company owner what they would do if they had millions of spare cash sitting on their books and you can seem them recalibrating their ambition.
“There is an ‘energy change’ and they remember what it was that drove them to create the business in the first place,” said Bryant.
The BGF invests off its own balance sheet and while it will fund capital equipment purchases it stops short of backing buyouts.
“We are interested in funding businesses that need to grow in other areas, such as sales and marketing or other ways to grow the business, such as looking at an acquisition,” he added.
“We are ideal for those that have a ‘big picture’ view and who fit our criteria, but we’re not going to be right for everybody,” he added.