Finance in the South West 2018 - Established (>2 Years) Session
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PKF Francis Clark is hosting a seminar which brings together providers of business funding, including both debt and equity; business support agencies including grant specialists; our own corporate finance experts and business owners themselves to provide short, sharp presentations in order to assist business owners and managers in assessing which funding stream is right for them.
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Finance in the South West 2018 - Established (>2 Years) Session
- 1. 1 Richard Wadman, Corporate Finance Director Finance in the South West 2018
- 2. Funding and support – for businesses > 2 years old • 10 minute presentations on: • Business Support - Innovation • Debt – alternative • P2P – secured debt • Growth Capital (equity) • Venture Capital / Private Equity • SME Perspective
- 3. TITLE Yvette Coles, innovate2succeed Business West 21/02/2018
- 4. About the innovate2succeed programme innovate2succeed is an intensive coaching programme designed to stimulate innovation in business. The programme supports scale-up businesses wanting to improve their innovation capacity and capability to support future growth.
- 5. Why innovate? Growth Enter new markets Defend market position Keep ahead of new entrants I have a great idea that’ll change the world! Keep customers interested Reduce costsStrengthen revenue streams Streamline processes
- 6. What are the challenges of innovation? • Funding • Innovation culture • Idea filtering and selection • Development processes - & failing early • Understanding or developing a market - & testing it • IP • Finding partners • Reaching customers to fully commercialise
- 7. Who is it for? SMEs Have a sustainable business model Looking to grow Recognise their barriers to growth Want to create a culture of innovation Want to develop new products or services Not ‘business as usual’ Recognise innovation forms part of their growth plans
- 8. What will be achieved? Fully funded support to help businesses to: ● gain a better understanding of innovation management processes ● develop new products or services ● access new sources of finance ● identify new markets ● develop or review internal processes ● access tools and expertise
- 11. Presented by John Sharpe February 2018
- 12. T h e G r e a t S o u t h W e s t 13 • Latest figures show that the South West is worth more than £127 billion • Second fastest growing economy of UK nations and regions • Year-on-year growth of more than 4%
- 13. T h e F u n d i n g G a p 14 Funding gap estimated at £22 billion* in the UK Varying factors; including Brexit uncertainty, stricter banking regulations since 2008 and sparse data available on SMEs Fuelling strong growth of Alternative Finance sector - In 2016, business funding transacted for start-ups and SMEs grew by 50 per cent, from £2.2 billion to £3.3 billion*
- 14. B U I LT F O R B U S I N E S S - Dedicated to funding SMEs up to £5m - Institutionally backed and funded £200m+ - Lending against assets and/or cashflows - Savvy, proven and successful 15
- 15. P I O N E E R I N G - Award winning data modelling - Doing the deals the banks can’t do, not won’t do - Funding the deserving underserved 16
- 16. - Relationship driven, transactional focus - Dedicated credit analyst - Deal Forums engaging you in the process - National team to support along the way P E R S O N A L 17
- 17. P R A G M AT I C - Reflecting the individuality of every business - Looking at each deal on its own merits - Lending against assets and/or cashflows 18
- 18. O U R F O U N D AT I O N S PIONEERING Opportunity Spotting PERSONAL Initial Review PRAGMATIC Detailed Assessment CERTAIN Deal Execution+ + = 19
- 19. Click to edit Master title style Click to edit Master title style Click to edit Master title style Recent Success Stories £750,000 Refinance & Working capital £465,000 Share buy-back £526,000 Growth Finance Waste Processing Business Road HaulageOutsource service provider “We’d rather lost confidence in the banking system; the ThinCats loan has tidied everything up, and given us a leg up.” Nic Cooper CEO Clinipower Ltd.
- 20. T H A N K Y O U
- 21. Giles Cross Chief Executive Officer
- 25. What we offer British businesses *If you have all the relevant documents ready, and there are no complications. Your property against which the loan is secured could be at risk if you don’t meet payments. • Borrow £50,000 to £5m or more • Interest-only repayments • Decision within 24-72 hours* • Fixed or flexible loans, 6 months to 5 years • Secured against land or property
- 26. Who we are The Local Lending Movement: Helping to build and sustain socially and financially successful local and rural communities across the UK. Essential to Britain’s pre-and post-Brexit success.
- 29. Introduction to BGF Ned Dorbin
- 30. What we offer Equity funding for growth and cash out Long-term capital investments typically between £2m-£10m, with further funding available Minority partner typically between 10% and 40% Flexible investments including a mixture of equity and unsecured loan notes Network and strategic partnerships including connections with almost 5000 board-level executives, advisors, policy makers, and sector experts.
- 31. Earlier-stage businesses Product launched and gaining rapid customer traction Disrupting a large industry or forging an emerging one Growth-stage businesses Privately-owned companies with revenues typically between £5m and £100m Looking to raise funding for organic and/or acquisitive growth strategies Listed businesses Publicly-listed companies with market caps usually below £100m Seeking funding for growth, with potentially less dilution for shareholders BGF Ventures BGF Growth BGF Quoted Strong management teams with ambitious growth plans headquartered in the UK & Ireland
- 32. BGF today #7 most active investor in the world 11 BGF offices £1.3billion invested 202 companies backed • Focused – efficient due diligence and investment process • Local – investors and support staff based across ten regional offices
- 33. Why do business seek to raise equity funding? To fund growth • Debt capacity? • Taking equity capital as an alternative option, allowing for rapid and flexible growth options Restructuring the shareholder base • Exit misaligned or less involved shareholders To personally de-risk and/or manage succession • Shareholder cash out, but maintain a majority shareholding and active role Exit • Increase the focus on exit as well as the certainty and value of an exit Reason Things to considerHiring people Investing in systems Supporting an export drive Buying new plant and machinery Funding an acquisition New store roll-out Strengthening the balance sheet R&D and product development Working capital
- 34. Anthony Francis Private Equity Funding
- 35. Private Equity/ Venture Capital Sales growth Efficiency savings Improving reporting and human resources Cash generation and procurement Supply- chains Marketing and sales Buy / Sell (or Invest / Exit) • Medium to long-term finance provided in return for an equity stake • Unquoted companies • Work alongside management
- 41. How does private equity work in practice? • Understanding the business • Due diligence • Board representation • Exit planning and execution • PE is set up to transact deals • Financial vs. strategic
- 44. Alert originates from The Select Group of Companies Ltd based in Paignton and now in its 30th year of business • Select’s core market is the construction trades Select Solutions – Idea’s factory Select Product – Supplies to merchants and distributors Trade Counter Direct.com – Supplies +20,000 products online Alert Technology Ltd – Instrument manufacture • Select has an growing multi-channel distribution network with sales of £5m • Select is recognised for launching new products that provide unique solutions to construction trade problems Our Challenge…… • Was to stay ahead of competitors, develop new innovation and maintain our market leading position. Eight years ago I set a new challenge to develop a new world class, unique and profitable product that no one else had thought and with a clear IP route…(Not easy) • After considerable research we identified a gap in our core market sector for detecting airborne asbestos in real-time
- 45. Asbestos affects the Construction industry with 20 workers dying per week from asbestos- related diseases 5,000 people in UK die annually and 107,000 worldwide. Asbestos is the cause of 1-in-3 occupational cancers. More than 30 industry sectors are affected by asbestos Known as the “Hidden Killer” asbestos can be found in over 3,500 products There are NO safe levels of exposure. You can’t see, smell or taste airborne asbestos fibres Half the world have banned it but are left with a dangerous legacy – the other half still use it When asbestos is discovered or suspected it takes time and costs to confirm and remove it – Sites can be shut down and evacuated as a “Duty of Care”. Heavy fines or imprisonment are common. Asbestos will continue to be a major problem for many generations Sources: WHO / HSE / Mesothelioma Centre
- 46. ALERT……Asbestos Locating Equipment in Real Time Transmission Electron Microscopy Expensive. Lab based. Not real time. The Status Quo Asbestos ALERT Pro Affordable. Portable. Real time. The Future – ALERT’s Disruptive Technology Schematic of scatter chamber ALERT’s Heart Background particles ALERT uses laser light scattering technology and the unique magnetic properties of asbestos to distinguish asbestos fibres from other fibres. Alert reads >600 particles per second! www. asbestos-alert.com Alert has two patents, is sufficiently complex to build and has a perpetual license to commercialise giving complete freedom to operate globally.... and currently NO competitors With so many USP’s, large sales potential and enviable margins, raising finance for such a life saving product should be a no-brainer, or so we thought but it was not so… It took more than eight years from conception to fully develop the product and raise sufficient funding – Yes, 8 years! Here’s our story… Asbestos fibre
- 47. Realising fully we had a unique product in demand globally and a large scale business opportunity we needed to move ASAP to ensure that our leadership would be retained This is a brief timeline journey of how we funded the required £3m to fully enable commercialisation and a fast track the global launch - post conception (note £3m is too big for some investors and too small for others) 1st step – 2010 – We successfully bid and won £1.5m FP7 grant for a 3yr R&D “Proof of Principle’ project from the EU and placed 9th out of 3,500 other European businesses. Sounds good but these projects take too long and funds go mostly to consortium members (not easy to win, manage and complete) 2nd step – 2013 to 2015 – Select Group invested a further £500k funding to ensure steady progress was maintained (investors like skin in the game) 3rd step – 2015 to 2016 - Engaged growth advisors to develop a credible Investment Memorandum and a detailed business plan – We then began the hunt for investors (Francis Clark & others helped) 4th step – 2016 - Secured Cornerstone Investor to invest and a small size VC to help navigate the private investment minefield (successfully gained £500k from a County Council) 5th step – 2017 - Alert Technology Ltd was spun out of The Select Group (an Archer family business) forming a separate SPV, it then qualifying as a “Start up” tech business (some investors like tech’s and start up businesses - other don’t. However doing so it did simplify the due diligence process for us)
- 48. 6th step – Other funding options – Pitching to the high street banks for support (don’t bother) – We also tried other EU funding options like Horizon 2020 (Brexit scuppered that, but we did get “Highly Commended” and a lovely “Seal of Excellence Certificate” - but no money)! 7th step – Crowdfunding used to raise the £500k balance. (Very important to have cornerstone investment in place and go with the right online funder, for us as a tech firm it was Syndicate Room, for more consumer products try Crowdcube, Kickstarter etc) 8th step –We raised a total of £1m by offering a 20% equity stake (80% remaining in the family) *Try to gain SEIS / EIS status with HMRC for investor tax relief (take professional advice) 9th step – Be prepared to manage shareholders expectations correctly (use professionals for this) 10th step – Get on with it… (always look out for sector grants and Government help such as R&D tax credits etc) Other Considerations Make sure you develop a watertight business plan and financial model Pull in the experts to address patent, legal, accounting and scientific issues as needed Make sure you recruit the right internal team place them ASAP Our pro team, includes…
- 49. Dr Chris Stopford Technical Advisor Mark Nichols Snr Tech Ops Reid Archer Director Alan Walker Eng Advisor NCL Loretta King Mkting Director Alan Archer MD Jonathan Synett Investment Director I hope you found our storey interesting and thanks for listening
- 50. Scrap Book
- 51. 52 Richard Wadman, Corporate Finance Director Finance in the South West 2018
- 52. Summary • The South West is a great place to do business and has great businesses • The South West full of entrepreneurial spirit (businesses and funding options) • Funding and business support here… • http://www.pkf-francisclark.co.uk/news- views/blog • Factsheet • Thank you
- 53. Thank you to…. And more, including our SME Perspective presenter
- 54. Thank you to…. And now to Lunch/ Networking...
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Notes de l'éditeur
- What is innovation? Innovation is something that is quite hard to pin a definition on as it means a lot of different things to a lot of different people. It's safe to say that innovation goes beyond what some may think of as traditional innovation: new technology, new gadgets, engineering solutions, widgets that you can patent One quote that I quite like is from Lady Barbara Judge, chair of the UK Pension Protection Fund “using something new, or something known, but in a different way, different time or a different place.” In innovate2succeed we the approach with clients that asks them to identify how they create value for their customer by doing something different or doing something in a different way. Both of these points are important for us as the client needs to be doing something that isn't "business as usual" or that someone else is already doing ("me too" products) but it also needs to be valuable for the customer - this is what makes sales! What isn't innovation? This can be quite a controversial topic, particularly if we consider that innovation has many definitions. If we remember how they create value for their customer by doing something different or doing something in a different way then we can set a few questions: Are you really doing something that no-one else is doing? Are you creating value for a client in a way that they currently can't access? Unfortunately this isn't as simple as recreating a business in a different location. There has to be something novel and new. We can run into difficulties when we start to look at business model innovation - is offering the same range of products and services as competitors but offshoring the work to reduce cost an innovative approach? This all depends on the business and it's offering. It's important here to remember that ideation (the creative process of coming up with new ideas) is not innovation if the eventual commercialisation of the product is not borne in mind. Does your idea have commercial potential? Have you thought about the eventual business model that will suport it? Have you fully explored customer needs to make sure that you are fulfilling an unment need? History is littered with the remains of products that never quite made it (remember the <need an idea for this>).
- Built for Business to be the “campaign” title so that it is consistent across all pieces of collateral
- More than a process, it is a formula for success
- Built for Business to be the “campaign” title so that it is consistent across all pieces of collateral
- Introduction: EY, LDC, ContactEngine, Rockpool Talking about PE in general Discuss some of the trends, and the amount of money ready to be invested. I have four recent investments I have made, that will hopefully illustrate the types of transactions Would like to make it Interactive
- Assume most people know about Private equity. Venture capital – smaller end, higher growth. Invest in a company to exit within a certain time frame. Effectively a number of triggers that private equity look for. WORK ALONGSIDE MANAGEMENT
- Types Growing role of private equity in M&A…… PE allows management and owners a huge array of options
- Profitable women’s fashion brand with huge growth potential We provided £5m of equity funding to enable incumbent team to buy company Appointed experts in fashion and retail sector as non-executives to support management Plans to expand the company across UK and Ireland and increase marketing activity Process led by an advisor firm acting for shareholders, two individuals Cotswold designs and sells clothing and accessories for mature women Catalogues, taking orders via telephone, post and online. It has a large and loyal customer base, with 95,000 customers purchasing in 2016, of which 40,000 were repeat customers. Management believed that much higher growth can be achieved by investing more heavily than was possible under the current owners, who focussed on income. The current team reinvested half of their proceeds The non-executives have experience of building and exiting businesses in similar sectors; they have assisted in the due diligence investigation and are investing £175,000 on Rockpool investor terms
- We provided £1.2m of equity, £3.6m of loan note and £1.0m of quasi senior funding Strategy to demerge a contact centre business from the whistleblowing business to create longer term value Growth capital to grow the whistleblowing service and improve efficiencies in the contact centre Customers sign up to Expolink’s whistleblowing services in order to provide their employees anonymous 3rd party Services are typically provided under 12 month contracts, which are paid for yearly in advance and typically generate over 70% gross margin. Expolink retained 96% of whistleblowing customers each year. Expolink’s contact centre services division provides customer support for around 80 businesses. The management team comprises three existing senior managers of Expolink and an experienced executive chairman. The current owners of Expolink, a husband and wife team, founded the business in 1995 and now wish to retire.
- Revolve Performance is an automotive engineering business which owns a leading performance parts brand, Mountune We supported the management plan to grow its US presence by providing £1.5 million in equity and £1.5 million in loan notes The funding has also allowed for research and development into new products and services Profits are on track to triple within the first 18 months of investment Growth in the UK as well as the US investment is designed to drive the branded business towards a high value exit, supported by cash generation from the engineering service division. All growth capital (no cash off the table) US growing rapidly now – more than doubled within a year
- Hydralectric provides valves and flexible hose solutions to control the flow of water in showers, coffee vending machines and similar products Bolstered incumbent management with industry experts to effect a buyout We provided £1.8m of equity funding and £1.8m of loan note funding Industry experts providing strong commercial insight and potential Company has excellent trading relationships Growth capital as part of the deal to increase sales and marketing High retention of customers & reputation for quality. Trade versus private equity – didn’t tick the boxes for the various trade buyers Grow the business, partly organic and partly acquisitive. Position part of the business (the valves with technical barriers) as a “need to buy” asset.
- Private equity in practice: Getting up to speed with the business and market A lot of work ourselves but hire in accountants and lawyers to help We normally always take a board seat – information, influence and hard work! Often the best use of our resource is positioning the business for a sale. The industry revolves around doing deals. Set up for due diligence, legal documentation and speed/efficiency. Private equity are often strategic in their purchasing. This isn’t necessarily due to sector insight or a portfolio approach but: Release part of the capital for owners to derisk. Reorganising a business for furutre value (such as Expolink) Maximising brand value (such as Cotswold) Acquiring further businesses (such as Hydralectric (next example)) Always align with management to allow for maximum shareholder value
- Questions? **Introduce next speaker**