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Accelerating your growth with Private Equity funding

Charlie Kerlin Charlie Kerlin

Confusion still reigns within SMEs in relation to what Private Equity does and their approach to investment companies. At a recent funding event one private equity provider described PE as “neither the devil nor Mother Teresa”. The image of the Gordon Gekko Wall Street asset stripper has thankfully passed but work remains for the Northern Ireland Corporate Finance community and the Private Equity sector themselves in promoting the benefits of private equity.

In the last two years we have seen an increase in the number of private equity deals in Northern Ireland and we now have a wider spread and variety of funders. It is clear that there are plenty of funds available for investment and private equity firms are having to stretch further in relation to geography and deal size to secure transactions.

Often the misconception is that private equity is only interested in the technology sector. Whilst this sector has seen significant investment, particularly from venture capital, private equity’s interest goes well beyond this sector. Recent transactions include Business Growth Fund’s investment in RiverRidge, Foresight Capital’s investment in Hospital Services and Sun Capital’s investment in O&S Doors – all more traditional sectors but with the characteristics of strong management teams, excellent growth stories and a track record of execution.

Grant Thornton’s experience of delivering the Funding for Growth initiative on behalf of Intertrade Ireland has resulted in over 400 discussions with SMEs across the island of Ireland. There remains a large number of businesses with ambition to grow and seeking funding, however sometimes more planning and focus is required if businesses are to achieve successful outcomes. First impressions of your business are critical especially in an environment where funders are making quick decisions on where they will focus their efforts.

Fundraising can also be a distracting process for management and the risk remains that performance suffers just at the time when it is important to show sustained growth. Securing the services of advisors at an early stage will help promote the business as an investment opportunity and will make the fundraising process more efficient by accessing the right funders at the right time.

Throughout 2017 and beyond Grant Thornton predict that the level of private equity investments in Northern Ireland will increase – steady growth rather than an avalanche of deals. Short term challenges particularly around Brexit, currency fluctuation etc. will be outweighed by the need to deploy capital by private equity, the backlog in MBO opportunities that currently exists, and the evolution of secondary buyout opportunities from early stage invested companies.

The recent BVCA Award Dinner sponsored by Grant Thornton attracted a range of private equity funders and potential investee businesses. The clear message was a willingness to do more in the market and promote the wider benefits of the private equity option.

Private equity investment is not a panacea for all, but for those SME’s with ambitious growth plans the potential of targeted PE funding should be on the agenda.