Going for growth
One of the biggest supporters of growth businesses in the country has just reached a couple of important milestones and is keen to spread the news.
In April, BGF became the first investment company to receive a Queen’s Award for Enterprise, and it has just seen the first merger of two businesses that it has backed.
Enough reason to throw a party and tell the wider community what it has been up to since it launched seven years ago, which is exactly what it will be doing this week when it hosts a dinner for connections in Edinburgh.
Formerly the Business Growth Fund, it is effectively a family of investment advisers sharing out a £2.5 billion fund provided by five banks to help scale up companies with good growth prospects.
Patrick Graham, who heads up the BGF office for Scotland’s central belt and Northern Ireland, says he is constantly surprised by the quality of opportunities he comes across.
“What I love about the job is meeting talented individuals, but also coming across businesses I have never heard of that are at the top of their game,” he says.
“Scotland is second to none in terms of quality. For us, it’s about finding it. There is more visibility in the south, whereas up here people are a little more modest about their success.”
He says this means being proactive and spending a long time building relationships that he sees as vital to BGF’s ethos of investing and supporting companies.
He mentions Walker Precision, a family business run by two brothers who succeeded their father who founded it.
“It’s got a blue chip customer base and long term relationships. They’re a modest team doing a very good job. It has taken four years to get to know the management team.”
Graham arrived at BGF from Sigma Capital Group, where he focused on providing development capital into the general tech and clean tech sectors across the UK and Europe.
‘I didn’t quite get the gravity of it, but there wasn’t much I could do’
After qualifying as an accountant at Edinburgh University he was due to take up an offer from Arthur Andersen when he returned from travelling in Australia.
While out there he was following news of the firm’s increasing predicament amid the scandal surrounding the collapse of Enron in the US.
“At first I didn’t quite get the gravity of it,” he says, “but there wasn’t much I could do about it.”
When he came back he was taken on by Andersen’s acquirer Deloitte which honoured the promise to him.
He’s never looked back, securing the BGF role in February 2012 as part of the team building the Edinburgh office.
Since then it has been a story of patient progress, developing a portfolio of clients, some of which have matured to seek acquisitions or an exit.
Across the UK the BGF teams have already plundered £1.5bn of the funding pot, but as Graham says: “It was no good sitting in our bank account. We wanted to put the money to work. It is generating returns and helping to grow the economy.”
He described BGF as something that sits between early venture capital and mainstream private equity, set up along similar lines to the original 3i. It takes equity of between 10% and 40% and does not wish to emulate the bigger private equity companies by acquiring businesses outright.
Its focus is providing funding packages of between £5m to £100m where there has been a gap in the market.
BGF targets companies with what he calls the “sweet spot” £3-5m turnover. It has invested in 20 companies across Scotland and Northern Ireland in a range of sectors. The average size of investment has been £6m, which includes initial and follow-up funding.
‘We work with others, but typically it is just us, as we have deep pockets’
The biggest deal in his patch has been £20m invested in ACS Clothing, a Glasgow company supplying the likes of Moss Bros, and £15m in waste management firm Riveridge in Northern Ireland.
Sometimes it works in partnership with other investors such as SEP, but “typically it is just us, as we have deep pockets.”
It is now developing a venture capital arm to invest in smaller companies.
“We kept hearing how it would be great if we could go down lower in terms of turnover and we have turned away opportunities,” he says. “We are now looking at companies with £1m to £1.5m turnover, though it will be a smaller part of the business. At this end of the scale we are doing more co-investments.”
He says BGF is not following the trend of focusing on technology companies and remains “sector agnostic”, pursuing companies in any line of business that have significant growth prospects.
“If we believe the concept is sufficiently attractive we will look at it.”
He believes the economy is generally robust but deals have become more drawn out.
“It can take a little longer to get things over the line but that is not necessarily a bad thing,” he says. “There is a strong pipeline of prospects so it is just a question of whether they move into deal process.”
As BGF is still a bit of a new kid on the investment block he says there is still work to do to spread the word. He sees the dinner this week at the Playfair Library as part of doing just that.
“The more deals we do and the more we embed in the market there is more willingness to engage with us,” he says.
Job: head of investment team at BGF for Scotland’s central belt and Northern Ireland
Education: Edinburgh University (law), qualified as Chartered Accountant
Career highlights: Deloitte & Touche, working in the financial services team and the corporate finance department specialising in SMEs ; Sigma Capital, investment director focused on providing development capital into the general tech and clean tech sectors across the UK and Europe; BGF, head of investment team for Scotland central belt and Northern Ireland
What makes you angry?
Individuals not treating others in the way they would want to be treated
Best advice you’ve received?
Always keep an open mind. You never know what may come around.
East coast of Australia. It’s where I met my wife.
Favourite place for lunch or evening out?
Dishoom (St Andrew Square, Edinburgh) and the Canny Man’s (Morningside)
Claim to fame?
Not so much fame, but I played golf for Ulster Boys (5 handicap)
If you could meet three people past or present who would you choose?
James Dyson (inventor), a genius and I’d love to know what makes him tick
Roger Federer (tennis player), someone who has achieved so much and won respect with his dignity
Sir Richard Branson (Virgin tycoon), just to get his take on what inspires him