Is private equity good for growth?

MATT Hirst, chief executive of Chorley-based Utiligroup and Adam Hodges, the former chief executive of PlayNation, both took their businesses out of the ownership of larger corporates via private equity-backed management buyouts.

Hirst bought Utiligroup out from listed company Bglobal with the backing of NorthEdge Capital, while Hodges was supported by another Manchester investment firm, Palatine, in his acquisition from US-headquarted Inspired Gaming.

Both said this “energised” their teams and has been a huge catalyst for innovation and growth.

Hodges added: “It (private equity) challenges you and drives you forward. You go from being starved of investment to being supported and you have to find growth.”

EY director Ben Wildsmith agrees that for the management team with a proven business plan and further growth prospects there are a host of options.

“The BVCA (British Venture Capital Association) has highlighted Manchester as having the largest concentration of private equity firms in Europe outside London and this is further proof of the entrepreneurialism and enterprise in this region,” he said.

EY and TheBusinessDesk.com have worked together on a project celebrating some of the north’s most successful entrepreneurs, looking at their journey to the top and the challenges they have overcome as their business has grown and developed.

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The lending landscape for entrepreneurs is robust, with abundant choice locally of private equity and venture capital investment, bank debt at attractive terms, and also public markets such as AIM.

David Grimes, founder of MPD Group, the venture capital-backed technology company, which is behind MyParcelDelivery, said: “The market is buzzing at the moment – as an entrepreneur you can almost take your pick about who to go with. If you make the right choice you won’t look back, but for me this is more than money, it’s vision and experience too.”

Hodges spoke to around 30 private equity firms when he did his deal, while Hirst saw more than a dozen firms.

Having a good team to support him during the fundraising process was vital, to Grimes.

“Being challenged during the process is a good thing,” he added.

“Often when you are sat at the top, you are not challenged and questioned that way. It’s really tough keeping a handle on the business during it though, and you have to be careful nothing tails off. The team you have behind you is so important.”

Private equity also requires businesses to adopt more rigid business disciplines – not least around sharing data and of course delivering on strategy.

Hodges concluded: “If you are not moving the business forward, as agreed, they will replace you with someone who will, it’s as simple as that.”

EY and TheBusinessDesk.com have worked together on a project celebrating some of the region’s most successful entrepreneurs, looking at their journey to the top and the challenges they have overcome as their business has grown and developed.

Click here to download the supplement