YFM chief looks for ventures with an edge

YFM Equity Partners may be celebrating its 30th anniversary but, as its managing director David Hall told Ian Briggs, there’s never been a better time to invest in ventures with an “edge”.

David Hall has some sage advice for anyone launching a business in today’s economic climate.

“You’ve got to have something as a business that’s a bit different,” he says. “An edge doesn’t always have to be what you think it’s going to be. It’s not just about smart phones and taking on Apple.

“It’s about things such as licensing, brand definition and overseas markets.”

Asked what the success stories, technologies and companies of the future will be, Mr Hall admitted: “I don’t know what they’ll be. I just know that if the past is a guide to the future the deals we’ll do in 2013, ’14 and ’15 should be really good deals by the time we get to 2020.

“If you look back over the years, the best deals we’ve done have been the ones that were done at the bottom of the economic cycle. It’s the ones that have been counter intuitive.

“So in terms of an investment opportunity it has to be exciting now. Everything in history points to the fact that the next deals will be the most exciting ones because of the growth we can achieve.”

YFM Equity Partners, launched in 1982, invests up to £10m of equity in growing UK companies. Its present portfolio includes Bagel Nash, Go Outdoors and Sarian Systems. It has realised more than 100 investments since launch.

The organisation, which operates across six regional offices, including Liverpol and Manchester, relinquished the management of the North West Fund for Development Capital last month.

Its regional teams are now focusing on investments from its British Smaller Companies Venture Capital Trust Funds and its Buoyant and Growth Capital institutional funds.

Mr Hall believes regions such as Yorkshire offer the best investment opportunities despite the strength of London’s economy.

“Today’s is the same market that we’ve always invested in. We’re probably not doing the same deal volumes under £1m that we were.

“Opportunities in the regions are really on for us. We invest a lot more outside the South East and London than we do inside.”

Mr Hall pointed to the sale of Yorkshire-based ICM, which listed on the Stock Exchange, as a highlight of the organisation’s deals since its launch.

“We got eight times our money on that deal,” he recalls. He also pointed to the success of Sheffield-based outdoor equipment retailer Go Outdoors as another success story.

Making an investment into the business seven years ago, Go Outdoors has grown to boast 40 stores and turnover approaching £200m.

“One of the things we learnt from this business is that it’s about working with owners for a long period of time. It’s not about going in and out quickly.”

Commenting on the appetite from ventures towards investment he said: “There’s a bigger population of businesses that are considering equity than before. However, most businesses are generally more cautious because of the economic climate we’re in.

“One of the big changes we’ve seen over the last 30 years is the stance from small business towards equity. Thirty years ago businesses didn’t take outside advice about how to run a business.

“The thing that doesn’t change is around the quality of the businesses. It’s about growth in one shape or another.”