Debt fund is final piece in fully serviced city jigsaw
TOSCA Debt Capital – launched six months ago with a mission to invest up to £110m in SMEs by late autumn 2016 – is claiming to be the final piece in the jigsaw to make Manchester a fully-serviced city.
The company led by former EY principals Gary Davison, Richard Williams and Wells Fargo director Mark Metcalf has just completed its first two deals – the $15m Airswift merger last and the funding of £10m into 1st Stop Group, a Blackpool-based lending business.
Its unique selling point is that it the only company outside London lending directly to corporates in the North of England.
“We’ve all given up highly paid jobs and it’s turned out to be what we thought it should be,” explained Davison at Tosca’s offices on Cross Street.
“The focus of our marketing is boots on the ground in the Northern region – across the Northern Powerhouse corridor.
“Because we’ have a good reputation, Richard, Mark and myself and a team of three other people, we attract business from all over the UK.
“We’re sector agnostic. We looking at the trading history, whether a company is growing, profitable and it’s also helpful when we know the people involved.
“We’ll deploy up to £15m per company and go as low as £2m in a single corporate transaction.
“It doesn’t have to be M&A, it can be a recapitalisation of a business, a business that’s looking to be acquired or be refinanced – management must demonstrate good reasons for wanting the capital.
“What we’re doing in most cases is supplementing back debt, and equity.
“It might be private equity in the purist sense or capital that’s been built up in the business over a period of time.
“We are junior capital – we’re not looking to compete with banks – we’re supplementing the market. If you look at the way the UK market’s gone there are around 65 funds registered with the FCA.
“They’re all based in London so if the market up here wants to tap into that capital they have to get on train and reach out to those people.
“They only really want to get on the train back up here if the cheque size is £25m to £50m. So it becomes quite hard to generate the interest.”
Metcalf reiterated the Manchester connection when he added: “The money that’s come into the debt fund market is US money, where the decision-making has to go back to the US. So you’re going from Manchester, to London, to Europe to the US to get that approval.
“But you lose the story when you’re so remote from the centre. So we are a Manchester-based debt fund. All the people in this team have predominantly been in Manchester therefore all of those factors play well in the local market.
“You do get parochial markets and people want to deal with people they know. They don’t necessarily want to deal with a person that’s remote from this location. That’s critical. It’s the people, our commitment to this region which is critical.”
Williams said the activity – four more deals are currently in the pipeline – is indicative of the vibrancy in the North West.
He said: “The interesting thing that sets the North West apart from London and the Midlands is that it’s so well populated with really successful, driven entrepreneurs.
“They sort of benefit from being far enough away from London to really drive their ideas and they really have value in their proposition.
“Even though there are loads of businesses, it’s amazing how many you haven’t seen. It’s like ‘where’s that business been that’s round the corner and that’s now borrowing £20m to £30m’. And they keep on coming with really good ideas.”