Beechbrook raises £120m in third SME fund

Beechbrook Capital, which opened an office in Birmingham last year, has achieved a first close on its third UK SME focused fund, raising £120m.

This fund has attracted repeat and new institutional investors, including British Business Investments, the Greater London Authority Strategic Reserve and the Greater Manchester Pension Fund.

British Business Investments, a wholly-owned commercial subsidiary of the British Business Bank, has made a £30m commitment to the latest fund, following commitments in 2017 and 2019.

Beechbrook’s UK strategy supports small and medium-sized businesses in the UK with a turnover of between £10m and £100m and EBITDA of £1m and above.

It will provide mainly senior secured loans to non-private equity-backed companies to support acquisitions, buy-outs, shareholder re-alignments, refinancing, and general expansion plans.

Since the launch of its Birmingham office, Beechbrook says it has seen a notable increase in investments in the Midlands region, from £25m in Fund I to £35m in Fund II.

To date, the UK funds have contributed towards a total 28 investments worth £267m to date, six of which have been in the Midlands, amounting to approximately £60m.

Complete Detection Systems, a Leicester-based specialist in the fire protection market, was one of the final investments by the second SME Credit Fund, which raised £130m and closed in March 2020.

The management team is pursuing a buy and build strategy to expand across the UK and diversify their offering into other compliance areas such as water safety and electrical systems.

Beechbrook has provided a debt and equity solution to support this strategy as the company makes further acquisitions.

Beechbrook managing partner Paul Shea said: “We are pleased to announce the first close of our third generation UK SME Fund and are grateful for the support we have received from both existing and new investors. Given the uncertainty created by the pandemic, providing flexible financing for SMEs is more crucial than ever. There remains an acute shortage of development and expansion finance available in the UK lower mid-market and we will continue to play our part in helping fund growth in this important segment of the market.”

Judith Hartley, CEO, British Business Investments, said: “This £30m commitment from British Business Investments to Beechbrook Capital’s third UK SME Credit Fund will enable promising smaller businesses in the Midlands and the rest of the UK that require growth capital to scale up successfully by accessing additional investment capital. The mandate of British Business Investments to promote greater diversity in the supply of finance compliments Beechbrook’s own approach of providing a combination of debt and equity finance to those established businesses who need growth capital.”