Gregory: BGF ‘not competing’ with financiers

THE new £2.5bn Business Growth Fund will increase the range of funding options available to entrepreneurs as opposed to competing head on with existing financiers, according to regional director Andy Gregory.

Gregory is currently in the process of recruiting a five-strong team of investment managers who will cover the north of England from Manchester, but he told TheBusinessDesk.com that he is also keen to explain its offer to members of the private equity community.

He feels there is currently “a bit of a misunderstanding about what we will and we won’t do”, which has led to some in the sector taking the view that the Business Growth Fund will be in direct competition with them.

“A lot of what we are going to be doing are the deals that are not happening,” he said. “We should be expanding the market.”

For instance, he said that the Business Growth Fund will not support management buy-outs, particularly if the bulk of the transaction fee is being withdrawn from a business by the vendor.

“We’re providing funding for growth,” he said. “That could be for acquisitions, it could be for working capital or for anything that can be credibly shown to be adding value to the business. We’re happy for some value to go out, but the primary focus of the investment has to be for growth.”

Similarly, given that the size of cheques being written by the Business Growth Fund is  £2m-£10m, it won’t compete with the £185m, ERDF-backed North West Fund, whose investment limit is £2m.

Gregory said that the fund will also typically seek minority stakes in investments, whereas many private equity firms prefer to take controlling stakes in sub-£10m investments.

The Business Growth Fund fund has been set up by the UK’s four major clearing banks – RBS, Lloyds, HSBC and Barclays – as well as Standard Chartered bank.

“It’s important that we get out and show the community that we’re ready to lend, although having said that we’ve already had some interest. Deals have come in directly to me and we have quite a few referred to us by advisors. The banks have also sent some our way.”

The fund is headquartered in Birmingham and has already made some progress since launching in June, having completed its third deal last week. It also has offices in Scotland, Bristol and in London.

Mr Gregory said there are no “hard and fast” rules as to where funds are allocated geographically, or indeed on the length of any investment period, although it is anticipated that a return will be realised within ten years.

Resources are being allocated commensurate to the size of market, he said, so the north of England will have five dedicated staff but London has ten.

“It’s important we are part of a marketplace, whether that is Liverpool, Leeds or Newcastle. We have to make sure that we are engaging with those communities.”

Moreover, like the other regional heads Gregory will sit on the fund’s investment committee, so he will have a say in the type of deals which are funded.

“I want to come back with a clear view of what we can and can’t do. I want to be able to make sure that when we’re speaking to the local market that if I say we can do something, we will – subject to the necessary due diligence.

“We’re supporting businesses and investing in a recovery. Hopefully, we’ll be involved in backing success stories across the North West at a time when that is very much needed.

“I’ve been very encouraged by the response from the market so far and it’s only week four.”