The Courier & Advertiser (Angus and Dundee)
BGF looks for stakes in more Tayside and Fife firms
Richard Pugh, an investor at BGF, discusses the mergers and acquisitions climate in Scotland.
Q. What is the history of BGF?
A. BGF is the UK and Ireland’s most active investor for growing companies. Set up in 2011, BGF has invested £2.5 billion in nearly 400 companies, including more than £250 million in Scottishbased businesses.
We operate as a minority, non-controlling equity partner with a patient outlook on investments. Initial investments typically range from £1m to £15m with the potential for follow-on funding to support new growth opportunities. We often buy shares as part of an investment but our focus is always on growth. We support all stages of growth, from early-stage technology companies to established
owner-managed SMES and quoted companies.
Q.
What do you look for in an investment?
A. It’s all about backing a high-quality management team who know their business, their market and have a clear plan.
This could range from providing funding to make acquisitions, working capital support, through to entry into new markets or supporting new product development. Our funding is completely flexible and the uses are unique to each company we invest in. We’ve seen from experience that the best management teams adapt best to change – for instance, during the challenges of the last 12 months – but are also able to spot where a market is going and act quickly to make the most of it.
Q. What have been some of the companies you have invested in Tayside and Fife?
A. Our first investment in Tayside was Waracle, one of the UK’S largest mobile app and digital product developers. This was to support the company’s organic expansion while maintaining its position at the cutting-edge of digital product development. Waracle is a highly innovative company, constantly pushing the boundaries on the latest tech, working with some of the UK’S largest businesses across sectors including fintech, digital health and energy. We are just over a year in and the team are doing a fantastic job. We have also invested in Campion Homes, a Fifeheadquartered housebuilder, to accelerate its building programme in both private residential and affordable homes.
They were recently identified as one of the London Stock Exchange Group’s “1,000 Companies to Inspire Britain 2020” which is a fantastic accolade and a testament to the team.
We’re keen to speak to more companies in Tayside and Fife who are ambitious and looking for longer-term investment which will help them scale. That investment comes hand-in-hand with our support without taking control of the company.
Q. How has Covid-19 impacted your operation – has it made business owners more willing to consider investment?
A. During one of the most challenging periods in recent history, businesses have had to adapt quickly to protect their operations, their employees and their cash flow. We had anticipated widespread business distress but among our portfolio we were encouraged by their ability to adapt to new ways of working, and worked rapidly to ensure they had the largest possible cash buffer.
BGF has stayed open for business throughout the pandemic, meeting the ongoing appetite for investment. In 2020, BGF’S Scotland and Northern Ireland teams invested more than £30m across a variety of sectors and size of companies. It is early days obviously but these companies are performing really well.
It is too soon to know the longer-term impact on business owners. Many are actually sitting on unusually large cash balances but
are still uncertain about the outlook – the time for a partnership with BGF is when they have sufficient confidence to want to really push on.
Q. What are your thoughts on the M&A climate in Scotland right now?
A. Uncertainty is always the main barrier to M&A activity. But, thankfully for us, entrepreneurs don’t like to stand still for too long and although there will still be a degree of caution, ambitious businesses still want to grow. The time for a partnership with BGF is when they have sufficient confidence and want to really push on.
In all crises, even one of such global proportions, there are winners and losers.
The rise in the requirement for digital technology has meant that the IT and tech sectors have, in many cases, flourished. There has been a sharper focus on life sciences than ever before. Both of these sectors have seen lots of M&A activity in the last 12 months and we think that will continue.
The lifting of restrictions and the vaccine roll-out will be a boost to the economy with a reasonable chance that the bounce-back will be better than anticipated. This in turn will drive M&A activity as confidence returns.
Q. Will Brexit make cross-border mergers/ acquisitions more or less likely in your opinion?
A. Now we have a Brexit deal, despite its teething problems, companies know what they have to do to grow their international business. This will lead to more crossborder deals and we know there is a lot of pent-up demand in this area.