The Press and Journal (Aberdeen and Aberdeenshire)
Mike Sibson
As the world gradually emerges from lockdown and social distancing measures are eased across Scotland, businesses are getting back up and running and making plans for the future.
One of the many questions some of them will be seeking to answer is whether there is funding and investment available not just to keep them going, but to enable them to grow.
Many investors have reacted to the uncertainty by easing back. Data from Pitchbook showed that deal-making activity across the UK dropped from 300 transactions in the first quarter to only a handful of deals being completed in April and May.
Prior to lockdown, the BGF team were talking to numerous entrepreneurial businesses about possible investments that would help them realise their plans for expansion, acquisitions, new product development and entry into new markets. Understandably some companies have put their plans on hold – but not all.
Given the disruptive nature of the pandemic, a period of adjustment was inevitable and the drop-off in deal flow is not surprising. But, as we have seen across the BGF portfolio, many entrepreneurial companies have demonstrated resilience and innovation throughout the period and, helped by strong underlying balance sheets, are already planning to restart their expansion plans.
Since the start of lockdown, BGF has completed 11 new investments into private companies, and five AIMlisted companies, demonstrating that, where the focus is on the longer-term growth prospects of businesses, it is possible to get transactions over the line. And, thanks to the collective efforts of all involved, BGF has delivered a strong run of eight exits in the first half of the year, including throughout lockdown, generating £135m from the £65m invested across these companies.
Indeed, equity investment has a key part to play in sustaining recovery without stifling innovation and ambition.
Initiatives such as the furlough scheme, Business Interruption Loans, deferment of PAYE and VAT through HMRC have provided a vital emergency lifeline which has kept thousands of businesses afloat through events of recent months.
Without them, it is likely the devastating impact of the coronavirus pandemic would have seen many more businesses fold, unable to meet their financial responsibilities during what has been a challenging time.
But, with the exception of the furlough scheme, it has to be paid back.
The cost of securing their future means many companies have incurred an unplanned and increasing debt burden, creating additional problems for longer-term recovery.
In its latest quarterly survey published earlier this month the Scottish Chambers of Commerce found, not surprisingly, that levels of business confidence have fallen to a historic low across multiple sectors of the economy and the number of companies applying for credit has risen.
The challenge now is to identify ways to help businesses survive and thrive so that they play a part in Scotland’s and the wider UK’s road to economic recovery. Determining a way to support business recovery to help rebuild the economy in the aftermath of a national and global crisis is not new to BGF. It is how we started.
From those early days to where we are now, one thing hasn’t changed and that’s the ability and resilience of our portfolio companies. Many have really stepped up to the plate in terms of how they have adapted or transformed their business to meet and respond to the challenges caused by the pandemic.
But even the most robust of companies can face a scenario where working capital is stretched, debt has built up and will need to be refinanced. Growth capital helps them realise their ambition and puts them in a position of strength to make the most of opportunities.
BGF has remained very much open for business during this period and we’re continuing to make new investments that help rebuild resilient and sustainable businesses.
The challenge now is to identify ways to help businesses survive and thrive