AS the world gradually emerges from lockdown and social distancing measures are eased, businesses will be getting back up and running and trying to make 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.
However, many investors have reacted to the uncertainty by easing back. Data from Pitchbook showed that deal-making activity across the UK and Ireland dropped from 300 transactions in the first quarter to only a handful of deals being completed in April and May.
In the six months prior to lockdown the BGF team were talking to numerous entrepreneurial Northern Ireland 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 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.
In fact, since the start of lockdown, BGF has completed 11 new investments into private companies, and five AIM-listed companies (as well as two successful exits), demonstrating that where the focus is on the longer term growth prospects of businesses, it is possible to get the transactions across the line.
Those deals included a £10m investment in Lisburn-based blind and window covering manufacturer Decora, which became our seventh portfolio company in Northern Ireland. The company is a market leader in the UK and Ireland and our funding will be used to support its strong growth via expansion into European markets, strategic M&A and continued investment in product development and infrastructure.
In the same week, our team in Dublin announced a €10.5m investment in cyber security business Edgescan. This was followed a week later by a €3.6m investment in Action24, a security business based in Dublin.
So, while it is an understatement to say a lot has changed for businesses in the last three months and we are undoubtedly in for a period of flux as the economy tries to right itself, what investors like BGF are looking to invest in hasn’t changed. We back businesses with quality management teams and strong long-term fundamentals in order to help them manage difficult times as well as being able to continue to capitalise on opportunities that arise.
We have seen the benefits of this approach across our portfolio during Covid. Leading housebuilder Braidwater has continued to expand, submitting plans for a £95m scheme to build 650 affordable homes in west Belfast; while integrated waste management company RiverRidge has recently acquired the business and assets of ISL Waste Management.
As companies emerge from lockdown, we think that equity investment has a key part to play in the recovery. Working capital is being stretched, debt will build up and need refinancing, and business will require growth capital to make the most of the opportunities that present themselves.
Predictions from Pitchbook suggest it will be the fourth quarter of this year before broader deal activity rebounds, but, as we’ve seen throughout lockdown, entrepreneurs continue to demonstrate determination and decisive action.
It’s important to acknowledge that mentally, economically and emotionally, there has been a great deal for entrepreneurs to take on board and a lot of companies are now having to work very hard to stand still, let alone looking to grow.
But our investment teams are continuing to work hard across the UK and Ireland and even at a time when it may feel that everything has turned upside down, we know many business owners in Northern Ireland are looking towards funding to help them achieve their goals. It is vital they have options and, for our part, BGF remains open for business and is keen to hear from them.
Paddy Graham is head of NI and Central Scotland for BGF
