How to find niche investors for owner-managed SMEs

31st March 2016

More and more owner managers looking for equity investment with a direct link to industry-specific skills are harnessing the services of alternative funding specialists.

Leonard Curtis Lifecycle’s equity finance partner, Aqvvs Capital, links SMEs to ‘off-the-radar’ investors who have the funds and industry knowledge to deliver transformative solutions that unlock supressed value across a broad spectrum of areas.

Last year (2015) saw many owner managers looking for a post-recession strategy to reflect their personal and business needs.

Some owners want more family time, or to share the burden of majority shareholding, while others are looking to grow the business but lack the skillsets and funding to realise game-changing ambitions.

Another type of owner has recently taken control of a family business and is unsure about its future direction. Risks and challenges include: access to funding; retaining and boosting competitive advantage; accessing international markets; economic volatility; and compliance and regulatory issues.

On the opposite side of the equation are entrepreneurs – including high net worth individuals – who built and sold businesses before the recession and now want to put both cash and sector-specific expertise into appropriate ventures.

Paul Reeves, director at Aqvvs, said: “We set up Aqvvs as a matchmaking service for businesses requiring a capital injection for a specific purpose, such as taking the company to its next level; paying out exiting shareholders; providing a partial exit for the majority shareholder; injecting cash for a strategic acquisition; or paying down post-recession debts.”

Aqvvs recently worked with a niche market steel product fabricator in the North West that had recently been handed from father to son.

The business had suffered a dramatic downturn in trade during the recession and the son felt uncomfortable with a 100 per cent shareholding – even though the order book was beginning to fill up again. One of the main issues was a large HMRC debt that was putting the business under substantial stress.

The team at Aqvvs found a sector-specific investor who not only dealt with the HMRC debt, but could also bring additional management expertise and open up new customer channels needed to expand the business. A few months later, it is performing well and the new owner, who retained a 50 per cent stake, is part of a clear strategy of building shareholder value in preparation of his own retirement in 10 years.

Paul Reeves commented: “In 2015, we met many business owners who were not quite sure where the future lay. They were still keen to push forward but liked the idea of taking some cash now, as well as bringing in a hands-on investor with the experience and contacts to develop a full-value exit for the founder when the time was right.

“These investors are often difficult to find, which is where Aqvvs comes in. We know who will invest in what and can match the personality and aspirations of a business owner with the most appropriate investor.”

Paul Reeves added: “We work in a simple way. We act for businesses that have a cash requirement. If we are successful in delivering the investment, we charge a fee. If not, there’s nothing to pay. There’s nothing to lose from having an informal conversation to explore the ‘art of the possible’ with one of our team.”

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