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26 January 2012

Fund manager round up - deals, deals, deals

A review of deals so far...

Fund Managers

The fund managers at The North West Fund ended 2011 with a rally of investment activity. In December alone they invested £3.7m into nine SMEs and secured two follow on investments.

Securing co-investment for the businesses that we support is an important aspect of our investment as this allows us to further leverage the funds at our disposal in order to maximise the funding available for business growth in the region. To date, our fund managers have been especially successful as, on average, £1.28 in co-investment has been raised for every £1 of investment from The North West Fund.

Below, our fund managers briefly review their highlights from the last twelve months and share their thoughts on the future...

Simon Cleaver head shotSimon Cleaver, investment director at YFM Equity Partners, managers of The North West Fund for Development Capital

We enter 2012 positively because of the way we ended 2011. We completed two transactions, both in the healthcare sector. One of them was Evodental, which saw us invest £400,000 in a business that provides dental implants. This will help the company expand, create jobs and offer an even better service - exactly what The North West Fund is all about.

Importantly, we have a strong pipeline in place and the pace of deals is really picking up. Towards the end of 2011, we launched our Mezzanine product, which as it is much more akin to a debt investment in its appearance, is more appropriate for longer established businesses.  This has already generated significant interest  and we expect to complete our first such investment in early 2012.  Consequently, we are expecting a steady stream of both mezzanine and equity investments to complete in 2012.

Specifically, we expect healthcare and manufacturing to be especially active areas, particularly for those who export. My view is that whilst 2012 will be challenging, there will be increasing appetite for development capital amongst established businesses as they look to exploit market opportunities and "grasp the growth nettle".

Richard Young head shotRichard Young, fund manager at EV, managers of The North West Fund for Venture Capital

It has been incredibly rewarding working with businesses at the very beginning of the lifecycle. The great thing about The North West Fund for Venture Capital is meeting brilliant businessmen and women who are setting up exciting new enterprises. It is a privileged position for us to be offering advice and, when things look good, investment.

During 2011, in all, we made 13 investments worth a total of £3.8m. Some of the applications didn't fit our criteria but there are a lot of quality people out there. The common themes are entrepreneurs who have proved they know how to run a business but have come to the conclusion that they don't want to do that forever. They want to be masters of their own destiny. They have a flair for business. The fact is that recessions, or the aftermath of them, are great times to set up a new business.

Picking a favourite deal is like picking a favourite child - they are all my favourites. However, one which has got off to a particularly rapid start is Rock Networks, an IT and communication services business, which we backed in May 2011. Rock secured its first customers within weeks of starting up and has added to that number on a weekly basis.

Our goal for 2012 is to invest double the amount we invested in 2011. We have a well developed pipeline so I see no reason why we cannot achieve that goal.

Gary Guest 100sqGary Guest, fund manager at FW Capital, managers of The North West Fund for Business Loans

Interest in The North West Fund for Business Loans has been encouraging and we have seen no shortage of applications.  So much so, that to date we have lent over £3.5m to 21 businesses.

The Fund offers loans from £50,000 to £250,000 and has different lending criteria to banks, which has proved attractive.  Demand has come from a variety of established businesses operating throughout the North West with development and expansion funding needs.  The quality of applications and business plans we are seeing is particularly impressive.

Lancashire-based household, health and beauty products manufacturer, Expac (Preston) Ltd is an excellent example.  The company received a £150,000 loan from the Fund and Director Mark Langtree and his team now have expansion in mind.  This includes investing in new product ranges and exploiting market opportunities.  The loan helped Expac relocate to new premises to underpin these plans.

With offices in Liverpool, Manchester and Preston, FW Capital has strong relationships in the North West.  We work closely with banks and advisers to structure loans that provide businesses with the right funding at the right time.  Banks have been a particularly strong source of referrals for us and we have provided loans both when they have been unable to and indeed as part of a joint funding package. Having different lending criteria can often mean a 'win-win' for the banks and advisers who have referred clients to us.  This is something we are keen to expand throughout 2012.   

Penny A head shotDr. Penny Attridge, investment director at SPARK Impact, managers of The North West Fund for Biomedical

Many of the deals we have completed so far have been £50,000 early-stage pathfinder investments. With that initial investment, our portfolio companies have done some amazing things already and in 2012 we shall be looking to follow up with additional investment to develop them further, subject to completion of milestones and the commercial imperatives. Securing early-stage investment can really inspire entrepreneurs to develop their ideas and pursue their ambitions.

The highlight of the past year has been working with businesses in the North West that have the potential to shape the future of healthcare. Evgen Limited, which received £500k as part of a total funding round of £1.055m last September, is completing the pre-clinical development of Sulforadex, a patented pharmaceutical composition with enormous potential to prevent and treat prostate cancer.  The prospect of improving how we manage patients with prostate hyperplaysia will be invaluable. 

The whole team has enjoyed helping young businesses find their feet and, with hard work and further investments, the future will be bright for them. With fourteen deals under our belt, we look forward to another year of providing investment that will continue to support the growth of the biomedical sector in the North West.

David Smith head shotDavid Smith, investment director at AXM Venture Capital, managers of The North West Fund for Digital & Creative

It was a proud moment to get The Fund moving in June last year when we completed our maiden investment. Since leading the £660,000 funding round for Chester-based e-learning company, Autology World, the business has significantly expanded its management team and is developing its technology platform, based on an Autonomy licence.

Other deal highlights include our £50,000 investment in Salford Quays software developer, Camiloo which is developing a suite of products to support e-commerce retailers and is already selling globally.

We rounded off 2011 with two transactions in December, participating in two Liverpool-based company investments of over £1.5m demonstrating our continued commitment to Merseyside.

For 2012, we are encouraged by the pipeline of opportunities in our priority sector and look forward to supporting high quality entrepreneurs.

Adam Workman head shotAdam Workman, partner at CT Investment Partners, managers of The North West Fund for Energy & Environmental

The energy and environmental sector is one of the driving forces behind growth in the North West economy. As a relatively fresh-faced industry, a network of the region's clean technology businesses is only beginning to take shape and we are here to support them.

We are looking to invest not only in technology companies, but also in the green supply chain, green services firms and potentially putting equity into clean energy and other projects that, in the current climate, are finding it difficult to access bank finance.

In June, The North West Fund for Energy & Environmental invested £400,000 in Runcorn-based fuel cell developer, ACAL Energy, which has the potential to become an industry leader. The investment was part of a syndicate and broader £6.1m fundraising, which will enable the company to commercialise its technology in applications, such as off-grid power for telecommunications and automotive power trains.

The investment demonstrates the exciting businesses that we have in the region and looking to back, but also our appetite to collaborate with co-funders to get these capital-intensive projects off the ground.

With a strong pipeline, which we have worked hard to develop in 2011, we are confident that we can continue to make a real difference to the North West and the development of the energy and environmental sector in the region.

If you are interested in finding out more about equity/loan funding to help grow your business please visit: http://www.thenorthwestfund.co.uk/funds

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