George joined BGF in early 2012 and is based in the London office. Covering London, Essex and Norfolk, George is responsible for identifying and completing new investment opportunities as well as continuing to work with the boards of BGF’s investee companies.
Prior to BGF, George advised a number of large cap companies in fundraising and M&A across the Telecoms, Media and Technology sectors as an investment banker at Bank of America Merrill Lynch.
He holds a MA Oxon in Politics, Philosophy and Economics from Oxford University and a MSc in Finance from the London School of Economics.
“With a background in investment banking working on large pan-European deals, the move to BGF in 2012 was a complete change of course for me. Here I have the opportunity to work closely with management teams of some of the UK’s brightest and most aspirational companies. The added bonus is that with the financial clout of £2.5bn from the banks behind us, BGF is at the heart of the growing conversation around funding UK small and mid-sized businesses. Having the flexibility to listen to and fulfil entrepreneurs’ ambitions is a great place to be.”
- Four Communications (Board Observer)
- Thames Card Technology (Board Observer)
- Broadbandchoices (Board Observer)
- McMIillan Williams (Board Observer)
- Renal Services (Board Observer)
- Oliver Sweeney
- The Exchange Lab
Alistair joined BGF in July 2011 and is based in London. His main role is to identify and successfully execute investments. He also sits on the board of a number of our portfolio companies.
Alistair has 14 years’ experience in small company investing and has led investments into over 25 businesses. His investment experience was gained initially at Close Brothers and then at Octopus Ventures, where he was involved in a large number of growth capital and management buyout transactions, across multiple sectors and throughout the UK. In the majority of cases, Alistair also joined the board of those companies. Alistair began his career at Price Waterhouse with direct entry into the Business Recovery Services team.
Alistair has an MA in Modern History from Oxford University and is a qualified Chartered Accountant. He is married with three children and lives near Guildford. When he is not running around after his children, Alistair likes to play (or increasingly now settle for watching) cricket.
“What excites me most about my role at BGF is the privilege of interacting with a wide variety of entrepreneurs, and I try to bring the same passion they display into my own efforts to support a portfolio company’s growth.”
- Acro Aircraft Seating
- Oliver Sweeney (Board Director)
- Gymbox (Board Director)
- The Consulting Consortium
- Cennox (Board Director)
- Wow! Stuff
- Chesney’s (Board Director)
James joined BGF’s South West team in December 2011. He is responsible for the origination and execution of investments in Wales and South West England, with a focus on Oxfordshire, Berkshire, Hampshire and Dorset. He will also sit on the boards of certain investee companies.
After qualifying as a chartered accountant in Glasgow, James specialised in corporate finance transactions surrounding privately owned companies, typically in the SME space. He has worked in the South and South West of England for more than 10 years including as a Director in the RBS Structured Finance Southern team and latterly as an Investment Director in LDC, the Lloyds Banking Group owned private equity house.
He has experience of a broad range of sectors and transaction types but always with a bias towards growth companies and with a particular interest in businesses that have the ability to scale rapidly and the qualities of the management teams that are required to support them.
James enjoys golf, rugby and most sports but is usually diverted by three small children and two large dogs.
- Adestra (Board Director)
- Abbey Pharma (Board Director)
- Skyscape (Board Director)
- Bullitt (Board Director)
- Primrose (Board Director)
- Vysiion (Board Director)
- MyLife Digital (Board Director)
Q&A WITH KEITH JORDAN (CHAIRMAN OF CENNOX)
BGF Talent Network
The expertise of management teams is at the core of the way the BGF does business. As well as partnering with some of the UK’s most ambitious SME management teams, we are building an external Talent Network specifically to develop relationships with a broad range of experienced business leaders from across the corporate spectrum who can offer valued executive and nonexecutive support.
Already, we have introduced 19 non-exec chairman and four other non-exec directors to companies we have invested in. These directors come from a wide range of backgrounds, but their common link is a commitment and drive to encourage and help great small and medium sized businesses with ambition to grow.
What is it that attracts you to working with small and medium-sized businesses?
Their dynamism. They’ve often got management teams that are more focussed on the business opportunities than getting drawn into bureaucracy and the politics of a large group. I look for SMEs who are still in the growth phase of their development.
What is it that makes a particular business or a particular management team stand out for you?
What attracts me is either a sector that offers fresh growth opportunities; or if the sector is mature, then a business that has got something special; some sort of ‘disruptive technology’ or an edge that can set them apart. As far as the management team is concerned, I’m looking for commitment, energy and openness to external involvement. An awful lot of management teams don’t understand or want any form of non-executive involvement in their companies. I’m looking for the team that says, “Yes, I’d really like somebody with me because this is the first time I’ve driven the business above X size, and somebody who’s been there before – possibly several times – can help me.”
What do you think that they really need from the nonexecutive and how would you see that evolving as the business develops?
A one word answer would be “structure”. Structure makes for proper action plans, targets and KPIs – the discipline that you’d expect from a well-run business. But at the same time, you need to ensure that structure doesn’t stifle the very creativity or entrepreneurialism that created the company initially. It’s a very careful balance.
Hopefully you are also bringing something additional to the party, whether it be experience of a particular sector or a new activity, for example exporting for the first time. In these cases a non-exec who’s been there and done it before can be invaluable.
What would you see as the main challenges of working with smaller businesses from a Non-Exec perspective?
Three things: attracting talent, building a sustainable customer base, and securing funding. Generally the smaller the company, the more difficult it is to attract talent at a senior level. Really good people tend to migrate towards larger companies. They look at SMEs and see more risks, and possibly less immediate rewards. This is a real challenge. Secondly, small companies are more vulnerable. Larger companies will generally have a broader customer base. For some SMEs, losing a single major customer can be almost terminal.
Finally, I would say finance. Most SMEs are independently financed and life is never as straightforward and as simple as everybody would like. So an SME that hits a few headwinds in the marketplace or loses a customer can suddenly face huge challenges so far as keeping the cash flowing and the business solvent.
Are there particular qualities that you feel that are important for an SME non-exec?
Yes, but whether I’ve got them or not, others will have to judge! For me it is about empathy, understanding what drives the guys and where they’re going. Management need to know that you’re part of the team or you may never really find out what is going on at the heart of the business. You need to be able to bring professionalism where it is needed; but make sure that you don’t smother the company.
You need to be approachable, but you can never forget that you are also the independent director on the Board and therefore you must retain that independence of thought and deed. Chameleon qualities can be useful.
Do you think that it’s helpful from an experience perspective for a non-executive to bear some battle scars of their own?
Of course. Young management teams often don’t really understand what the role of a non-exec is, and it’s our job to explain. In this life you earn respect, you don’t just get it because you’ve got the name Chairman or non-exec on your business card.
What makes real impact is being able to say I have been there; I raised money; I’ve worked with third party investors; I’ve been in a small business’ I’ve also been in a large business; I understand what it’s like when your customer doesn’t pay you and he’s late; I understand when the bank is getting shirty.
How can a CEO get the most out of the relationship?
Firstly, be open-minded; see this person as a potentially valuable addition to your team, rather than being an imposition. Secondly, get to know each other. Get to know each other as people, but also get to know what the non-exec’s key skills and qualities are so that you know where they can make most impact. Lastly, don’t be afraid to ask questions. Some entrepreneurs are very good at it, but others think they’ve got to have the answer to everything. They don’t and a non-exec is there to help find the right one.
What sort of time commitment should a management team expect from a non-executive?
I don’t think there’s a simple answer in terms of days or months a year. I think that era’s been and gone. It’s about what each individual business needs. At the extreme, last year I spent 120 odd days in one of my businesses – a turnaround situation. It was about half my capacity for the year and a big commitment. At the other end of the spectrum, it may be a couple of days a month in the business, one of which is a Board Meeting; but time can also usefully be spent on phones and emails, meeting customers and suppliers, mentoring the management team. On average, I probably spend about four days a month in each of the businesses that I support, but it really does ebb and flow. It also tends to be front and back loaded. At the beginning, you need to invest time in getting to know the people and the business and finding out what makes it tick. Also, helping the business get to know you. I want to know the whole team, not just the Board so it’s important to spend time physically within the business. It is also often more involved as the company moves towards a sale or exit.
What would you say is critical for the Board to work together really effectively?
We can’t be friends all the time, that’s for sure. However the chemistry between management and the non-exec, the way that they interact and the mutual respect that they have will ultimately determine how effective the Board can be. As far as Board Meetings are concerned, I think efficacy depends on three key things. The professionalism of the person who’s chairing the meeting, the way the agenda is structured, and the CEO feeling that real progress has been made. He or she is my number one audience.
The Board pack is important – what goes in and what doesn’t. But it needs to be reviewed and challenged from time to time. Sure, there are things that always stay on the agenda, but you need to try and ensure that the discussion is kept alive and appropriate. Don’t get stuck in a rut.
What do you think are the biggest obstacles holding back SMEs?
Three things: Nervousness or lack of confidence in the outside world; the huge gulf between being national and being international; and access to working capital. Going from national to international is a big step for any company and many entrepreneurs are intimidated because they haven’t done it before. Directors will often build up a business to a certain size and then stop. They accept the status quo. They may feel that stepping from being a national business to an international business is just not for them, or a bridge too far. This is a critical moment. You either say: ‘Well okay, this is as far as we’re going to take this business with this team; we can keep it ticking over, or perhaps now’s the time to exit and sell.’ Or you can say: ‘This is an opportunity for the taking; let’s strengthen the Board; lets bring in people who feel comfortable doing overseas business; and let’s put a plan in place to make the leap.’ These are precisely the situations where a non-exec can make a real contribution to an SME, as well as personally benefiting from a highly rewarding and stimulating experience.
CAPEX TO BUILD GROWTH
Aberdeen-based STATS Group and South Wales’s SHS Infrastructure Services (SHS) may be hundreds of miles apart but the two businesses have much in common. Both specialise in largescale project management and engineering services for demanding clients; both have exciting growth plans that are dependent on capital expenditure; and both have turned to Business Growth Fund for help.
Without external investment to fund that expenditure, both companies would probably still be struggling to fulfil their potential. With the money, however, the two businesses are building reputations as leaders in their fields: STATS provides maintenance, repair and modification of oil and gas installations and pipelines, onshore and offshore, while SHS erects and dismantles large-scale scaffolding constructions on technically demanding projects. “When I arrived in 2011, SHS was operating with a significant overdraft and was having to turn down opportunities to bid for new work,” recalls Gavin Payne, the company’s finance director. “We did have a finance line with the bank that was facilitating some growth, but cash was massively constrained and we were never going to be able to move to the next level – we turned away £6m of business in the first two months I was here simply because we didn’t have the capital to commit.”
SHS’s difficulties started with the pressing need for capital spending, Payne explains, because the projects where the company specialises, working at refineries in the petrochemicals industry, require so much equipment.
“We needed to spend sizeable sums on the basics of our business – on tubing, boards and other scaffolding kit,” says Payne. “And we wanted to think longer-term – for example, we’d always bought wooden boards, even though steel boards last much longer, because our cash was so short we needed the cheapest option even when it turned out to be a false economy.”
Another issue was cashflow, adds Payne. “Payment terms in this sector are generally 60 or 120 days, which makes life very difficult for under-capitalised businesses.”
It is a story that Pete Duguid, the chief executive and founder of STATS Group, recognises very well. Duguid first launched STATS in 1998 and spent most of the next ten years battling with the company’s constrained finances. “I vividly remember my bank manager telling me I couldn’t build a business on enthusiasm alone and in truth, while there was always growth, we were constantly fighting working capital,” he says. “That was fine in 2007 when the banks were offering very easy access to credit but then the financial crisis came along and the oil market collapsed.”
In the years following the crisis, STATS faced a challenge simply to survive – not because of any flaw in its business model or products and services, but because it did not have the capital buffer needed to ride out a difficult trading period comfortably.
Fortunately, the business made it through, but Duguid realised he needed help to take STATS on to the next level. He could see clearly how the company could expand its range of products and services, and had plans for international expansion. But STATS still lacked the resources for the capital expenditure required to turn that vision into a reality.
“By the end of 2010 we’d stabilised but banking support had disappeared,” Duguid says. “I had to make a call – we knew we had to do something different and that’s when I began looking foroutside investment.”
The search ended in March 2012 when BGF invested £7.8m in STATS, in what was then only the fund’s fourth investment. Six months and 11 other investments later, BGF and SHS agreed a £5.4m injection of growth capital in the scaffolding business.
“What’s clear in both these cases is that the companies had no chance of any significant growth without taking on additional capital,” says Paul Oldham, a BGF regional director based in the Bristol office. “They could have opted to go for much slower growth, but they were ambitious, which is one of the things we look for in a company when we’re considering whether to invest.”
Oldham believes growth capital of this type – as opposed to debt – is ideal for companies with large capital expenditure requirements. You’re not going to be able to arrange debt for a period of longer than five years, which isn’t a great basis for long-term capital investment,” he argues. “Even as you’re investing, you’re already worrying about when you’ll have to roll over the borrowing.”
In contrast, Oldham says, with a slug of capital to fall back on, businesses can concentrate on worrying about growth rather than financing. “What our money has done in both these cases is take away the constraints from these companies and level the playing field with their larger competitors,” he argues. “That’s what BGF does – we invest in smaller companies whose skills are just as good, or better, as those of larger companies, and whose products and services are of equally high quality, or higher, so that they’re no longer at a disadvantage just because of their balance sheet.”
SHS’s Gavin Payne shares that analysis of the value of growth capital, but says he had particular reasons for choosing BGF.
“We spoke to a number of potential sources of funding, and while BGF’s terms were competitive, more important in the end was our impression that there was a greater willingness to work with us,” he says. “It didn’t feel like a traditional private equity involvement – they’ve only taken a minority stake and while we welcome their support and advice, it’s still us running the business.”
At STATS, Pete Duguid had similar anxieties. “My concerns were all about whether I was working for a new master and about how the decision making process would work,” he says. The fact the fund was happy with a minority stake in the company helped allay those fears. BGF also introduced Duguid to oil industry veteran Graeme Coutts, who subsequently became chairman of STATS and now plays a crucial role in helping the company realise its plans for international expansion.
In the end, says Paul Oldham, this is the type of edge that BGF needs to communicate to companies looking for investment.
“If all we were offering was money I think we would have done a lot fewer deals than we have done – our network of contacts is often an important part of businesses’ decision to go with us.”
ONE SMART COOKIE: SHANGHAI TRAVEL DIARY
China’s prominence on the world stage is growing and it is a market that any company with an international outlook cannot fail to consider. It is demonstrating increasing demand for international products and services. It is also looking to move up the value chain, which in turn offers exciting opportunities for businesses in dynamic sectors seeking to collaborate with Chinese companies.
In September 2012, HSBC hosted a programme of international exchange events which sought to bring corporate businesses from around the world to selected fast growth, emerging markets for the purpose of facilitating introductions, sharing best practice and informing on opportunities.
September 2012, saw 75 businesses from across the world gather in Shanghai.
Clive Nation, founder and CEO of the Surrey based Cennox plc group of companies – a provider of services to the ATM (cash machines) sector and backed by BGF in June 2012 – was one of the CEOs taking part.
Clive Nation’s Travel Diary:
Soon after we received backing from Business Growth Fund, I was approached by their Regional Director Paul Oldham, with details of a suggested exchange visit to Shanghai. Through connections with its banking shareholders, BGF knew of HSBC’s international exchange programme and recognised the relevance of the Chinese market to our business.
32% of Cennox’s turnover is generated overseas, and the rapid expansion in the ATM market as a whole is being driven by a sharp rise in the banked population in emerging markets. China also has the potential to play a major part in our supply chain.
Having arrived in Shanghai after a 12-hour flight from London, the group of 75 businesses gathered for a welcome from Monty Ho, HSBC’s Head of Commercial Banking in China and Helen Wong, President and CEO of HSBC China. Over a light supper (just twelve courses!), they mapped out the plans for what would prove to be a highly engaging, and revelatory, three days.
Alan Keir, HSBC’s Global Head of Commercial Banking, set the scene with some staggering statistics. China is home to some 160 cities with a population of more than 1million, dwarfing the 10 similarly populated cities in the US and 30 in Europe. If the group was in any doubt about the size of the opportunity here, reality had now definitely dawned.
This is a country that is currently acting on its 12th five-year plan. It is also undergoing significant change, which any entrant to the market needs to be aware of. Life does not get better by chance. It gets better by change.
Consumerism is well underway in China. Long established as an exporter, it is now increasingly looking to supply its own internal market; and this in turn represents opportunity for foreign businesses with a strong brand, product or service to offer.
China has long since been influenced by the working practices of the West, and traditionally you would expect many of the most senior corporate positions to be occupied by Western executives. However there is a noticeable shift in the structural hierarchy of local businesses and an emphasis on business education. Increasingly local people are moving out of mid-management into more senior positions, taking proactive ownership of their market. The man who waits untill tomorrow, misses the opportunities of today.
State ownership remains an obvious feature of business in China. However there are signs that the state grip is releasing. It is still true that most foreign businesses seeking to establish a presence in China would look to agree a joint venture with a local company. However the state ownership levels are decreasing, with a stake of 30% now more common than the historic 80%.
The face of Chinese manufacturing is also swiftly changing. I have visited China ten to twelve times in the past, generally through Shenzhen and Hong Kong. The manufacturing scene that we witnessed in Shanghai was markedly different – now there is much less of the compound setting, with factory and residential accommodation built side by side; and much more modernity, almost like walking into American or European manufacturing facilities. 300 new factories are opening every day in China, not just in the first cities but also in well-populated inland locations, made more attractive by new tax incentives.
This reflects the way that the Chinese approach to the manufacturing sector is developing.
The actual process of manufacturing is changing with an increased emphasis on efficiency and automation. Low labour rates had previously reduced the importance of automation but rising local wages have brought issues of headcount and operational efficiencies further up the business agenda and more investment is going into R&D, particularly in the engineering space.
There is a perception that China is a cheap manufacturing base. And to an extent that holds true. But it is certainly not as cheap as it once was and relatively speaking, it faces competition from both Korea and South America, which anyone with an interest in supply chain management needs to recognise.
The RMB is set to become the third global currency and local banking structures are changing so that it is more possible to buy, sell and trade with Chinese partners in the local currency. There seems to be a drive to address issues that hinder international trade and a growing willingness to adopt the best of business practices. This is good for businesses like Cennox who seek to do business in the region.
This impacts an area that is critical to my own business: intellectual property. It is key because we have developed and patented a security device that combats skimming from payment terminals. Any patent holder should enter the Chinese market with their wits about them, as the country has been renowned for the high incidence of counterfeit. But moves are clearly afoot to recognise and address this failing and increase the overall attractiveness of trade with the West.
A key benefit for me was building relationships with other likeminded business owners and directors. I had come to China expecting to find a way to source products locally but soon realised that the relatively small quantities needed would necessitate me speaking to a number of Chinese companies. At the exchange event, I met an Oxford based company that is meeting exactly this need and is well placed to help us source product direct from China – reducing the time and energy that I would otherwise have had to commit.
I also found common ground with a Huddersfield based automotive business, with factories in the US and India; and a Spanish waste management business. Although we do not operate in the same sectors, we do have a mutual interest in international commerce and doing business in China and as such can share valuable experiences and insight.
Cennox is currently in talks with the UK banks about adoption of our anti-skimming security technology. This will necessitate higher volumes of production and at that point, we will have a strong commercial reason to source direct from China. As a result of this exchange visit, I feel significantly more confident in doing that. I have a better understanding of the issues that the local market is currently facing and their objectives for the future; as well as some insight into the way they do business, negotiate and build relationships.
As I look at my travel plans for the year ahead, I see good reason to visit South America. And, I expect it won’t be long before I return to China – this time better equipped for what awaits me.