Formerly a subsidiary company of fellow BGF portfolio business Magma Global, M-Flow Technologies is a flow metering technology business operating in the upstream Oil and Gas sector.
Based in Abingdon, M-Flow is positioning itself as a leading provider of next-generation water-cut metering technology. The Company will enable oil and gas producers to reduce operating costs and improve asset performance across the life cycle.
M-Flow have installed their first meters into oil fields internationally and are working with global major oil companies and smaller independent companies to develop a market position.
M-Flow produces an innovative range of advanced full bore meters that provide accurate, real-time data on the oil, gas and water content in flow lines, with no impact on production integrity and flow.
M-Flow has exclusive access to the composite manufacturing technology developed by partner Magma Global specifically for demanding oil field environments. This technology enables the embedding of metering technology in pipe walls without impacting on mechanical integrity or compromising sensitive components during manufacture. M-Flow now works closely with Magma harnessing unmatched experience and knowledge in the mechanical design of complex composite structures to deliver high pressure, monolithic, ‘smart’ piping spools at the heart of Sure-Cut meters.
BGF is an investor in M-Flow alongside Kern Energy Partners, a Canadian specialist energy investor; and NES, a Danish venture capital investor which is focused on New Energy Solutions and Strategic Industrial Capital Partners LLP.
Mike joined BGF in January 2012 in Aberdeen, where he is responsible for originating and delivering investments in the North of Scotland, and for working with the management teams of the investee companies to help maximise their potential.
Mike started his career as a drilling engineer with Shell, working mostly in exploration in Angola and Congo. He then joined 3i, and after spells in Birmingham and Cambridge Mike moved to Aberdeen in 2004, where he was subsequently appointed joint head of 3i’s oil and gas team.
Mike has a BA and MEng degree in Engineering from the Downing College, Cambridge University, and an MBA from INSEAD, and he is a Chartered Engineer and a Sainsbury Management Fellow.
Mike is married and lives in Banchory in Aberdeenshire. He provides a taxi service for his four kids, and in his spare time likes to be outdoors, running, skiing and biking.
“The economy in the North of Scotland is outward-looking, with UK sales making up the minority of revenue for most of our businesses. The culture is very entrepreneurial, and Scotland regularly generates innovative technology and services on which business owners build some great and valuable companies. This makes it a great market for BGF.”
Latest investments/Board Director:
- ROVOP (Board Director)
- Task-Fronterra Group (Board Director)
- SPEX Group (Board Director)
- 3sun Group
- Inoapps (Board Director)
- Petrotechnics (Board Director)
- Magma Global
- M-Flow Technologies
- STATS Group
- Frontrow Energy Technology Group (Board Director)
Richard joined BGF in August 2011 and is based in Aberdeen. His role is to identify and successfully execute investments for BGF then work with portfolio companies to support their growth plans. This involves meeting a range of companies to explain the type of funding that BGF provides, working with them to develop their business plans and then structuring and executing investments. Richard will then typically join the board as either an observer or director.
Richard has 10 years’ experience in investments into small and mid-sized companies. This was initially as an adviser at PwC where he was involved in over 30 corporate and private equity transactions in the UK and overseas and since 2011 at BGF, where he has been involved in seven investments so far, with a particular focus on oil service companies.
Richard has an MA in History from Oxford University. He is married with a daughter and lives in Aberdeen. When he is not running around after his daughter, Richard enjoys running around in the Cairngorms!
“I have had the opportunity to work with companies ranging from FTSE 100s to SMEs – this experience has made me realise my real passion is in working with and supporting fast growing, entrepreneurial companies which is exactly what BGF is set up to do.”
- Keenan Recycling (Board Director)
- Aubin (Board Director)
- Task-Fronterra Group (Board Observer)
- Petrotechnics (Board Observer)
- Magma Global
- STATS Group (Board Director)
- Frontrow Energy Technology Group
Alex joined BGF from KPMG Corporate Finance in February 2012 and is responsible for sourcing and executing investments throughout the South West and South Wales.
Since joining, he has been involved in over 10 completed investments and currently sits on the board of a number of these in support of their growth aspirations.
Alex graduated from the University of Warwick with a degree in Mathematics in 2004 and qualified as a Chartered Accountant with KPMG in 2007.
He now lives in Bristol, enjoys playing tennis, squash and golf and participating in at least one ski trip a year.
- BVG Airflo Group (Board Observer)
- Canburg (Board Observer)
- Sub10 Systems
- Magma Global (Board Observer)
- SHS Integrated Services
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.”