Ready? aim. fire!

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Tom Jenkins on BGF's distinctive offering for AIM-listed companies.

BGF was set-up to provide growth capital to small and mid-sized companies, with an initial focus on private businesses. Its goal was to fill a gap by providing ambitious entrepreneurs and management teams with access to a source of long-term equity funding that was previously unavailable to smaller companies.

Over the past five years, BGF has proved that long-term, minority equity investing works for private businesses. Listed companies, in theory, have more options to raise funds – but that doesn’t mean that they always get the finance they need, in the way they need it. In fact, many of these businesses, particularly at the smaller end of the listed market, are just as constrained by lack of useable funding with which to implement growth plans as their privately-owned peers.

In common with the private companies BGF invests in, many listed businesses have ambitions to grow and deliver value to shareholders too. They may want to achieve growth through, for example, making an acquisition, building a new factory or expanding into a new market – these plans require capital and all of them take time to implement.

There is, as a consequence, a demand for a longer-term and flexible funding option in addition to what is already available to quoted companies. But few investors, whether retail or institutional, can provide this.

The next natural step for BGF was to explore how it could meet the needs of smaller listed companies. In developing our approach we have worked closely with AIM companies and their investors to bring the central elements of our growth capital offer for private companies to the listed markets. The result is BGF Quoted – a dedicated offering and team working alongside our regional investment teams to provide something new and distinctive to the AIM market.

We made our first investment into an AIM listed company in Victoria (LSE: VCP), in October 2014. Geoff Wilding, Victoria’s CEO tells some of that story on the opposite page. Since then two more listed companies have joined the BGF portfolio, Styles and Wood (LSE: STY), an Altrincham-based integrated property services and project delivery specialist, and Castleton Technology (LSE: CTP) a software and managed services provider to the public and not-for-profit sectors based in Birmingham.

Like growth capital for private companies we can provide long-term and patient equity partnerships with the financial firepower for significant follow-on funding as and when required. Hiring specialists with knowledge of the challenges and opportunities presented by AIM – together with strong relationships with NOMADs and advisors – has enabled us to address a number of specific issues.

For example, BGF’s £2.5 billion balance sheet means certainty of funds once an investment decision has been made. This is particularly useful when a listed company is pursuing acquisitions or significant capital expenditure plans.

Listed companies also benefit from our ability to create flexible investment structures. BGF offers a mix of equity and loan notes that few others can match; this often means less dilution for existing shareholders and a lower blended cost of capital than a straight equity fundraising.

Structured investments are typically between £2 million and £10 million, but BGF will also make smaller straight equity investments where the team sees an opportunity to work with an ambitious management team and provide further funding over time. We have made five such investments so far.

Looking forward another opportunity we see for BGF is to provide shareholder continuity before and after an IPO. As long-term partners we can invest pre-IPO in a private company. We can work with the company to strengthen its balance sheet and board, support the company through the IPO and continue as a cornerstone investor following a successful flotation – a very distinctive, and we believe attractive, offer.

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