Deals News - from Insider Deals Magazine
Published: 17th October 2002
While much of the private equity market has hit a brick wall during the greater part of 2002, smaller niche deals are flourishing in the region. Old-fashioned venture capital deals are still being done where there is a will and where advisers and investors are being given sufficient incentives to seek out good opportunities.
South Yorkshire Investment Fund (SYIF), in particular, has blossomed in this respect. The £50m Fund that was launched earlier this year has already completed a wide range of deals ranging from smaller unsecured loans in fast growing businesses in South Yorkshire to larger venture capital deals, where it has backed management buyout and buy-in opportunities.
Commenting on the past couple of months Tony Goulbourn, Chief Executive of South Yorkshire Investment Fund Ltd says: "While the rest of the market appears to have been in retreat during the greater part of 2002 we have been very active. In part this derives from the fact that we have a different agenda from some of the larger venture capital funds. We are here to support new and existing businesses in South Yorkshire and perhaps take a different approach to investment than more traditional VC investors.
"However, that does not necessarily mean that we are any less commercial in the way we assess the risks and returns. Our long-term game plan is that we create a self-sustaining commercial fund which will be in existence for a long time to come so there is not question of us just handing out fivers to whoever comes along.
"Moreover, because we are so focused on South Yorkshire we are probably better placed than anyone else to understand the needs of the indigenous business community and the investment opportunities in the area."
SYIF offers a series of loan and equity packages structured to support businesses through critical stages of growth. From seed corn through to major expansion, the Fund will provide financial support. The Fund has already supported several companies since it was launched. A unique feature of the Fund is its Mentorbank project, which provides subsidised mentoring support to help management teams grow the businesses more profitably.
Mr Goulbourn says: "We are delighted with the quality of the business proposals being presented to us and this is being illustrated in how many of them go forward to formal funding and drawdown."
Recent private equity deals included the management buy-in of Alambar Safety Products Ltd; the £500,000 MBO of Transtar Ltd, a specialist independent freight forwarding company based in Sheffield and the MBO of Pearce Buckle Ltd, the building engineering and design services group.
SYIF backed the £140,000 MBI of Alambar by John McCreery, an accountant, who has a wide range of experience as finance director of several companies including Dairy Express.
Mr McCreery said: "We are very much a hands-on team and believe we can make the business work much harder and generate further profitable growth. The market is growing and Alambar are well-placed to take advantage of any new opportunities with the backing of SYIF."
Alambar business makes customised, high-visibility safety clothing for a wide range of clients in emergency services and industrial manufacturing. It has plans to develop high visibility T-shirts and polo shirts that are currently unavailable to the market in the hot summer months. It also has a small but expanding, high quality corporate clothing division that is seen as being ripe for development.
Commenting on the deal Mr Goulbourn said: "We see this as an excellent opportunity to back an experienced management team, whom we believe will develop the business to its full potential, creating jobs and prosperity for the region. We are also delighted to be able to introduce a mentor with a skill set identified by the MBI team themselves as relevant and welcome."
Transtar, the specialist independent freight forwarding company, was acquired by its management in July when SYIF invested £500,000. Lee Bolsover and Jayne Wilkinson who have worked in senior managerial positions at the Sheffield-based company for more than ten years, bought the business from the founder, safe-guarding 13 jobs in South Yorkshire.
Joining the duo as a non-executive director is Kevin Gregory, who will provide financial and strategic guidance to the team. Mr Gregory is a partner at South Yorkshire chartered accountants Hawsons where he is responsible for the firm's corporate finance services.
Mr Bolsover said: "Transtar has been a consistently profitable business for several years now and has the capacity to grow turnover further over the next couple of years. Jayne and I are committed to further establishing the business as a premier freight forwarder in the region and further growing sales.
"The deal is very important to the region because if a sale to the MBO team had failed it is likely that Transtar would have been sold to an outside competitor and that might have meant that the business would have been lost to the South Yorkshire area.
"We are committed to providing a local service to local exporters in and around the South Yorkshire region. It frustrates us when business is lost to operators outside the area, but we will continue in our aim to provide a competitive, flexible and value for money service."
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About South Yorkshire Investment Fund
South Yorkshire Investment Fund provided seedcorn, loan and equity linked investments, ranging from £15k to £2.5m, specifically to help small and medium businesses meet the gaps in funding they need for growth and development.
Created as part of the Objective 1 programme, the Fund is a private and public sector business finance provider. The European Regional Development Fund and Yorkshire Forward are investors in the Fund.
South Yorkshire Investment Fund also provided access to Business Angel investments from the Yorkshire Association of Business Angels and Microloans through BiG Business Loan Fund and Donbac Microloan Fund.
Finance Yorkshire has now taken on responsibility for providing gap finance in Yorkshire and the Humber.
For further details please contact Suzanne Tinkler, on 0845 649 0000.
South Yorkshire Investment Fund Ltd is a company limited by guarantee (Registered No 3936065). South Yorkshire Investment Fund comprises three sub funds, the South Yorkshire Investment Capital Fund, the South Yorkshire Investment Development Fund, which are each managed by YFM Venture Finance Limited, and the South Yorkshire Investment Small Business Fund, which is managed by Finance South Yorkshire Ltd. YFM Venture Finance Limited (Tel 0113 294 5000) and Finance South Yorkshire Ltd (Tel 01709 386 377) are each authorised and regulated by the Financial Services Authority. South Yorkshire Investment Fund also provides a number of services, which are not regulated by The Financial Services Authority. These include the pilot Seedcorn Fund, BiG Business Loan Fund, Mentorbank and access to the Donbac Microloan Fund. BiG Business Loan Fund is managed by Donbac Ltd (company registration No. 01925556) and Key Fund Yorkshire Ltd (Tel 0114 242 8900).