THE head of the Scottish division of the new £2.5 billion Business Growth Fund wants to do up to eight deals north of the border next year and believes he could complete two in the first quarter.
Simon Munro said he wanted to invest in six to eight firms with growth potential in 2012 to create a portfolio that would help the bank-supported fund to establish itself in the Scottish funding market.
Mr Munro has to carve out a role for the Business Growth Fund in Scotland amid unhappiness with banks.
The fund was established last year with support from five leading banks, including Royal Bank of Scotland and Lloyds Banking Group, following claims that they were starving businesses of badly-needed funding.
However, Mr Munro said the team in Scotland is already talking to 10 companies that are candidates for investment.
“One is very active in the central belt and has the legs to become an investment in the first quarter and there is an opportunity in oil and gas which could complete in the first quarter as well,” said Mr Munro.
He said the fund expects to find good opportunities in Scotland in several sectors, including oil and gas and manufacturing, food and drink and technology.
Mr Munro thinks many good companies in fields like engineering, which have been focused on surviving the downturn, could have growth potential that they may not have realised.
A veteran of the private equity business, he believes the strategy adopted by the fund will allow it to play a valuable role in Scotland.
While many private equity funds want to take control of the firms they invest in, the fund will only take minority equity stakes. Mr Munro said the fund will be prepared to provide long-term investment, without looking for quick cash returns.
The fund says it will invest from £2 million to £10m in small and medium sized enterprises that “demonstrate a strong growth trajectory” and have a turnover between £5m and £100m. It accepts applications online.
The strategy could allow the fund to develop a portfolio of venture capital investments like the one that 3i built in Scotland before it shifted its focus onto mega buyouts.
The former Investors in Industry’s move upscale is reckoned to have left a gap within the market in Scotland.
David Cameron described the Business Growth Fund yesterday as “a long-term initiative to meet a real structural gap in funding for fast growing businesses”.
The Prime Minister announced plans to provide £95m funding for SMEs in England from the Regional Growth Fund.
This was formed to take over the support function of the former Regional Development Agencies in England.
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