In a deal negotiated through Glasgow-headquartered private equity outfit Maven Capital Partners, Vamosa will receive £1m of mezzanine finance from the government fund to help it continue its expansion drive.
The Herald revealed last month that a Glasgow company was poised to be the first to benefit from the Capital for Enterprise fund.
The Vamosa deal was confirmed by Business Secretary Lord Mandelson as he unveiled the first two companies to benefit from the Capital for Enterprise fund. The other company to benefit in this first wave of investment is Nottingham-based software company KeTech.
Vamosa, which has developed software which allows large companies and government agencies to track their content and data and thus assists governance, compliance and risk, has invested significantly in the US.
It wants to ensure it has sufficient funding to take advantage of what it sees as significant growth opportunities in the North American enterprise content governance sector.
The company has also established a customer base in mainland European markets including Switzerland, Belgium, Luxembourg and Germany, as well as in Australia and the UK.
Software industry veteran George Knox, chief executive officer of Vamosa, told The Herald that the company would not have been able to continue with its growth strategy had it not been for the Capital for Enterprise fund established by Lord Mandelson.
Knox said: “To be perfectly honest, without this fund we could not have raised the stuff we wanted from the banks. The banks are just dried up. We would not be able to continue on with our strategy without this.”
He added: “There are some other bank-type (funding) initiatives but there are still issues with the banks at the moment. There are so many hoops to jump through with the banks. They are just holding on to their money.”
Knox was also pleased that the deal had been done so quickly. Maven noted the deal had been done in a little more than 10 weeks.
He said: “It has been quite refreshing to have something move so quickly. It is a tough market out there. Things are really tough out there. People are really struggling to access capital. If you can’t get access to capital, you are going to have to stop your investment.”
Knox and his management team own the majority of Vamosa, which employs about 45 people. Knox is the largest single shareholder.
Vamosa opened up a North American office, in Boston, two years ago and now employs a dozen people in the US.
Its software, Knox explained, applies a structure to a document when it is created to allow it to be found again easily. This could, for example, help with information discovery in legal processes. Vamosa’s software can also be used in migrating data.
Lloyds Banking Group, through its rescue takeover of Bank of Scotland parent HBOS, and economic development agency Scottish Enterprise are minority shareholders in Vamosa. Knox acknowledged these minority shareholders’ cooperation in the raising of funding from the Capital for Enterprise fund.
Knox said: “The likes of Scottish Enterprise and HBOS have actually been very supportive on this...HBOS, even with all their difficulties, as a shareholder they have been very supportive.”
Maven is managing £30m of the Capital for Enterprise fund, with London-based Octopus Investments also running £30m.
Maven is focusing on investing its part of the fund in companies north of Birmingham.
Andrew Craig, who is based in Maven’s Glasgow office, said of the Vamosa deal: “It is a great deal for us. What the fund is there to do is to back businesses with real potential, proven management as well. We can use the (Capital for Enterprise) fund for refinancing a balance sheet but this was genuine growth capital.
“It is a Scottish business which has done extremely well to get a foothold in the North American market, which I think they should take a lot of credit for.”
He added: “It is great for us to announce a local business getting funding.”
Vamosa will pay interest on the five-year mezzanine finance. The structure of the deal means it will not result in any significant change in the equity stakes of the existing shareholders
Referring to the funding having come in the form of mezzanine finance, Craig said: “This is one of the attractions of this product for management teams. We are not going in saying, ‘We want 50% of your business’.”
Craig hoped the Vamosa deal would further raise awareness of the Capital for Enterprise fund.
He added that Maven was looking at several other companies across the UK which might benefit from the fund, with a number of these potential deals now in the formal due diligence phase.
Knox did not disclose Vamosa’s current annual turnover but said it hoped to be “in the $30m space in the next few years”, highlighting the company’s appetite for acquisitions as well as organic growth. About half of Vamosa’s business comes from the US.
Knox said Vamosa had invested about £750,000 in its US office -- reinvesting profits earned in 2006 and 2007.
He added: “We could have just sat on the profits but we felt we had to get into the US if we wanted to have that growth opportunity. You have to take risks, basically.”
KeTech is receiving £2m from the Capital for Enterprise fund.
Founded in 1998, KeTech provides communication software and services to the rail industry. It also produces specialist detection systems for use in defence and emergency services markets, together with a range of building management systems. The firm has more than doubled its turnover to £16m since 2006 and employs more than 100 people at six UK sites.
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