There are currently very different perspectives of the economic forecast for Northern Ireland. According to recent press, there is a high level of investment in local businesses but beware the spectre of public sector austerity and the restraining pressures of the Eurozone.
Tughans work with both local businesses seeking investment and funders looking to invest so are particularly well placed in assessing the investment opportunities for Northern Ireland businesses. We spoke with Ciara Lagan, Director, in Tughans Corporate Department:
First and foremost, why even look at investment?
The decision to seek investment from an external source can be influenced by different factors. The local market today is demonstrating its potential for growth opportunities, whether for product development or export and investment is needed to support that growth.
A number of businesses have been in survival mode during the recession, looking inward to manage their cashflows, rather than looking to expansion and taking on external investment. Those businesses that have been looking to grow or expand during the past 6 years have looked at not only traditional funding but also angel investors, venture capital funds and trade partners. And they have been successful in doing so – a recent report identified Northern Ireland as one of the two fastest-growing ‘knowledge economy’ regions in the UK, thanks to a growing number of private equity and venture capital deals.
Venture capitalists and angel investors don’t just offer cash injections for businesses. They can bring invaluable management experience, sector knowledge and a wide network of contacts from which businesses can clearly benefit.
So what are the opportunities for investment in Northern Ireland?
The opportunities for businesses in Northern Ireland haven’t been better since before the start of the recession. Invest NI introduced 3 new funds into the market, with the two Development Funds run by Kernel Capital and Crescent Capital, and the recently launched Techstart NI, which all run alongside their other funding opportunities like Co-Fund and the Growth Loan Fund. There is also increasing interest in the Northern Ireland market from external funds, as evidenced by the recent investment in Lowe Refrigeration by MML Capital, a ROI venture capital fund and Hg Capital’s investment in Relay Software.
There are other UK government initiatives such as the Start-Up Loan Scheme and the support provided by the British Business Bank. The good work of Halo at the Northern Ireland Science Park also continues to facilitate the support of local entrepreneurs by angel investors.
What continues to be an option ignored by more mature local businesses is a public listing on a stock exchange. Northern Ireland continues to punch well below its weight in terms of plcs – there are currently only 2 listed plcs that originated from Northern Ireland. The advantages of being listed is clear – better visibility, increased credibility with suppliers and customers and ready access to growth capital.
How can local businesses position themselves to attract investment?
If considering investment rather than going public, you need to identify the right investor. Private equity houses often target specific sectors. For instance the Foresight Group and Green Investment Bank, which last year invested in the Evermore renewable energy power plant in Derry/Londonderry, focus on the infrastructure and environmental sectors. You also need to consider the target market of the investors – Techstart NI is focused on early stage technology companies whereas the Development Funds are for later stage companies. The right commercial fit is crucial – tapping into an investor’s experience and network will be beneficial but it is also essential for the right chemistry between the management team and the investors.
Businesses should also carry out their own due diligence exercise – prepare a robust business plan, get their paperwork together and address any commercial, legal or financial issues. Presenting a clean and well-organised business with growth potential will always be attractive to an investor.
The listing process may be more stringent and regulated but the same good corporate governance applies to a company looking to going public. Preparation, as always, is key.
Tughans regularly assist local businesses during the investment process and through to exit, providing commercial legal advice to help facilitate a smooth transition and growth opportunity for the business. Please contact Ciara Lagan for further information.
While great care has been taken in the preparation of the content of this article, it does not purport to be a comprehensive statement of the relevant law and full professional advice should be taken before any action is taken in reliance on any item covered.