Print Published 7th Jun 2017, 14:21

Private Equity: is there a better way?

Can value be realised from a private business without the risk of giving up control? The Business Growth Fund may provide one answer.  

In the nineteen eighties marketing agencies were created with twin aspirations. First, they wanted to be famous and recognised for the quality of their work. Secondly, they wanted to get rich.

Those aspirations are probably as relevant today as they were then. But when it comes to getting rich, the options have narrowed. In the nineteen eighties, many of the home grown agencies offered their shares for sale on the stock market.

SP27 - Private equity & BGF - front page

By the end of that decade, there were 20 publicly listed marketing agency groups. Of those only WPP remains on the stock market today.  Nearly all of the rest were sold to, or rescued by, even bigger companies – mainly foreign. A few failed altogether.  Many of the entrepreneurs involved bemoaned the costs and external pressures imposed on public companies.

Since then private equity funds have offered intermediate finance to those company owners who wish to realise some their investment and/or finance further expansion.  But private equity funding comes with strings – not least the almost inevitable obligation to sell the business in its entirety within five years or so to provide a payback for all concerned.

So the arrival on the scene in 2011 of BGF – the Government sponsored Business Growth Fund – may offer a new way to enable founding shareholders to achieve their aspirations.   Its aim is to fill the “equity gap” by supplying expansion capital to entrepreneurs whose privately owned businesses are too small to access the public stock markets.  But it can also enable founding shareholders to achieve a partial realisation of their investment or to buy out one of their team who wishes to retire before the rest.

In a Special Report, Marketing Services Financial Intelligence examines what the Business Growth Fund has to offer and on what terms.  The report includes feedback from extensive interviews with two of BGF’s investees in the marketing sector – Four Communications and Zone – reflecting their experiences to date.

The report also contains detailed research into the fate of all the marketing groups that turned to the stock market during the nineteen eighties to provide a payback on their founders’ investments and to fund further expansion.  Where are they now?  What lessons can be learned?

The full report is available now, but only to subscribers.

 

To become a new subscriber, follow the instructions.

For further reading on this topic go to: Who profits from private equity?