Investor says SME market in mood for growth

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THE UK’s SME market is very buoyant, according to a leading private equity investor, with good investment opportunities in companies seeking between £1m and £5m of capital.

Claire Madden, a founder and partner of Connection Capital, told the Yorkshire Post: “We are certainly seeing in terms of our portfolio companies and the deals that are coming through a lot of appetite for growth capital.”

She was speaking in light of the British Private Equity and Venture Capital Association’s 2014 Budget submission in which the industry body for UK private equity and venture capital said that companies with high-growth potential must be given the support and funding they require.

Among its key policy recommendations, the BVCA is calling on the Government to encourage more large businesses to invest in smaller ones through corporate venture capital programmes by offering corporation tax relief and loss relief.

It says that while that Government has “done much to encourage the success” of SMEs, further steps need be taken to ensure the UK’s recovery is a balanced one and to transform the SMEs of today into tomorrow’s global leaders.

Connection Capital said that often overlooked by the media in favour of the activities of the large buyout investors, the level of private equity investment in SMEs continues to develop.

According to the BVCA, around 90 per cent of private equity and venture capital investment in the UK is directed at SMEs.

An active investor in the SME market, Connection Capital, which is based London but operates nationally, welcomed the BVCA’s Budget submission. Connection Capital currently has more than 750 private investor and family office clients, with a combined net worth of over £7bn, and more than £150m of funds under management.

Its clients invested £28.5m over a range of investments in 2013.

Ms Madden said that providers of private equity remained in the SME market when banks retreated during the financial crisis.

According to a report by the CBI, the amount lent by alternative finance providers reached £939m in 2013, an increase of 91 per cent on 2012’s total of £492m.

Ms Madden said: “If you track the deals that have been done in this part of the market place (the SME sector) there are a lot of businesses either changing ownership, growing and raising growth capital and you just need to look at some of the funds that are providing that, (they) are very active in deal completion.”

Ms Madden said that this activity indicates that the SME sector is feeling “happier about life, more confident and more willing to make the investment that is needed to grow further”.

Ms Madden said that it is widely recognised that SMEs are the backbone of the economy, adding: “It’s where the growth is going to come from.”

She said: “We can add significant value to the management team of an investee company not just through the experience of our own investment team but from the experience of clients within our network, many of whom are entrepreneurs themselves with a wealth of relevant experience that they willingly provide to our investee companies often in the form of NXD resource and in some cases as chairman of the business.”