Invest NI seems unable to get rid of its money, so will a fund do any better?

A £2.5 BILLION (€3 billion) equity investment fund backed by five of the UK’s biggest financial institutions has confirmed it is in talks with several companies in Northern Ireland about potential investment opportunities.

The Business Growth Fund, backed by Barclays, HSBC, Lloyds, Royal Bank of Scotland, and Standard Chartered, has cash to spend and appears to be keen to find a home for some of it in the North.

According to Andy Gregory, one of the fund’s regional directors, it is “actively looking” to invest between £2 million and £10 million in businesses that can “demonstrate a strong growth trajectory”.

There may be cash on the table, but whether the fund will find companies prepared to take its money – and thereby give up a minimum 10 per cent equity stake and share a seat on the board with a fund director – is another matter.

History would suggest that most companies in the North do not subscribe to the “sharing is caring” approach when it comes to equity investment. Currently just one company, Andor Technology, has successfully managed to take its venture capital investment – in this case from Belfast-based Crescent Capital – and run with it to the London Stock Exchange.

The fund, set up to help small and medium-sized UK companies, believes there are growing companies in the North that do not have access to the capital it is offering.

According to Gregory, the fund operates as an independent company and is not influenced by any bank or government, notwithstanding its backers. He believes it represents a new departure because it can be more flexible and take a longer-term view – possibly up to seven years or more – when investing.

“We are a commercial organisation – this isn’t about soft money – but our specific mandate is about more than just money; it is about helping growing and entrepreneurial companies,” he says.

“We recognise there are successful companies in Northern Ireland which, at this time, have real growth potential. What the fund is in a position to do is make a long-term equity investment that can help them fund their ambitions – whether it is about working capital, developing new products or making acquisitions.”

Gregory says the fund’s core mission is to offer a “collaborative approach to financing growth”.

Since it was launched last May, the fund has completed three investments, none of which is in the North. It hopes to offer equity investment to up to 40 businesses a year once established. How many of these will be in Northern Ireland?

Gregory is optimistic about finding the right companies in which to invest, but he admits there could be challenges.

“Companies should have a turnover of £5 million to £10 million as part of the investment criteria, but these are guidelines and we are flexible. We are looking at investment opportunities across every sector – but not financial services or property-related ventures – so there is plenty of scope,” he says.

The fund’s desire to find “the household business names and listed companies of tomorrow” could be a tall order – particularly given the business development agency, Invest NI, appears unable to give money away to businesses with few or no strings attached.

The agency intends to give £21.6 million back to the Northern Ireland Executive because it has not been able to spend the money supporting new investment projects, it has emerged.

Profits made in the past year from earlier investments may be a contributing factor, but this is the second year in a row the agency has handed money back to the government. Last year it returned £17.5 million.

The real reason for the majority of the surplus cash this time is that a number of firms have postponed expansion projects or put them on hold indefinitely. As a result the generous grants on offer from the agency have not been taken up and it has been left with cash on its hands.