It has been a busy 12 months for Scottish businesses and, as we reflect on what has been a challenging year for the oil and gas sector, we must consider how this will impact the private equity market into 2016 and what businesses can do to utilise this method of funding.
North of the border, a large proportion of private equity investment has been the growth engine of the oil and gas sector and the north-east of Scotland. This has been the case for the last five to six years, accounting for around two thirds of the value and volume of transactions.
In the last year however, there has been a subtle shift back to the Central Belt, supporting a wider range of sectors, which is set to continue into 2016.
This will be driven by private equity firms from outside of Scotland that have traditionally invested in oil and gas. These firms are still activity interested in Scotland and with more resource now available they will be looking for new and different opportunities that other industries, such as food and drink, manufacturing and financial services present.
Advisers and banking partners of course continue to further support the energy sector as it endures the effects of the current downturn in the price of crude oil. This assistance includes sponsoring follow on deals, strategic merger and acquisition activity and helping management teams to put in place additional methods of cashflow finance to ensure businesses come out on top once the tide begins to turn.
As such, my wish list for 2016 is for a more cohesive and vibrant community approach to private equity across the central belt of Scotland. There are so many quality businesses that have missed a generation of private equity investment, losing that experience of managing this type of capital. Next year we hope to change all that and move forward together.
The skills and capital honed by the private equity sector over the past decade can be put to good use to help a wider range of sectors – with disciplined and robust business models, confident management teams and strong adviser support – to really capitalise on this expertise to support growth.
I am convinced that there are Scottish mid-market businesses that would fit the bill. This space provides opportunities supporting growing businesses that can then help drive value creation through transactions that are sensibly structured and leveraged.
For these reasons, we expect to put even more money to work next year and ensure that well-chosen deals in 2016 have the potential to continue to help Scotland prosper in 2016 and beyond.
• Jimmy Williamson is senior director, acquisition finance and capital markets, at Bank of Scotland