AS A keen cyclist, Business Growth Fund (BGF) director Simon Munro is not shy when it comes to challenges, writes Peter Ranscombe.
Despite facing a fifth operation for a torn cartilage in his leg, Munro is already planning his return to the saddle with a 120-kilometre corporate cycling event run by accountancy firm KPMG in the south of England.
“I’ll hopefully be cycling again a week after the operation,” says Munro, who admits to having 12 bicycles in his garage for various disciplines and surfaces. “Cycling is great for helping to clear your head.”
The 47-year-old is also gearing up for a new professional challenge, too. Having been appointed as the Scotland director of the BGF in September 2011, he is now gearing up to expand the fund’s work in the Central Belt.
In exchange for an equity stake of at least 10 per cent and a seat on the board, the fund will pump between £2 million and £10m into fast-growing companies. The BGF – which was set up by Barclays, HSBC, Lloyds Banking Group, Royal Bank of Scotland and Standard Chartered – has £2.5 billion at its disposal and will consider investing in businesses that turn over between £5m and £100m a year.
Born out of the Project Merlin talks held between the Treasury and the big banks following the financial crisis, the fund is co-ordinated by the British Bankers’ Association (BBA) and was designed to address a gap in the market for “growth capital” – riskier investment than traditional bank lending.
“The Central Belt has been starved of this kind of investment since 2002, when 3i left the market,” says Munro. “Before the financial crisis, the banks were lending against high multiples of profits, but now they’re back to lending at maybe just two-times earnings.
“That’s fine – in fact it’s good for the banks to be back to lending in that kind of market – but it leaves a gap for funds such as ourselves.
“To be honest, I would hope to have been further on at this stage in our penetration of the Central Belt,” admits Munro. “But I’ve not been disappointed by the number of quality companies that are coming to us to talk about investments.”
So far, three of the five deals in which the BGF has been involved north of the Border have involved the oil and gas sector, with pipeline specialist Stats Group receiving £7.8m, software firm Petrotechnics notching up £6m, and well preparation firm Aubin taking £2.25m.
While the other two investments – £4.2m for Morphsuits fancy dress owner AFG Media and £3.85m for M-Squared Lasers – might be diverse, Munro is now keen to cast his net wider in the Central Belt to pump investment into other high-growth businesses.
In the past few weeks, he has nearly doubled the size of his team in Scotland, hiring Gemma Hamilton from Glasgow-based Maven Capital Partners for his Edinburgh office and PwC’s David Gammie and Parkmead’s Kathryn Ramsay for his Aberdeen base. The appointments bring the BGF’s headcount north of the Border to nine including Munro, who “floats” between the two offices, spending much of his time visiting potential portfolio companies.
“We will do a number of things as we expand in the Central Belt,” he explains. “We’ve already spoken to the adviser community – accountants and lawyers – and we will receive introductions from the banks, which account for about 17 per cent of our work throughout the UK. We have also built a database of target companies and we approach them directly.
“But the best advert for our services is to do deals. The entrepreneurs we work with have friends who are also entrepreneurs and, when you do a deal, word spreads quickly.
“It really helps that we now have a range of case studies that we can point to and show people what kind of deals we do.”
Munro has a further four deals up his sleeve and hopes that the BGF will complete a total of six investments during 2013, having already completed two. The current batch of companies being considered by the fund are spread across the information technology (IT), oil and gas and retail sectors, although Munro remained tight-lipped about their identities.
Though the BGF may have a relatively-narrow range of companies within its remit, Munro spends some of his time speaking to businesses that are not quite yet ready for his investment.
The BGF supported a conference organised by Scottish Secretary Michael Moore and enterprise minister Fergus Ewing in Aberdeen to speak to small and medium-sized enterprises (SME) about fundraising.
“Those are the kinds of events you used to see all the time before the financial crisis,” remembers Munro, who cut his teeth working with entrepreneurs at accountancy firm Rutherford Manson Dowds before working with United States energy bank Simmons & Co, investment bank JP Morgan and private equity firm Lime Rock Partners.
“It’s good to see that kind of event happening again now and I think there is a real pent-up demand for funding from those SMEs in Aberdeen. We’re always interested to speaking to early-stage companies because we can advise them on what we’re looking for but also point them in the direction of other help, such as government funds or business angels.”
Education: Robert Gordon’s College, Aberdeen; Robert Gordon Institute of Technology, now the Robert Gordon University.
First job: Rutherford Manson Dowds corporate finance team.
Ambition while at school: Doctor.
Car: Range Rover Vogue SE, but also 12 bicycles.
Favourite music: Anything really, with the exception of country and opera. Driving my kids to school listening to Radio 1 means I am up-to-date with the charts.
Can’t live without: My wife and kids – they’re awesome. Easy access to the countryside.
Claim to fame: I was awarded a black belt in Shotokan karate aged ten. At the time, I was the youngest person to get a black belt in the UK.
What makes you angry: Bullies.