David Kirchin: Optimism for private equity

During times of political and economic uncertainty, you would be forgiven for thinking that private-equity and venture-capital deals would slow down, at least until the dust settles.

David Kirchin says there is 'positive movement' in the private equity field despite political and economic uncertainties. Picture: Ian Rutherford
David Kirchin says there is 'positive movement' in the private equity field despite political and economic uncertainties. Picture: Ian Rutherford

After the EU referendum, the reality is however a little different.

Preqin, a source of data intelligence, recently released survey results gauging the views of asset-management firms on Brexit. These included 70 per cent of alternative-assets investors expecting to maintain their EU investments in the short term, while three quarters predicted no change in the longer term. A not-so-bleak outlook perhaps?

Sign up to our daily newsletter

In Scotland, we are seeing positive movement in the private-equity sector despite the political and economic uncertainties.

Panoramic Growth Equity, which provides investment to smaller UK businesses, recently announced the closeure of its second fund at £65 million, oversubscribed by 30 per cent.

First Scottish Group, a Souter Investments portfolio company, has completed the sale of the trade and assets of two subsidiaries, Legal Post and First Post, to DX, the listed independent mail logistics operator.

Newer entrants to the market in Scotland have included YFM and Verlinvest, the latter supporting the continued growth at Genius Foods.

Business Growth Fund (BGF), set up in 2011 to provide growth funding to SMEs, has expanded its Scottish operations and has provided Campion Homes, a Fife family-owned housebuilder, with a multi-million-pound investment to help construct 700 homes in five years.

We can see growth in the sector but it’s important that investors and investee companies do not become complacent: adapting to the ever-changing environment is key to progress.

Investors need to give future plans of any business being considered for investment intense scrutiny and consider the likelihood of Brexit-related headwinds; this analysis will be sector-specific and look at the company’s relative position in that sector.

For those looking to attract investment, there are additional questions to be asked such as what opportunities does a post-Brexit environment offer and are you prepared for the alternative visions of Brexit?

Investors are increasingly becoming sector specialists, following trends in Silicon Valley and London where they are fully immersed in their sectors. The message for investee companies is to prepare well and reap the rewards.

At any time of political upheaval, financial investment is almost guaranteed to bring with it some trepidation. Scotland’s private-equity sector does, however, remain active with deals being done and growth in many areas. We may be living in politically and economically turbulent times, but the private-equity sector is again successfully adapting to deliver genuine growth.

• David Kirchin is a partner at law firm HBJ Gateley