SME executives back buyouts

A survey has revealed lower mid-market buyout firms are widely appreciated by UK entrepreneurs despite the negative publicity the industry has received in the country.

Almost 90 percent of UK entrepreneurs at small to medium-sized companies have a good relationship with their private equity and venture capital backers, according to a survey published by Bowmark Capital.

The entrepreneurs said 71 percent of private equity backers had set realistic targets for their companies, while 58 percent said buyout firms provided useful guidance on strategy.

Of the 172 executives from a mix of private equity-backed businesses and independent businesses surveyed, more than half believed private equity investment would deliver the best growth for entrepreneurial companies, against 12 percent who felt that a stock exchange listing was a more effective path to growth.

The private equity responses were compiled from around 70 entrepreneurs at companies with up to 500 staff and revenues of between £10 million and £100 million a year.

Charles Ind, managing partner at Bowmark, said the backing of the industry by entrepreneurs in the lower mid-market contrasted to the “mass of disinformation perpetuated by certain interest groups with their own agenda.” In the UK, private equity has been targeted by unions and politicians who perceive the industry as the unacceptable face of capitalism. Ind said the positive results may be harder to replicate in a survey of executives in the larger leveraged buyout market, which has drawn the strongest criticism in the UK and worldwide.

There has been a wave of recruitment in the European lower mid-market in the last week. Close Brothers’ head of European financial sponsors Darren Redmayne left the company to open US mid-market bank Lincoln International’s London office as a managing director of its European operations.

Inflexion Private Equity, the European mid-market buyout firm, recruited Gareth Healy and Malcolm Coffin as investment director and investment executive from European banks Close Brothers and NM Rothschild & Sons respectively.
Ind said: “The last few years have been favourable for larger buyouts but the environment will be much more conducive [in the coming years for the lower mid-market].” Smaller buyouts should continue to prosper despite the problems in the credit markets because they rely on top line revenue growth and are less dependent on leverage for value creation, he said.