Growth capital is helping to turn an increasing number of good manufacturing businesses into great ones. Mark Bryant, Head of Manufacturing at Business Growth Fund (BGF), explains.
BGF has backed close to 30 British manufacturing businesses in the past four years – from component engineers in Huddersfield to laser specialists in Glasgow; carpet makers in Kidderminster to packaging experts in Tonbridge, and more.
What the people behind these companies have in common is the talent, tenacity and ambition to scale-up their operations. Implementing growth plans often means hiring more staff, buying new machinery, making acquisitions or diversifying into new areas. All of which requires capital.
But not all business owners can or want to self-fund their expansion plans, particularly if it means putting down millions of pounds upfront at additional risk to their personal finances or assets. And, realising the importance of being adequately capitalised, not all business owners can or want to build their businesses on debt alone.
BGF has the express purpose of providing growing companies with a different funding option: long-term, patient capital with first investments of between £2m – £10m and the ability to provide additional funding when required. In exchange, BGF has a non-controlling, minority stake.
BGF also offers connections to a network of experienced manufacturing experts who have either built their own businesses or held senior positions at global manufacturing firms. With capital and connections, comes confidence.
There’s a lot to admire in owners of small and mid-sized manufacturers: they’re the visionaries and the risk-takers and their success depends on having a robust support infrastructure.
We encourage our investee companies to maximise profitable growth, through appropriate financial backing, access to strategic support and a network of inspiring entrepreneurs who are already leading the way in the UK’s manufacturing renaissance.
Molecular Products Group
In September 2014, the McKernan family secured a £4m long-term, growth capital investment from BGF. Ian and his brother Andrew, in addition to two other family shareholders, decided to look for an external backer to support their growth ambitions for the business, which currently generates revenues of around £20m.
Ian and Andrew explored a number of options for funding before deciding on growth capital from BGF, which the company is using to enter new markets such as India and Japan. Through BGF’s connections Ian and Andrew were introduced to and appointed Paul Bernard, former Group MD at Rocol, to the board of Molecular Products Group as its non-executive chairman.
Huddersfield-headquartered VTL Group develops and manufactures precision engineered components for the commercial vehicle and passenger car markets, and counts Cummins; Toyota; Renault, and JLR among its customers.
Set up in 2001, the business has grown from a single product, single site business to a global operation. In September 2013, VTL Group secured a £4m growth capital investment from BGF, and a further £1.5m investment in December 2014.
The latest round of funding is being used for a capital investment programme ahead of commencing an eight year project to supply engine components through Ryobi UK to JLR for use in its new engine platform.