Family Business Scale-ups: Breaking Barriers to Growth
Mid-market family businesses
Investment dynamics in mid-market family businesses
Four hundred and twenty-seven mid-market family businesses have collectively raised £2.38 billion across 676 fundraising rounds. This amount is fairly evenly split between debt – £1.36 billion across 300 rounds into 250 companies – and equity – £1.07 billion across 388 rounds into 213 companies. Twelve rounds involved both debt and equity. Equity investment represents 46% of the total amount raised by these mid- market family businesses. While not all businesses or funders report how their investment is used, among those that do, the most common use of equity was for research and development, with £262 million in funding directed toward these activities. However, the greatest amount of equity was earmarked for job creation (£308 million) and £231 million was planned for international expansion. BGF has backed the largest number of equity deals (26) followed by Business Angels (17). The investment picture is slightly different when one looks at uses of various forms of debt finance. While job creation appears as the most common primary use of debt finance, accounting for £534 million, property attracts the largest overall amount at £570 million. HSBC is the most active provider of debt finance to family businesses, participating in 56 deals, followed by Lloyds Banking Group with 38 and NatWest with 35.
The role of government agency funders is also evident in the mid-market arena: • The British Business Bank, through both direct
investments and co-investment activity in established funds, participated in 18 fundraising schemes for 15 mid- market businesses. • The Development Bank of Wales participated in ten deals involving mid-market businesses. • Scottish Enterprise participated in two deals across two mid-market businesses. • Innovate UK grants have supported 209 mid-market family businesses in their innovation and R&D activities, awarding 368 grants with a total value of £33.7 million and leveraging a further £44.6 million in follow-on investment. Notably, 85% of these grants were awarded to mid-market firms located outside London and the South East.
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