Family Business Scale-ups: Breaking Barriers to Growth
Scaling family businesses
Investment dynamics in scaling family businesses
involvement: US investors participated in six deals with six scaling family businesses worth £391m; Korean Investor SeAH Wind backed one scaling family firm in a deal worth £260m; and the European Investment Bank (EIB) in Luxembourg backed one firm with £185m. Other investors came from Australia (two deals); China, the Netherlands, Denmark, Ireland and Germany (all one deal each). Half of these firms were in the IS-8 but spanned a diverse range including Advanced Manufacturing, Construction, Clean Energy, Fashion, Software Development, Shipping and Childcare. When using debt finance, these scaling family firms report that almost £400m is for the financing of specific projects and £374m is for property. HSBC is the largest debt funder for these businesses (42 rounds), followed by NatWest (22) and Lloyds Banking Group (21). As with the mid-market, the role of the British Business Bank is evident through both its direct investments and its co-investment in established funds, participating in ten fundraising schemes in ten scaling family businesses. The Development Bank of Wales has participated in seven deals in six scaling family businesses. Scottish Enterprise has been involved in one deal with a scaling family business. When it comes to R&D and innovation, 89 scaling family businesses have received 241 Innovate UK grants with a total value of £57.2m; these firms also leveraged £163m in private funding. Three-quarters (76%) of these firms backed by Innovate UK grants were from outside London and the South East.
More than £2 billion has been raised by 278 scaling family businesses across 420 funding rounds. More than half of this total has been raised through 241 equity deals, amounting to £1.14bn, while there have been 185 debt raises worth £918m. Six rounds have involved both debt and equity styles of funding. Of the scaling family businesses that have raised investment, 63% are within the government’s eight priority Industrial Strategy sectors (IS-8). As observed with the mid-market family businesses, the scaling-up cohort are particularly focused on resource hiring (£268m was noted as being raised for this purpose) and international expansion (£220m), while £45m of debt funding and £148m of equity are reportedly to be used for R&D and Innovation. UK investors are key backers of family businesses, with BGF (11) again the most significant backer of equity funding rounds in family businesses that are scaling up, followed by Business Angels (8). Overall, the vast majority of investors were from the United Kingdom; however, 15 deals had international
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