TWO Newcastle-based venture capital firms are to be sold to the private sector in a bid to establish a pipeline of regional business funding for generations.
A handful of leading firms, including City-based players, are said to be interested in purchasing publicly-funded Northstar Ventures and NEL Fund Managers.
Senior regional business figures say a successful sale will help anchor a strong venture capital (VC) presence in the region and should attract additional private sector investment to the North East. And fears the new owners could move Northstar and NEL’s head office operations outside of the region were last night allayed.
Richard Maudslay, chairman of the firms’ parent company, NF Holdings, said: “A core objective of this process is to ensure the presence of long-term sustainable venture capital in the North East and Yorkshire in order to provide continued support to growing SMEs in both regions.
“This will maintain and improve access to finance for SMEs in the future by allowing Northstar and NEL to raise and manage further funds to invest locally.”
Over the years, the two outfits have invested almost £100m of public sector money into hundreds of regional businesses.
NorthStar and NEL are two of the major investors of the Jeremie fund, now known as the Finance for Business North East Fund. This was created last year and has £125m of taxpayers’ money to invest in regional business by 2014.
Two years ago, the ownership of the two was transferred to NF Holdings, which is now up for sale.
Maudslay explained that One North East needed to put the two companies at arms’ length before the Jeremie funds were spent.
The company responsible for overseeing the operation of the Jeremie programme in the region is Newcastle-based North East Finance.
Its chief executive, Andrew Mitchell, said a purchaser of the two businesses would not be allowed to close the regional offices. He said: “The aim of this process is to establish a long-term sustainable ownership structure for Northstar and NEL.
“No matter who ends up running the businesses, they will have to fulfil that commitment – to maintain their presence in the region. That commitment is not negotiable.”
The new owners will be expected to demonstrate a long-term commitment to attracting additional private sector VC money.
It is understood there are several interested parties and there is speculation that talks are taking place with the existing management teams about a possible MBO.
The businesses could fetch over £1m, to be spent in the region, most probably through legacy funds operated by North East Access to Finance.