GAINING a maximum advantage in minimum time - often vital to business success these days - can be tough if you're going it alone on limited capital.
Many banks, as we know, not only cut back on their financing but have become choosy too about what they get involved in. Yet even cash-rich firms sometimes need more money to grow. Fortunately dealers in private equity recognise the requirement.
So the presence of many private-equity fuelled firms in the new North East Top 200 Companies listing, which is due to appear in The Journal next month, will show the importance of venture capital and other alternative funding sources in helping the region’s economy to recovery.
Pharmaceuticals is a sector where large outlays are required for development as the multinational players outsource more and more of their activities. Both Aesica Pharmaceuticals and Quantum Pharmaceutical of Burnopfield are amassing volume partly with capital injections from outside.
Dr Robert Hardy, whose successful management buy-out of BASF’s pharmaceutical production plant at Cramlington in 2004 brought about Aesica, has a group that with further private backing already pledged may well surpass its present turnover of more than £154m, and may indeed be nicely placed to climb higher than its 73rd place in last year’s Top 200.
LDC, the mid-market private equity house of Lloyds Banking Group, first recognised Hardy’s abilities and the need to build an organisation of substance fast if rivals of Aesica were to be thwarted. It extensively funded the MBO, while Barclays provided term debt and working capital facilities. Now Aesica is one of the UK’s fastest growing companies, and partner of choice to several of the top 10 global pharmaceutical leaders. To its Tyneside headquarters and three UK manufacturing sites (including Cramlington) it has added offices in Shanghai, New York and San Diego.
And recently it doubled in size after buying two manufacturing plants in Germany and one in Italy, this with the backing of a new private equity partner, Silverfleet Capital, which facilitated LDC’s exit. More acquisitions could follow, and while Hardy is not a poor man, he could hardly have reached today’s exhilarating heights without the like of LDC and Silverfleet.
Quantum Pharmaceutical, a one-stop shop inspired by chief executive Andre Scaife to become perhaps the UK’s biggest independent manufacturer and supplier of special medicines, has in three years made two acquisitions and also secured a key stake with an option to buy a third company. With backing from the like of LDC and Yorkshire Bank, Quantum – still only eight years old – looks likely to enter the Top 200 now, a distinction that narrowly eluded it last year.
Private equity even supports everyday shopping and price-tag buying such as for Sunderland-based furniture company ScS. And cash and carry firm Kitwave, which trades as M&M Value, recently made its first acquisition with part of a £7.5m investment it secured from Newcastle venture capitalist NVM Private Equity Limited (NVM) to secure growth.