A decade of hard work coming to fruition? Just look at our investments and exits

Investment and exit activity has accelerated this year, explains Andy Gregory, BGF’s chief investment officer.

As some of you may know, BGF is celebrating its tenth anniversary this year. I had the pleasure of sharing data for the past decade with the audience at Portfolio Day, our annual gathering of founders, CEOs, non-executives and staff from portfolio businesses.

The first thing to mention is that, far from slowing down as a result of the coronavirus pandemic, our investment activity has stepped up both in pace and volume. Despite the lockdowns and disruptions, last year was our second best yet in terms of deployed capital, while the current year has already smashed through the previous record. With plenty of deals still in the pipeline, it seems that 2021 will be something of an annus mirabilis.

How has this come about? There is evidently a lot of pent-up demand in the market. Businesses are looking for growth capital to help them exploit opportunities that have opened up during the pandemic – the IT industry being just one example of a sector that has seen a rapid rise in demand. We have also seen a desire from some founders to realise some of the value of their shareholdings while setting up their businesses for future growth.

As a result of these and other types of deal, we have deployed a total of more than £445 million this year – a figure that includes 48 new deals and more than £130 million of follow-on funding.

Clearly, the market backdrop has helped to drive these results – but so has a great deal of drive and determination from our investment teams. After ten years in the market, BGF has built a reputation and a credibility that gives us a formidable ability to originate and close deals at pace. Put simply, our current results are the result of a lot of hard work coming to fruition.

But it’s not only in terms of deployment that 2021 has broken new ground. We have also seen a record number of exits this year – 25 to date, with several more expected by the end of 2021. This year’s exits have generated a total return of £367 million, which is equivalent to a money multiple of 2.16 times. I’m encouraged to see a very healthy pipeline for exits in 2022, which suggests the exit boom will not slow down any time soon.

The market background has likely accelerated exits for a few of our investee businesses but the step up in activity is predominantly driven by the continuing maturity of our portfolio. In some cases, exits are being facilitated by increasing collaboration both within BGF and with our portfolio businesses. For example, we have an excellent in-house quoted team, who can provide help and advice for portfolio businesses, such as Dianomi or Arecor, which have both gone on to successfully IPO this year.

There have been challenges, of course. The same market dynamics that are encouraging businesses to pursue exits have made it more difficult for investors to find companies that are priced within a fair range. The key, as ever, is to balance pricing concerns against the promise of future growth and, of course, to invest in well-managed companies with the ability to navigate successfully through a range of market environments.

Evidently, there are challenges in the broader economy. The current shortage of lorry drivers is just one of many difficulties that consumers and businesses will have to cope with as we emerge into some kind of post-pandemic normality, whatever that may look like. Businesses have already had to adapt to new ways of working during the pandemic. There will no doubt be further adaptations in the months and year ahead as businesses grapple with future challenges, such as climate change. I continue to be both impressed and encouraged by how the entrepreneurs we have backed continue to respond and flex to these headwinds.

As BGF moves into our 11th year, I think it’s fair to say that we are feeling optimistic about our future. We have now invested in more than 400 businesses across the UK and Ireland, cementing our position as the most active investor in the growth economy. There is plenty more still to do, but we are in a good place from which to do it. Here’s to the next decade.