Last year £6.7bn of equity investment was made to SMEs in the UK highlighting the amount of funds available to small businesses, and 40% of this was invested outside of London.
Regional investment grew by 29% whilst investment in and around London declined, with many equity firms now migrating back regionally as costs are lower and the opportunities are increasing. The West Midlands in particular was a key growth region.
What is equity investment?
Equity investment typically takes the form of a private equity firm or venture capital trust (VCT) acquiring shares in a target business. It can take the form of cash out for existing shareholders or can be a cash injection into a business or both. Investments are made on the assumption that there is strong growth in the target company and that the value of their shares will increase over time. Investors will make their return via a capital gain through finally selling their shares, but some may require dividends or interest payments (a yield). It is also possible to obtain High Net Worth funding on a similar basis.
Small businesses luring international investors
In 2018, the amount of equity investment funding funnelled into small UK businesses from investors hit a record breaking £6.7bn – marking a 72% increase over the last two years – and much of which was from foreign investors.
The UK small business scene is appealing for overseas investment for many reasons and a preferred investment destination. Despite ongoing geopolitical challenges, the UK offers some of the most forward-thinking businesses in the world, with great talent and resources at their fingertips, which ultimately attracts capital and makes for a favourable business environment.
This increased appetite is a vote of confidence for small businesses in the UK, and indeed the wider economy as foreign investors invest their money for the long haul.
The UK Government is further seeking to support local businesses through British Patient Capital. A £2.5bn fund aimed at ensuring UK businesses remain in UK ownership. This is because most investment in funds is now driven by overseas wealth.
Securing equity investment
For a company to successfully execute its financial strategy, it is imperative that its finances are fully aligned.
With an extensive network of contacts, both locally and internationally, our expert team of specialist corporate finance advisors are well-placed to assist clients with fundraising, whether it be debt or equity, at whatever stage of their business life cycle they may be.
We specialise in deals involving equity investment, and our partner-led team can help you navigate this market to support your funding needs. Get in touch today.
