New interest from UK investors in regions like the North East is driving healthy competition in the private equity market, according to the regional head of a leading investment group.
Michael Vassallo, investment director at Maven Capital Partners, said growth capital investment activity in the region is regaining momentum after the initial impact of the pandemic.
As a consequence of remote working trends, the North East has become more accessible to workers and entrepreneurs - and that has simultaneously broadened the horizons of many investors, he said.
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Mr Vassallo said the changes were beginning to result in competitors of Maven showing new interest in high growth companies in the region.
He said: “We’ve got to welcome competition because it raises the awareness of funding opportunities and it encourages businesses to consider taking on equity or some kind of growth capital. Ultimately, it’ll bring more opportunities for us in the long run.
“People can work from home now and we’ve seen more people moving from London to live in the North East. And in the technology sector several large companies have opened offices in the North East and that leads to more people learning good principles through those businesses before thinking ‘I’ve got a good idea I can go off and do myself’.
“It stimulates more start-ups and a larger technology community.”
Maven - which itself set up a Newcastle office in 2017 - has recently invested in two London-based businesses that have been encouraged to set up in Newcastle. They include fast growing ecommerce firm RevLifter, which hopes to have 40 staff in the city by the end of the year and fintech firm Pockit.
Mr Vassallo added: “I think the private sector can already see the North East is a good place to do business and there’s funding there to help them do that. It’s not grants but commercial investment.
“A lot of London and South East companies have started looking at the cost of their office space for one thing, and they’ve also started looking at the quality of people in the North East. I think the more forward thinking businesses also realise you need some office culture and that’s ultimately good for us because the region needs people to come back into the city centres.”
Maven focussed predominantly on equity deals during the pandemic as demand for debt finance was taken up by the Government’s Coronavirus Business Interruption Loan Scheme (CBILs).
In 2020 - described as a “slower” year - the firm invested £5m, in 2021 that increased to £10m and in the first quarter of 2022 alone, it has invested £9m.
Mr Vassallo said pandemic restrictions had limited Maven’s ability to do deals in more traditional sectors such as manufacturing and engineering. Instead it had focussed on technology businesses during that time.
Mr Vassallo added: “Just this month we’ve done five deals, two of which are into technology businesses and three into manufacturing businesses. We’ve started getting back into lending again. Of those deals, three of them were debt and two of them were equity.
“There are still recovery schemes around but they tend to be slightly different products.”
Overall, private equity has enjoyed continued growth since 2008 as investors have looked to other avenues for better returns.
Recent research from KPMG showed mid-market private equity investment in the UK soared to record volumes and values in 2021 including 803 deals worth £46.8bn.
And Maven - which typically looks to exit roughly four to six years on from initial investment - says its appetite for risk remains unchanged despite pandemic and geopolitical pressures.
Mr Vassallo also said he was hopeful the next generation of Northern Powerhouse Investment Funds would bring significant opportunities for the North East LEP area.
