Tuesday 12 December 2017

New €235m fund targets equity investments in Irish SMEs

Fund run by H2 Equity Partners was launched two weeks ago, writes Gavin McLoughlin

H2 investment manager Cathal Turley
H2 investment manager Cathal Turley
Gavin McLoughlin

Gavin McLoughlin

A new €235m fund is targeting equity investments in Irish and UK SMEs.

The fund is being run by UK-based private equity firm H2 Equity Partners and was launched two weeks ago.

"We're looking to invest in businesses that have strong potential to become one of the market leaders in their sector," H2 investment manager Cathal Turley, told the Sunday Independent.

"We're expecting to roll up our sleeves and take active roles in the profit improvement plan. We don't just attend board meetings and measure performance against budget. We're looking to actually work alongside management and provide extra bandwidth. We don't sit in management's seat, what we do is we help to effect change if required," he added.

The fund will look to make investments of between €5m and €30m but will go up as far as €100m. It will invest on a deal-by-deal basis and does not have a specific amount allocated for each of Ireland and the UK.

"We're looking for businesses of at least €2m to €3m all the way up to €30m profitability," Turley added.

"We think the Irish market is interesting from the perspective that private equity is generally a new source of funding within the market. We think we can assist ambitious management teams to make their business grow faster, and we think it's a good alternative to the traditional form of funding through debt."

H2 was founded in the Netherlands in 1991 and has offices in London and Amsterdam. Companies currently in its portfolio include Dutch shrimp products supplier Klaas Puul, and British medical products distributor GBUK Healthcare.

It's one of a long list of funds and alternative finance providers that are eyeing up the Irish SME sector.

Non-bank lender GRID Finance announced last week that it had raised €30m to pump into the sector, while investors such as the Carlyle Cardinal Ireland fund, MML Growth Capital Partners and Renatus Capital have also been active in recent times, as has Finance Ireland, the alternative finance provider run by former Irish Permanent executive Billy Kane.

In addition, the Strategic Banking Corporation of Ireland (SBCI) - an SME-focused lender - raised €450m in an effort to meet growing demand for its loans.

Turley said many of its investments come from businesses managed by their founders or a family, which have limited or no succession plans in place.

"We often see that initially the founder or family may wish to realise 100pc of the value tied up in their company and move on. Sometimes this is the sensible move but other times this means that founders potentially leave a lot of value on the table. We are ambitious, the aim is to double profitability over the course of our investment," he said.

"We also aim to make the business strategically attractive to trade and other financial investors.

"Therefore the founder can realise the majority of their investment on the first process and then benefit from the value creation on the second exit."

Sunday Indo Business

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