During the first half of 2019 YFM Equity Partners (YFM) completed GBP230 million of deals and raised GBP100 million of new funds, a sharp increase on 2018.
YFM says that the results demonstrate that the UK’s smaller businesses are continuing to innovate and invest for growth, despite the ongoing backdrop of continued political uncertainty on both domestic and international levels. The company believes this market could have performed better, but given the on-going activities in Westminster, the performance levels are understandable.
David Hall, Managing Director at YFMm says: “Overall returns, both realised and unrealised have remained steady. There’s been a healthy appetite for YFM’s assets from both trade, overseas and UK investors, as well as from UK private equity houses. This has translated into positive returns and more importantly distributions to investors who are largely individuals, rather than institutions.
“Against a background of low interest rates and returns, YFM’s strong performance has whetted investor appetite which remains strong and it is clear they remain committed to invest in this sector of the market.”
YFM has seen increasing levels of opportunity over the last few years and 2019 has shown a stepped increase on 2018. There are several common characteristics that these businesses share; they are generally younger, typically less than 10-15 years old. In addition, they are either undertaking a management change/refresh which brings a new injection of ideas and energy or have a proposition that improves their customers’ businesses by making them more efficient, working smarter or builds an extra robustness.
Hall adds: “Whilst these businesses may be small they tend to have an international outlook and customer base. Their delivery systems lend themselves to being able to scale rapidly and respond to market changes irrespective of geographical boundaries.
“However, there are some businesses which have more technical and complex products where they are mission-critical, protecting data being a prime example. These have longer sales cycles and arguably more contractual longevity with their customers, but perhaps can’t scale as rapidly needing bigger sales forces to meet the customer’s buying needs.
“One area that is surprising by its absence is the premium/advanced engineering sector. This is an area of traditional UK strength, but investment in and enquiries from this sector don’t seem to have been as strong. If I could wave a wand I’d like to see this area represented as well as in the recent past.”
YFM invests in UK-based smaller businesses, none of which are listed, and their investments cover the length and breadth of the UK through its network of regional offices as well as its hub in London.