BGF: Backing the companies that will be the engine of NI’s future economy

Jim Meredith

You don’t have to go far to find a small to medium sized Northern Ireland company that has at one time or another been marked as a potential scale up – a business with real potential to grow into a major player in their sector.

Unfortunately, the statistics show that while we have many brilliant high potential SME companies, many of those scale up contenders – for a variety of reasons – never manage to maintain the momentum needed to go beyond their initial growth phase.

BGF, the UK’s most active and influential equity investor in small and medium sized businesses, last year identified over 350 potential scale ups in Northern Ireland – businesses with turnover of up to £150m, which had grown over the previous three years and had potential to scale even further.

BGF provides long-term funding in return for a minority equity stake in the companies it backs. Initial investments are typically between £1m - £15m and BGF can provide significant follow-on funding as and when required. BGF’s £2.5bn fund has supported companies across every region and sector of the economy, including five companies in Northern Ireland – Braidwater, RiverRidge, Audit Comply, Bob & Berts and Uform.

While funding is undoubtedly a major factor in whether a business will successfully scale, it is often lack of access to a broader network and level of experience that holds SMEs back – this is something BGF has addressed by creating a talent network of more than 5,000 senior business people/ board directors who become non-executive directors to its companies. These individuals have typically been entrepreneurs themselves and therefore have the knowledge, experience, and a network to share with the companies that BGF supports.

One example from BGF’s talent network is Jim Meredith, who is non-executive chairman of two BGF portfolio companies in Northern Ireland – RiverRidge and Uform. In addition, Jim is currently chairman of Augean plc, one of the UK’s leading specialist hazardous waste management businesses, and is the former chief executive of Waste Recycling Group. Jim has also held a number of senior roles in the manufacturing sector. “BGF is supporting the companies that will be the engine of the economy of the future,” Jim says.

“What I like about BGF is that it is making a decision to help SMEs at that point in time when the companies really have an opportunity to realise their growth potential and need that external help. I think that’s incredibly worthwhile if we want to grow our economy.”

He says that having spent his career working out problems and growing businesses, he, like many in the talent network, is in a good position to help others see opportunities and avoid potential pitfalls.

“The role of a chairman or a non-exec director is about making sure owners and bosses keep looking at where the value drivers will be for their business in the future, but also making sure that they have the senior team of people and resources they need and that those people are working appropriately,” he says.

“People like me have experience from other companies and in many cases know what management teams are facing. So, we can help entrepreneurs foresee some of the problems they haven’t got to yet, things that might get them in trouble, and put in extra tactics to help them avoid it. If I haven’t got experience of an issue, then someone in the BGF network will have. It is pretty powerful for that reason alone.”

Of course, for many businesses, bringing in an external non-executive director or chairman is a big step. But Jim Meredith says it is beneficial to have outsiders who have not been influenced by internal politics to help structure a board for the next phase of growth and to provide experience of upcoming challenges such as acquisitions or restructuring.

“We are there to act as a sounding board for the chief executive and other directors, to help them thrash out problems, challenge plans and provide strategic direction. We also bring an increased level of corporate governance they might not have been used to,” he says.

“For RiverRidge and Uform it has been about challenging the businesses to really think about why they want to do something and making them explain it until they understand their own explanation. We want them to know why it is a good idea and how they will go about it.”

“I’m excited about the growth prospects for both of these businesses.”

 

RIVERRIDGE

Belfast-based RiverRidge is now the most integrated waste management operation in Northern Ireland, offering a broad range of collection, treatment, and diversion from landfill solutions to many local authorities, public bodies and private operations.

Brett Ross

The business was first backed by investment from BGF in 2016 and has seen its turnover grow by more than 60% since then, with BGF providing a series of following funding rounds.

Growth has come from a combination of organic growth and the acquisition of a competitor, while investment into its treatment infrastructure has also allowed the company to significantly improve its margins and position itself for further growth over the coming years.

“In the next five years the company is looking to double its EBITDA through continued expansion and further development of our treatment infrastructure,” Brett Ross, chief executive of RiverRidge, says.

“Like every other business, we face challenges in achieving those goals. Retaining our strong management team and expanding it when required is perhaps the most significant challenge. In addition to this, the unpredictable nature of policy direction and macro-economic factors has always presented the management team with challenges.”

The RiverRidge boss says while the business was already thriving, investment from BGF has helped accelerate its plans and cement its place as a market leader.

“The impact of BGF’s investment cannot be underestimated,” he says. “It is more than the fact that BGF provided RiverRidge with access to capital. The presence of a professional outfit like BGF on the board gave the team a far better appreciation of the level of governance required to successfully manage and grow a £50m turnover business.”

Brett notes that the other chief executives of BGF portfolio companies is also invaluable, as  it can be useful to talk to another founder who has faced a similar challenge in a different sector, who can offer a fresh and honest perspective because they are not competing for business.

He is also quick to point to the benefits that the non-exec board members added after BGF got involved have brought to the business.

“Our directors have been a source of guidance on a number of matters, most importantly during the financial restructuring that took place at the commencement of our relationship with BGF,” he says.

“Their appreciation of what our senior debt funders are interested in and how to better manage the relationship has been invaluable. The non-execs have also provided us with insight into experiences and alternative approaches to problems that other companies within their large portfolio have encountered and overcome.”

 

UFORM

Toomebridge-based kitchen door and component manufacturer and distributor Uform also has plans to accelerate its growth. Founded by Eamon Donnelly, his brother Paul and late father Eddie in 1993, the company was backed by BGF in late 2018 and currently employs around 340 people.

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Eamon Donnelly

Eamon Donnelly

Eamon Donnelly

Eamon says that even in a challenging environment, which has been impacted by Brexit uncertainty, sales to kitchen retailers continue to rise and sales leads from its biggest exhibitions have doubled, which he believes is down to the company’s focus on the quality of its products.

“We have been investing heavily in the business to acquire new customers and grow market share in the UK. In Ireland, we have good market share and it is about adding value for our customers there,” he says.

Eamon says that the business of creating a kitchen has changed since Uform started because the kitchen has become families’ main living space and homeowners have much more choice.

This year Uform launched three new kitchen ranges at trade show KBB and has expanded its offering by creating a new concept called ‘Beyond the Kitchen’ which as the name suggests is moving its products to other parts of the home.

“We’re asking our customers, ie retailers, to think outside the kitchen by giving them a proposition that adds value and allows them to provide their customers with value. It centres on aspirational pieces of furniture outside the kitchen – things like bookcases, sideboards, media units – that we make to the same high specifications. It’s a natural step for us as our business model is about putting the customer at the forefront of everything we do.”

Eamon says that in a fast-changing sector which is very attuned to the performance of the economy, the support of BGF and its network has already proved valuable.

“We had a board but it is now much better structured and the non-execs are challenging our thinking more. It doesn’t always go easy, but it has been a very positive experience having BGF involved,” he says.

“We are trying to move the dial on growth in the UK mainland so we’re investing to scale the business – around £8m in the last three years. Even if we find we are not growing as fast as we want, we will still be investing heavily in the next three to five years because we have to be ahead of the curve. BGF understands that.”