Eyes on Growth - June 2007
Eyes on growth - June 2007
Getting the funding structure right is often the key both to driving organic growth and creating opportunities for acquisitions. Even for businesses with healthy balance sheets, introducing a partner to share the risks can give the company new life. By diversifying their wealth, business owners can become more comfortable with taking risks such as setting more ambitious growth plans or expanding internationally. This can also create an opportunity to restructure a shareholder base and create a more focused, incentivised team.
This is 3i’s Growth Capital approach. It is about businesses exploring their options with an aligned partner, with the same appetite for success, who will share the risk. It is about having a partner who will invest substantial funds in your business, help drive exponential wealth generation and who brings with them an extraordinary network of
contacts and experience in growing businesses and developing strategy internationally. Growth Capital invests so much more than just money, it is a very active partnership to support management through the next stages of growth.
Growth Capital provides flexible funding; funds are invested from the 3i Group balance sheet without third party restrictions on structure or timing and hence can be tailored to each individual investment. Take Foster + Partners, the world’s most recognised brand in architecture and design, when their advisers came to 3i to talk about funding options, the Growth Capital solution we proposed was different to every other approach they had heard. A few months on and both parties are celebrating the beginning of a great partnership; excited about growing the business and aiming to expand it rapidly around the world.
The Foster + Partners deal is a good example of the benefits that an active investment partnership brings. New funding can create freedom in the ownership structure of a business, bringing change to align shareholders and managers with its future direction. In the Foster + Partners deal, the shareholder base was restructured to allow a shift from a founder-owner culture to one where all 14 senior partners have a significant equity stake with a further pool of equity for a broader base of employees. The long-term future of the business has been assured.
Foster + Partners is precisely the type of business that 3i aspires to partner: a world class leader in its sector with a long established brand and a matching global footprint. 3i is very much a people-based business, both in terms of its investors and its extended network of contacts and has committed to leverage these relationships to support the growth of Foster + Partners into new service lines and geographies. 3i taps into this network of people, the experience and knowledge of its investment professionals and the learning from people involved in its high quality international investments to create a unique pool of in-depth industry knowledge.
Often, the network is used to bring new skills and experience to the board. When 3i invested £15m into MKM Building Supplies, it created the opportunity for the founder shareholder to exit the business and for the company to fund its ambitious roll out plan. The senior team was strengthened with the introduction of Stuart Rose as Chairman,
who has significant retail and roll out experience gained from his roles at the Body Shop and Hamleys. Since our investment in November 2005, the business has grown from 19 to 25 sites and is continuing to grow confidently.
To contact the team, please email steven.nicholls@3i.com who will be delighted to hear from you.