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Industry events / 06 October 2021

BVCA Summit 2021 - Day 1 key takeaways (part 2)

BVCA Summit 2021 - Day 1 key takeaways (part 2)

Across the BVCA Summit 2 day event Crestbridge will publish a brief rundown of key takeaways from each session as the event unfolds. 

The event, which is deemed to be the UK's premier private equity and venture capital conference will take place online whilst this year’s exclusive roundtable discussions and networking events will take place in person.

Read our key takeaways below from the second part of Day 1 at BVCA Summit.

 

GLOBAL BRITAIN: RECOVERY, GROWTH AND COMPETITIVENESS 

John Glen MP, Minister of State (Economic Secretary to the Treasury)

I have witnessed huge strides taken in financial services in the past few years, watching companies go from unknown to become household names.

BVCA investment and support is helping firms go from strength to strength. Over one million people are employed by VC/PE companies in the UK.

While there are promising signs of growth we are still recovering from a global pandemic. We need ideas, determination and capital to secure this country's long-term competitiveness.

How the government will help you succeed.

We focus on getting the fundamentals right and ensure the financial services industry is more competitive than ever.

We need to adjust our game plan nimbly, swiftly and accurately, like Emma Radacanu in the US tennis open and Team GB in the Olympics/Paralympics.

The Wholesale Markets Review is not the most glamorous but is essential to the sector's long-term future.

No compromise on standards. We believe high-quality regulation is a strength, not a weakness. 

We will have to keep making our case.

Enhancing financial services competitiveness. More specifically, of the funds industry. We want to make this country an even better place to set up, manage and administer funds.

We are reviewing our current funds regime. And have taken other steps to sharpen the competitive edge in terms of tax treatment and VAT treatment of management fees. We want to boost the flow of capital into high-growth companies.

We want to tackle the growth stage company capital gap in particular. Future Fund Breakthrough. Government will co-investment and turbo-charge development.

We are introducing a new tech visa scheme to attract the best talent from around the world.

Helping investors take a longer-term view.

Over 80% of UK defined contribution investments are in quoted securities.

Illiquid assets will be more accessible more easily.

Will bring about cultural change to longer-term investment.

There is a job here for private sector investors. Like Mrs Thatcher with Big Bang, we want to have a similar impact. The whole country will see the rewards of channelling funds in this direction.

Thank you for listening to me today and for all you have achieved.

We want to develop the right conditions for your business to thrive and generate a better future for the UK.

 

WHAT'S ON THE REGULATORY HORIZON?

Gurpreet Manku, Deputy Director General, and Director of Policy, BVCA

The BVCA engages with huge range of stakeholders nationally and internationally, to have the right policy framework.

How to increase UK institutional investment into illiquid assets. Allocations are traditionally low. Why can't UK DC schemes achieve higher returns? There is a need to focus on value rather than just cost.

Long-Term Asset Fund. Liquidity and operational issues. UK funds regime review. Our ability to attract international talent. Reform of fund structures. A new regime for holding companies. Lord Hill's review of the listing regime.

Sustainability agenda. New climate disclosures will cover asset managers of different sizes and kinds. BVCA promotes responsible investment, building value in businesses for investors, society and a greener future.

 

MAKING THE MOST OF OPPORTUNITIES NATIONWIDE Where are the next opportunities?

Panel moderated by Michael Moore, Director General, BVCA

The panelists:

Simon Braham, Partner, Sustainable Growth Funds, Bridges Fund Management

Melanie Goward, Investment Director, Maven

Jan Rutherford, Partner, Scottish Equity Partners

Garry Wilson, Founder and Managing Partner, Endless

 

MM to Melanie: what attracts you to non-London opportunities?

Melaine: We've always been an active regional investor with offices around the UK. Being close to regional businesses gives us an opportunity to meet and understand management teams.

MM to Simon: Bridges is seen as London-centric. Why are non-London opps attractive?

Simon: We've always invested around the UK. My being in the north gives us access to local community. Helps with levelling-up agenda. There is a plethora of opps outside London that it makes sense to access locally.

MM to Melanie: What is the perspective different to London?

Melanie: We invest in high-tech companies all around the UK. We believe in this more than ever in this time of remote working. There is an opp to attract talent and differentiate.

MM to Garry: How does a regional lens help you identify opps and how exciting are they?

Garry: London dominates and there are few developed economies where a single city dominates in this way. When I started in 2005, 3i had just closed their Leeds office. LPs find it v v interesting that Endless is based in Leeds and Manchester as well as London. They are attracted as it is something other than London. Well agreed in PE that the closer you are to your companies. London is the fuel tank but the regions are the engine and the chassis. Look at my home town, Belfast. Look what hosting Game of Thrones did for the city. There are some fantastic opps and management teams react better to investors who are close to them. PE is a huge growth industry and the regions will benefit a great deal from that going forward.

MM: Does this go in cycles or is this something different?

Garry: Look at SEP in Glasgow. Look at Northedge in Manchester. That is their differentiator. This is not cyclical or a wave. It is attracting new firms and new capital to new cities.

MM: The world of work is changing. Has the pandemic opened up new opps and will we see all over the country?

Jan: The whole remote work field around tech can be a double-edged sword for some companies but it has been spurred on by the pandemic.

MM: Will the industry be more competitive?

Melanie: As Jan said, it is a double-edged sword but remote has become much more the norm and competition improves quality and access to capital.

MM to Simon: We're building up to huge decisions about things like climate change. What is the appetite to engage?

Simon: Transition to a green economy is something we've been looking at for decades now. We actively look for businesses with that in mind. There are lots of opportunities out there. People want to work in businesses that are doing good these days, which is a fundamental shift over the past decade.

MM to all: one selling point?

Garry: I'd like to think I've always been a 'big pie' guy. PE is a young industry. Its involvement in 5,000 companies is tiny. The growth opps ahead are fantastic. I've seen the number of PE companies quadruple in recent years, so I'd say 'bring it on'.

Jan: great businesses can be found everywhere. It's about enabling talent to flourish with the right life/work balance. It can open up career opps.

MM to Mel: Wales/England crossing getting busier?
Mel: The benefits go into the wider community.

MM to Simon: more than one office for Bridges outside London?
Simon: I hope so, starting with mine, which will open shortly.

MM: Thank you all for telling the regional story.


CONSUMER BEHAVIOUR AND TRENDS: PRESENTATION

Silvia Rindone, EY-Parthenon UK&I Retail Lead, EY 

I'd like to talk about consumers today. We started a consumer survey in April 2020. The main themes over the past 18 months. Shift to online. Home and health centricity. Price and purpose. Sustainability.

Online shift is here to stay. Stores were closed and forced to go online. Consumers who were reluctant are sticking with it for convenience. Some retailers have accelerated investment but customer experience will need prioritising to maintain online momentum.

Some stores have had to close but others are finding a different purpose, such as fulfilling demand. As Covid restrictions have eased, consumers are saying they enjoy the human contact involved in recreational shopping. The browsing experience is difficult to replicate online. Shoppers are becoming more demanding. Thanks to Amazon, they want it now and want it cheap.

Re health and home: UK consumers are not just consuming more at home, they are building their entire lifestyle around the household. They are more concerned about family health, spending more time at home and see healthy (non-meat) products as more important. Some people have come off their Peloton and embraced the gym instead.

People are very sensitive to value. They want not necessarily the cheapest but the best value for money. Inflation is rising. Companies need to be aware of the value proposition.

Sustainability has risen in consumer awareness but only 33% say they are prepared to pay more. A gap between intention and action remains and 66% say high prices would deter them from buying a sustainable product. Consumers are demanding. Want corporates to change for the better and be far more transparent, in a way that is easier to understand.

ESG is at the core of C-suite discussions these days. Sustainability needs to be deployed to improve the competitive position.


HAS VALUE CREATION REALLY CHANGED?

Panel moderated by Gurpreet Manku

Neil McFerran, Partner, EY 

What we have seen more and more of is: what does the top-line thesis look like? Can you buy and build? Can you change consumer sentiment? Do you have the right capital allocation process? And cash restraint? Can you pay your suppliers at the end of the day. Resilience of the supply chain is important.

Charles Megaw, Managing Director, Bain Capital

Take private and carve outs: Carve outs have been a major investment theme recently. The investment thesis is straightforward. You have an attractive business that is too small to get the investment and attention it needs within the larger company. You carve out, give it direction and you can have a great business. WorldPay, for instance, was relatively small in RBS at the height of its problems, but was carved out and has become a global payments powerhouse. What does that take? A lot. A lot of hard work. Very complicated hard work. Strengthening management teams. Managing the corporate to stand-alone transition. Invest in new processes, systems and governance, often a new tech platform. We see the theme as a big opportunity but not without risk. The execution risk and the uncertainty of what you will end up with.

We are very experienced at carve-out and an extensive playbook.

Garry Wilson, Founder and Managing Partner, Endless

Gurpreet: You invest in turnaround situations. How do these businesses deal with risk such as pandemic and generate growth?

The businesses we buy tend to be mature. They've been around for a long time. Common sense is our 'secret sauce'. Crown Paints. We give the opportunity to change the business. The Dutch parent had not invested. Making capital investment can work wonders. American Golf. A short-term challenge to get through and when golf courses and ranges have delivered growth we haven't seen in golf for 20 years. Pent-up demand for leisure spending. The growth in golf has been a global phenomenon. Having the right management in place is essential.

How can PE companies improve? We need to be more open and talk about more than pounds and pence. Value creation needs to be explained, and what is being done with new profits arising from value creation. ESG: we run the UK's only large sawmill business. For every tree felled, five are planted. We need to tell our story not just in terms of returns but how companies are improving as corporate citizens. We need to engage with journalists. We need to stop fearing publicity. We have some fantastic stories to tell. We pay a lot of tax. Let's be more open.

 

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