Successful companies often reach a point where they can no longer maintain growth by relying on existing resources and an injection of fresh capital is required, creating a need for development capital.
Having successfully passed the initial start-up stage, businesses can require funding for the next natural step of development. Companies may consider taking on debt, although this may not be an option if existing debt levels are maximised or there is a lack of asset-backed security.
Investors are attracted to this type of investment as it combines the reduced risk of investing in an established business with the potential for high growth and returns. Investment is available for a wide range of opportunities that the businesses wish to develop; including product development, recruitment, developing a presence in new markets, or to fund bolt-on acquisitions.
In addition to capital, development capital funders also provide experience of quickly scaling medium-sized businesses, highly developed networks, as well as giving the company an overnight visibility boost. In return, the investor will take a minority shareholding, leaving the existing management in control of day-to-day operations.
Cavu Corporate Finance have recently worked on a number of development capital deals such as the multi-million pound investment into consulting engineers Patrick Parsons by LDC, the £25m investment in financial advisers Fairstone by Synova Capital and the £7.5m injection into waste recycling business J&B Recycling from BGF.
Raising the capital needed to fund periods of development and growth can be an onerous task for management teams, and we work closely with management to assess funding requirements and determine which forms of capital are most suitable to their business. We also advise Shareholders who are looking to unlock value at the same time as raising development capital to de-risk their position.
Our strong connections and deep knowledge of the development capital market means we are able to identify the most appropriate funding partners for our clients. We are seeing an increased demand from North East businesses for equity and the ongoing over-supply of equity in the market makes this an attractive time to be raising equity finance.
