David Hall, Managing Director

2020 was many things, but perhaps one aspect really stands out – it was a year that forced us to do things differently. For many, it put work at the heart of the home, introduced the popular phrase “you’re still on mute” and saw a much higher involvement in meetings by pets, children, and partners that was arguably less disruptive than would have previously been imagined.

The UK’s small businesses have long been recognised as the engine of growth for the economy, but their ability to adapt has been tested in more ways than we might have imagined. We’ve seen physical retail moving on-line; restaurants re-organising their customer space; and travel businesses turning into repatriation services. Overall, the acceleration of trends feels like we have lived almost five years in one.

For ourselves, having completed £365m of deals and secured £110m of new funds in 2019, we were set up well as we entered 2020. Just before the first lockdown in March, we completed the final investment from our Buyout Fund I, investing £6m into West Midlands-based commercial vehicle safety specialist Innovative Safety Systems (ISS). In the same week, we realised our investment in Group BC, a project management software specialist for the construction industry, generating a return in excess of 3x.

After that, we really started to see the impact of the various restrictions that were imposed, but the remarkable support, adaptability and flexibility from all our advisers and investors that characterised 2020 was both challenging and humbling. Thanks to investor support, we closed our £80m Buyout Fund II in April. Just three months later, we made our first investment from that fund, supporting the loss adjusting and claims management specialist, GHG Limited  with a £7m sum.

The summer saw a lot of businesses focus internally on operations and revisit their go-to-market strategy. In such a fast-changing situation, it is important for businesses not to lose their nerve, but to keep sight of their long-term aims and ambition. Just one example, in July saw YFM-backed enterprise IT managed services organisation DSP acquire Explorer UK, an Oracle consultancy, development and support provider. Bringing together the two companies enables DSP to realise its vision to form one of the largest independent Oracle partners in the UK.

As businesses adapted their plans, the demand for growth capital strengthened in late summer/early autumn. This translated into increasing investment and in November, we made a £4.8m investment into award-winning marketing automation platform, Force24. This was followed by a £3.75m investment into global freight and commodity broker ARRACO in December and then early in January, we invested £2.5m into data validation platform Vypr that provides consumer intelligence.

If we take nothing else from 2020, it is, at least, a celebration of the human capacity to adapt. Despite the disruption, with the help of all our partners, advisers and investors, over the last 12 months we’ve seen increasing investment into small businesses, and a growing appetite and determination from those in the portfolio to meet challenges or seek new opportunities.

Of course, huge pressures and challenges still exist, and many small businesses and entrepreneurs need support to meet those challenges. Nonetheless whilst we look back at an unforgettable year, the growth ambitions of management teams across all regions of the UK need to be backed and encouraged and, as YFM starts to close in on our 40th year of investing, we look forward to playing our part.

If you want advice, support or funding, do get in touch…

Approved for the purposes of Section 21 of the Financial Services and Markets Act 2000 by YFM Private Equity Limited (‘YFM’), which is authorised and regulated by the Financial Conduct Authority (FRN: 122120). YFM is the Investment Manager to British Smaller Companies VCT plc, British Smaller Companies VCT2 plc, YFM Equity Partners Growth I LP, YFM Equity Partners Growth Fund II LP, YFM Equity Partners Buyout I LP and YFM Equity Partners Buyout II LP. YFM Private Equity Limited is ultimately owned by YFM Equity Partners LLP which is registered in England and Wales No: OC384467. Registered Office: 5th Floor, Valiant Building, 14 South Parade, Leeds LS1 5QS.

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