Adapting to a ‘new normal’: YFM Equity Partners’ Aaron Lowery and Helen Villiers tell us how they are changing the way they work
When it comes to investment activity, there tends to be much more focus on London than any other part of the UK. While London may be the capital, there is plenty going on in other areas of the country and a concerted effort to ensure more funds are available. There are a number of businesses that have offices across the country, enabling them to invest nationwide. We spoke to Aaron Lowery, a Leeds based Investment Manager and Helen Villiers, a London based Investment Manager, who are both from YFM Equity Partners, to find out more about the firm and their approach to investing.
YFM was founded in Yorkshire and has been investing in small business since 1982, having recently closed a new £80 million buyout fund and managing two VCT funds, focused on growth capital investments. YFM is sector agnostic, but with the VCT funds having an eye on fast growing businesses that are less than seven years old, the current portfolio leans towards tech, although the firm considers investment opportunities regardless of sector or region.
When it comes to making VCT investments, YFM generally looks for companies with minimum revenue of £1 million, although Aaron is keen to point out that the criteria is a guide rather than a hard and fast rule. He comments:
“We invested in a business called Matillion in 2016, whose revenue was below £1 million at that point, but has since gone through a number of additional funding rounds and grown annual recurring revenue to in excess of $20 million, as both the product itself and commercial traction with companies globally continue to develop. It’s a good example of how we will go below the criteria if we think the businesses is a scalable proposition and has shown growth in a positive market.”
“We also have a separate fund which can provide cash out for existing shareholders alongside our VCT growth capital investment, for example, allowing angel investors to realise their investment in our recent partnerships with Panintelligence and SharpCloud.”
Elaborating further, Aaron emphasises the importance of the management team:
“The strength of the management team is very important for us; we look for teams who have the capability to scale a business and have a well-thought out business plan. Particularly at a time like this, we understand that not everything is going to go to plan, but if you have a good team and a good business then there is usually a way to adapt and continue to grow. As a regional investor, we invest a lot of time getting to know the management teams that we will be working with. During a process we would usually have quite a few meetings with the team, understandably this has been a bit more challenging recently, but with video calls and virtual meetings, we’re managing to make things work.”
“YFM still has appetite for new investments, we’re just having to change our approach, with less face to face meetings and increased usage of platforms such as Teams and Zoom.”
COVID-19 has hit hard across the world, with the pandemic impacting all sectors. As businesses have had to re-evaluate what they do in order to survive, YFM has changed the way they work to support them. Explaining how they’ve had to adapt, Helen says:
“YFM still has appetite for new investments, we’re just having to change our approach, with less face to face meetings and increased usage of platforms such as Teams and Zoom. Processes are running a little slower, advisors are generally taking more of a cautious approach and the volume of new opportunities has fallen, but there are still a lot of good businesses out there looking for investment that we are definitely open to meeting.”
The role of YFM has had to change too. Carrying on as normal hasn’t been possible as founders and businesses have needed extra support.
“We’ve done a lot more recently to support some of our portfolio companies such as looking at short-term cash flows and helping businesses to manage their cash position. We have supported our portfolio with applications for CBILS, the job retention scheme and other government support schemes. We’ve all been rolling up our sleeves and making sure we get the portfolios as much support as we can.”
As well as having to pivot, businesses are starting to adapt to the ‘new normal’. Aaron comments:
“Our portfolio contains a lot of tech businesses; I think these types of businesses are generally well-equipped for adapting to the current environment with a lot of employees already having the flexibility to work from home. For other businesses in the manufacturing, retail and leisure sectors, it has been harder to adapt, although some in the leisure sector, for example, have been able to leverage other options such as Deliveroo.”
As YFM’s portfolio adapts to new ways of working, YFM has been doing the same as it continues to operate in the midst of a difficult climate. Highlighting some of YFM’s recent achievements Aaron says:
“We raised a new buy-out fund a couple months ago, which closed at £80 million, we continue to explore new investments and have recruited three people into the investment team over the last couple of months. There are still loads of great businesses out there that will need growth capital, and YFM is well equipped to support them and work alongside them as a supportive partner, despite the impact of the current situation. I think you’ve got to take the positives out of an adverse situation.”
Find out more about YFM Equity Partners at https://yfmep.com.