Bright business

May 1, 2019

Amy Wanless and Jennifer Hirst, corporate lawyers at Muckle LLP, share their advice on what investors are looking for in growing businesses

How about a cheery forecast? As lawyers, we may be used to analysing worst case scenarios, but even we’re tired of the UK’s frequently overcast economic outlook.

Well, when it comes to growing businesses, the North East is officially brightening up.

The Office of National Statistics has confirmed that the region is on track to reach its target for scaleup businesses. At the last count, a total of 780 North East companies were growing by more than 20 per cent a year, according to research published by the Scaleup Institute.

Just last month, Colin Bell, the North East LEP’s business growth director, said: “Scaleups are critical drivers of economic growth, generating one third of new economic growth.

“We now have 11 per cent more scaleups in the region than we did in 2017 – there is lots to feel positive about and the North East business community should look to the future with confidence.”

Great news. In fact, the North East is well on course to have 50 per cent more scaleups in 2024 than in 2017. The question now is, how do more businesses achieve scaleup status?

Growth capital is key

The finance sector has been through a lot in recent years. Banks, lenders and investors have never been under more regulatory pressure, which has a knock-on effect for business. Despite this, or perhaps because of this, many different funding streams now exist and economic growth continues to be supported and encouraged.

Backed by the European Investment Bank and the British Business Bank respectively, the North East Fund and the Northern Powerhouse Investment Fund support SMEs at any stage in their growth cycle, collectively making over £500m of funding available. However, accessing funding and securing growth finance are very different things.

Get investor ready

Whatever the size of your business, you will need a strategy to get you where you want to be, and it is never too early to think about the future.

That is one of the reasons why we have launched our corporate services team, made up of lawyers with a background in mergers and acquisitions who are now dedicated to helping businesses grow.

The team also works closely with the full range of specialists at Muckle LLP – including our banking team, the largest team of dedicated banking lawyers in the region. Taking experienced advice and structuring your business for success can be key to realising the investment you want.

Assemble the right team

A credible team can often give investors the comfort needed to invest, even if your business model still needs work. Ensuring you have a strong team (and this need not be big) of knowledgeable, experienced and trustworthy people and professional advisers is key. It shows that your business is professionally managed and possesses the skills to maximise any investment and go to the next level.

Structure for success

Making sure your business has the right legal structure and documentation in place is fundamental to achieving growth and securing investment.

Do you have the right corporate structure? Do you need to move assets? Do you need to demerge your business from the group? Deciding and delivering on these decisions might be complicated but making sure you have the right legal structure makes a dramatic difference.

And remember: investors will look at your entire business, not just the financials, so anticipate questions on all aspects of your company. Investors will expect detailed answers. Good legal housekeeping from the outset saves time and money when you want funding.

Maximise value – attract investment

The time will come when you want to make changes to your shareholder base or bring in new investors.

Whatever funding stream you take, it’s important to make sure your interests are protected, particularly when adding new shareholders. Taking shortcuts and not seeking advice on the future of your business, both from a legal and tax perspective, means you may struggle with securing bank lending or third party investment further down the line.

In short, a well organised business is a brighter business. It demonstrates that you really know your stuff and makes your company much more attractive to investors.

Muckle LLP
Jennifer Hirst and Amy Wanless lead Muckle LLP’s Corporate Services team. To learn more about creating, growing and realising value in your business, call 0191 211 7777 or email corporateservices@muckle-llp.com

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