Buying a business / Investing in an SME - where do I look? Part 2
I have blogged in the past on the methods used to identify suitable SME businesses. I spoke last week about ways of identifying acquisition targets for companies, and now I will focus my attention on individuals who would prefer to invest in – rather than buy – a business. These individuals are generally referred to as ‘Business Angels’, a more sanguine term than ‘Dragons’. The general approach taken by such investors is somewhere between the two.
Investment in SME businesses
There are two main options for an investor – do you invest in a syndicated / pooled fund, or do you go it alone?
A fund will make a series of regular investments, co-ordinating Due Diligence and other issues. The distinct advantage is that costs are pooled, and the syndicate will have well connected and experienced management. The latter carries more risks, but for the canny entrepreneur it can also generate greater rewards. The investor has increased autonomy, and can directly influence the day to day running of an investee company.
* Syndicated investment opportunities
There are several syndicates in the UK. The main private investment networks I am aware of are :
- Beer & Partners - www.investmentforgrowth.co.uk/opportunities.php. Network of around 1,700 private investors.
- Hot Bed –Slightly different model – see www.hotbed.uk.com
- CSS partners www.csspartners.co.uk/index.html Advisory firm – will align their interests with yours
There are many others – just enter something like ‘private investment network’ in Google or look at the British Business Angels Association www.bbaa.org.uk which covers some of the networks.
* Individual investments
The internet also provides many opportunities for private investors looking to go it alone. This takes a lot more effort by the investor, and as such opportunities are less ‘polished’ than those presented by the private networks mentioned above.
Sites such as www.angelnews.co.uk any others through Google are a good starting point.
Before taking any investment decision, is important to take the appropriate advice, by an individual or body regulated by the FSA. It is also important that sufficient ‘Due Diligence’ is performed on prospective investments to ensure that representations made are factually correct.
Date: 27th February, 2009
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