Life after VCTs
Private equity is all about investing, exiting – and fundraising. So what happens when your main source of capital is cut off? Ashley Broomberg explains to Marc Mullen how Mobeus Equity Partners adapted to big restrictions on VCTs.
The big rule changes for venture capital trusts (VCTs), announced in the UK’s Finance Bill in October 2015, meant such funds could no longer be used for MBOs. For Mobeus Equity Partners, which had been successfully investing VCT money to back SMEs across the UK for nearly 20 years, that meant finding a new source of capital.
This month, it has announced the first close of Mobeus Equity Partners IV, more than halfway to its £150m target. The fund will focus on small-cap buy-outs, as Mobeus always has, investing between £5m and £15m. Crucially, however, rather than using VCT money, the fund has been raised from institutions – pension funds, insurance companies and fund-of-funds – in the UK, continental Europe and the US. “We have a good, solid, broad base of investors,” says Mobeus partner Ashley Broomberg, clearly proud of this achievement.
“There is a real liquidity gap at this end of the market in the UK,” he adds. “There is a great deal of private equity in the UK, but the smaller end is relatively underserved. Big deals with big names and big advisers may get all the attention, but it is crucial to have capital and advisers in the small-cap market. The symbiotic relationship between the investors and the advisers means that getting capital flowing back into small-cap deals is very important for the corporate finance community – these are also the fuel for the larger deals of the future.”
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