FIN(4)FW056a
Finance Wales Inquiry
Response from PBD Consulting
PBD is a leading
Commercial Due Diligence firm that specialises in small to mid
market deals typically of less than £10 million.
Our clients include Finance Wales, UK and US private equity firms,
FTSE-250 firms and High Net Worth Investors.
- We echo the praise that is
reference in Part 1 on pages 26 and 27 that they are very
experienced and skilled in their work.
- Also in comparison to
other Investors we work with their focus as we work with them on
the Due Diligence of a venture is very much on “how do we
make this specific venture work” rather than the
traditional corporate approach of “how do we make this
deal work for us”. Specifically they
invest significant time to work through the challenges that would
make other investors walk away.
- Reading the report we were
impressed by the wide span of responsibilities of Finance
Wales. As its’ sponsoring body, the Welsh
Assembly can clearly support the organisation by working with
Finance Wales to clarify where it could best focus its limited
resources
- We were disappointed to
read that some people “question whether an organisation
that is wholly owned by the Welsh Government is undertaking tasks
outside of Wales”. Surely this is a testament to
the great capabilities that the Welsh Government have been wise to
create in Finance Wales. Their track record of creating
innovation, growth and economic impact and working closely with
businesses has enabled them to be seen as the best in the UK.
Hopefully this is seen as a source of pride.
Additionally it should be obvious that this type of success is very
powerful in helping Finance Wales recruit the talent to support the
mission it has been set by the Welsh Government.
- We were also surprised by
a number of the other discussion points and
recommendations
-
- “Given this [Finance
Wales has not utilised the full range of financial instruments
available under EC regulations]the Minister may have a view as to
whether Finance Wales is fit for purpose or whether the
organisation needs to be taken in-house into the Welsh Government
so that it can focus on its economic development role for the Welsh
economy” (Part 2: page 3)
i. It is surprising and disappointing that the
author choses to jump straight to questioning whether the
organisation is “fit for purpose” when he sees some
potential improvements in how Finance Wales could
work.
ii. It is even more surprising that the next
remedy is to take Finance Wales
“in-house”. This again feels like a
distracting “reorganisation of the deck chairs” and has
the potential to stifle the leading capabilities that are both
delivering for Wales, and admired throughout the UK
-
- “A case can be made
for spinning off the equity function from the debt function for
Finance Wales”
Being able to offer debt or equity into a deal as appropriate is an
important tool for any investor. Again this
suggestion feels more like “reorganising the deck
chairs” than addressing a specific problem
- We were curious to learn
about the potential “Welsh market for their (Business Growth
Fund) funding is around 85 mid-sized growth firms” [Part 2,
page 31]. As the Business Growth Fund website describes that
they have invest “183
million invested in 36 growing companies across the
UK”. Hence it is hard to see why the potential is
more than twice the size of the whole fund. The source
for this analysis is not foot noted
- We do not
believe that the report provides compelling evidence that Finance
Wales is “not fit for purpose” to “support
economic development in Wales and the SME sector.
To the contrary the report offers significant evidence it is doing
this successfully, though clearly there are areas where it could
improve or increase its focus.
- The report highlights a
well discussed dynamic that there is clearly a funding gap across
the UK including Wales. It aims to size
this challenge by using national and regional
statistics. It also discuss potential remedies
but offers limited insight into specific credible
remedies.
- For examples we could see
Private Angel investors would appreciate having a government
supported fund [Part 2, page 27] to co-invest (presumably as this
could have the potential to increase their investment returns or
lower their risk). It is not clear what will be
effective solutions to this funding gap
- Therefore it feels bold to
go through the disruption of creating a “Welsh Development
Bank” until it is clear what were are the levers it needs to
pull to address the funding challenge.
Any questions, please feel
free to contact me
Sincerely
Lisa Whelan
Lisa Whelan |
Director | PBD Consulting