Case Study
One of the major obstacles impeding the growth of smaller companies is getting access to funding, a prospect made even more difficult following the September 11th disaster. As the major clearing banks and venture capitalists gradually withdrew from the volatile marketplace, managing director of UK SME would be tearing out his hair in sheer frustration.
It is this very real scenario that prompted Pathway One VCT, a small company Venture Capital Trust, to float on the London Stock Exchange. The admission, which is believed to have raised £5m, will ensure that the firm continues to offer a source of funding for smaller organisations, that traditionally find it difficult to meet minimum deal or liquidity requirements.
Richard Henstock, Managing Director, takes up the story:
“In a nutshell, Pathway One offers private investors the opportunity to invest in a fund where the Board has the necessary diversity of fund management and business skills to deliver substantial tax-free returns."
He went on to add: "This is a philosophy that we will take into our next stage of development, with the company keen to invest in the pre-IPO stage and act as principal external investor supporting well managed, established organisations with strong growth potential.”
Hugh Robertson of Irwin Mitchell, led the team and introduced the original promoters of the VCT to Roland Cornish of Beaumont Cornish Limited. He commented :
“This VCT is a good example of the complex process through which promoters and their original advisers must be prepared to go. When the prospective VCT was first discussed almost a year before its launch, a suitably experienced Board of Directors had to be assembled as had the professional team. The latter was a reasonably quick process and the essential good working relationships were soon established. Assembling the Board of Directors took much longer, reflecting the need to balance relevant skills and experience with a shared vision for the business and its strategy.”
Hugh went on to add: “This is an exciting VCT whose target investments are in the ‘wealth trap’ created by the declining availability of clearing bank funds, as they become more cautious post amalgamation and the ever rising threshold set by traditional equity funders.”
Brebner Allen & Trapp were the reporting accountants and tax advisors to the proposed VCT.
David Taylor, was keen to put forward his view of the flotation: “We were attracted to the deal by the quality of the management team, and the intention of providing funds to smaller companies. A large part of our role focused on explaining to the directors the requirements of the Taxes Acts to satisfy the stringent VCT provisions, thus offering potential tax incentives to investors.”
