The Secret Investor on bending and stretching the rules

And just how much due diligence resource does the British Business Bank have?

Hello Rainmakers,

The Secret Investor is back this week with a few choice insights about what’s been said inside investment committees and deal completions.

To recap, you may have read The Secret Barrister, which lifted the lid on what really goes on inside the criminal justice system, or even The Secret Footballer, who spilled the beans on the dark reality of life within our (not so) Beautiful Game.

Some may even remember Roger Cashman, who at least three Cheshire business bad boys were convinced was based on them.

We have secured the trust - and the services - of The Secret Investor. Someone who we’re re-introducing in today’s Rainmakers post. These posts are from someone who wants to get a few issues of their chest, scotch a few myths and slay a few dragons.

It is someone who genuinely - and successfully - walks amongst you. It is not a comedy sketch by a journalist, or a put up job.

The Secret Investor on bending and stretching the rules of investment…

It feels like a lot has happened since we last spoke. Once again, it seems we are in a world that is moving faster than ever at the moment. Despite the doom and gloom, there is a lot to discuss when it comes to the Northern deal market.

Private Equity is still very active, with notable deals such as Palatine’s acquisition of Lancashire-based The Fulfilment Crowd still getting done.

We also have the Rainmaker features to thank for covering one or two other hot topics this month that I’d like to wade in on as well.

The first of those is the piece on the British Business Bank (BBB) being used to invest in overseas businesses. As someone who has been in and around the venture capital world for many years as an adviser, investor, co-investor and non-executive director, I have to say this is not uncommon.

Most the regional funds which generate the big headlines around “providing £Xm to businesses in the North West / North East” have thresholds and criteria which are designed to give the manager some leeway and allow them to deploy a small portion of that fund into businesses which aren’t based in that region.

The other point worth noting here is that other government backed tax schemes such as the Enterprise Investment Scheme (EIS) and Venture Capital Trusts (VCT) are also often open to interpretation. Fund managers and advisers are well-versed in bending and stretching these rules, firstly to suit their needs, but in fairness the rules interpreted in black and white are relatively narrow, and the practical application does generally differ. These funds also have the ability to invest in overseas businesses, providing they have a strong presence and resource in the UK, so it doesn’t necessarily surprise me that the BBB funds are treated similarly.