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Here we feature the latest equity deal investment news in Welsh business
Early stage venture capital firm Waterspring Ventures had made its first investment – backing Newport-based Operati which has built the first Software as a Service (SaaS) estimating solution of its kind for the SME market.
Cardiff-based Waterspring Ventures is investing £280,000 into the firm. It partnered with The Development Bank of Wales on the investment round, which is investing £150k from the Technology Seed Fund, whilst the founders of Operati have invested £50,000.
David James, chief executive of Operati, said: “Our mission is to offer a completely new approach, creating the first SaaS estimating solution of its kind on the SME market. With a cloud-based end-to-end system built from the ground up specifically for bespoke products and projects, our focus is entirely on meeting customers’ needs. We are providing the industry with a much-needed all-in-one estimating and quoting solution, giving access to the latest sales intelligence technology to help SMEs boost their businesses.”
Sam Huxtable, founder and managing partner, Waterspring Ventures, said: “We established Waterspring Ventures in 2021 with the mission to address the acute shortfall of funding available for early-stage UK companies, especially businesses in Wales and the south west of England.
“As a Newport-based company operating in the high value manufacturing space, Operati really fitted the bill for our first investment. The company knows exactly what problem it needs to solve in the manufacturing industry – and it’s one that our partners, who have over 25 years of experience in the sector, know all too well. We are excited to work alongside the team and to see the business develop in the coming months.”
Matthew Wilde, investment executive at the Development Bank of Wales said: “We are incredibly pleased to have joined Waterspring in making this investment into Operati – they’re a fantastic example of a Welsh tech venture making huge, innovative strides and providing the bespoke systems and intelligence which SMEs need.
“We were confident in the expertise and potential in the team at Operati, having invested in their former company Hudman in the summer of 2016. We’re delighted to see them progress into a new venture, and were especially pleased to take advantage of the opportunity to work alongside Waterspring Ventures when backing them.”
Future Fund
The UK taxpayer has taken equity stakes in two more Welsh companies. The British Business Bank has published a list of 67 additional firms in which the Future Fund holds an equity interest, taking total equity holdings to 591 as of the end of June 2023.
The now fully investment £1.1bn fund, from the Treasury and administered by its economic regeneration bank, the British Business Bank, was launched during the pandemic to support tech firms to scale-up.
The fund has seen the taxpayer taking small minority ownership positions in firms as they opt to turn original debt into equity.
Among the new additions are Transcend Packaging, a sustainable packaging company in Ystrad Mynach which manufactures products for big names like Ribena, KFC, Starbucks, and McDonald’s. Last year, the firm secured a multi-million-pound funding boost from alternative lender Growth Lending to expand internationally.
The other latest company which the British Business Bank has an equity interest in through the Future Fund is Cardiff-based Licentia Group, which provides IP licensing and technology services. The Future Fund has previously invested in Welsh firms such as Delio, LGN Innovations, Momentum Bioscience, and Human Food and Hydro Industries.
The Future Fund issued 1,190 companies with convertible loans worth £1.14bn in total. Third-party investors were required to at least match the Future Fund’s investment.
The rate of conversions in Q1 2023/4 increased compared to the previous quarter, with 67 new additions. Similarly, the number of insolvencies continued to grow in Q1, with 18 new insolvencies added. This comparative increase in corporate activity is in part due to outstanding Future Fund loans nearing their three year maturity date as well as wider economic conditions.
Ken Cooper, managing director, venture solutions, British Business Bank said: “The Future Fund was created to ensure a flow of capital, at the height of the pandemic, to companies that would otherwise have been unable to access government support schemes, while ensuring long-term value for the UK taxpayer.
“The Future Fund is now entering the maturity phase, which signals three years since the first loans were executed.
” The comparative increase in activity this quarter is in part due to outstanding loans nearing their maturity, as we contact companies with outstanding loans in advance to set out the options available to them.”
Reel Label Solutions
The Development Bank of Wales has completed a further six figure investment in Reel Label Solutions to allow the Pontyclun-based printing specialist business to scale up production capacity to meet growing demand.
Having completed a management buy-out in May last year that was funded by a £1.2m mix of equity and debt from the Development Bank, Reel Label Solutions has achieved forecast growth in the last year. The latest funding has been used to finance a new machine o produce digital labels at an even higher quality level. The press will help the business with its growth, improve its uptime and reduce waste and energy usage in the business. It is one of just six machines in the UK.
Managing director of Reel Label Solutions, Jonathan Wright, said: “The initial support from the development bank at the time of the management buy-out put us in a position of real strength to build a long-term sustainable future.
“The bank has stayed true to its word and stood by us as we’ve grown over the last year. This latest investment is a real vote of confidence in our business, giving us the extra growth funding required to invest in the latest printing technology as we scale up production to meet growing demand.”
Sam Macalister Smith, portfolio executive with the development bank, said: “From day one, Jonathan and the team have demonstrated their commitment to maintaining their reputation for being able to deliver high quality labelling while also growing their customer base. Our continued support means that they can make additional investment in their production facilities with the latest printing press technology.”
The follow-on funding for Reel Label Solutions came from the £216m Wales Business Fund is financed by the European Regional Development Fund and the Welsh Government.
Imagitech
Swansea-based software and app development company, Imagitech, has been acquired by its employees. The firm’s 17 staff have taken over via an employee ownership trust (EOT).
Founded by Mike Bews and Gerhard Manogg in 1995 the company works with UK and international clients to develop training and revision aids, as well as management and assessment systems for driving theory tests and health and safety qualifications, alongside custom-built applications and software for other businesses too.
Imagitech was advised on its employee-owned transition by Social Business Wales, which is delivered by Cwmpas.
The two founders will be remaining with the firm for the foreseeable future. The value of the deal has not been disclosed.
Founding director Mike Bews said: “Software and app development is a very fast-moving sector and as you get older you realise that you might be getting old hat, so as the business is on an upwards trajectory, we wanted to pass it on when we were on a high.
“When looking at a trade sale we could see that some companies were thinking of breaking the company up, however, or simply taking our contracts and stripping us out, and we didn’t want that as we have built this pool of talent within Imagitech and wanted it to remain in Swansea, and in Wales.”
He added: “The thought of the company being split up really didn’t sit well with us, so after initially dismissing an EOT as we thought we were too small, we looked at it again.
“Thanks to the help and support of the team at Cwmpas, we decided it was the right option for us and our colleagues, who will now have the opportunity to benefit from the hard work they put into Imagitech, their own business.”
Sarah Owens, specialist employment ownership consultant for Social Business Wales, said: “Imagitech is such an exciting and interesting business that has carved out a niche in the training, testing and assessment market, and so it is great that these skills will remain in Wales thanks to Imagitech becoming employee owned via an EOT.
“Employee ownership fosters a collaborative and supportive culture and one that drives innovation, which is a natural fit with the culture at Imagitech. Employee ownership is not a last resort when selling a business but is a model for forward thinking business wanting to retain and recruit talent and grow their business.”
Imagitech were also advised by legal director with Acuity Law, Natalie Jones, and partner with corporate advisory firm Azets Katherine Broadhurst.
Vantastec
The UK’s leading fridge van, temperature controlled vehicle and conversion specialist, Vantastec, has become majority employee-owned as it focuses on further expansion.
Funding for the employee acquisition of the Ystrad Mynach-based was provided by the Development Bank of Wales with 38 employees forming an employee ownership trust (EOT) that has taken a 51% stake in the business that was first set-up by directors Colin Smith and Gareth Edwards in 2006. Vantastec was advised by GS Verde. The value of the deal has not been disclosed.
Operating throughout the UK, Vantastec specialise in refrigerated van conversions but is expanding rapidly with a range of catering vans including bespoke vehicles for meals on wheels. As the only provider in Wales, Vantastec works with all major manufacturers and is increasingly selling electric vehicles to a client base that includes both the private and public sectors.
Director Mr Edwards said: “Colin and I saw a gap in the market and have since developed Vantastec to become the UK’s leading provider of temperature controlled vehicles. We pride ourselves on our quality, building vans that stand the test of time.
“Our team has been central to our success so we were keen to ensure that they have the opportunity to share in our future growth. The employee ownership Trust model is a great way to retain staff, develop skills and ensure accountability for quality as we grow. It was the Development Bank that helped us in the early days of setting up the business and it is now thanks to their support that we’re able to look to the future knowing that we’re all a part of the Vantastec family.”
Senior investment executive Ruby Harcombe and investment executive Emily Jones acted for the Development Bank of Wales on the deal.
Ms Harcombe said: “Our funding for this Employee Ownership Trust gives all employees a significant and meaningful stake in the business that they have helped to grow over the last 16 years.
Ms Jones added:“It’s a great step forward for the directors and staff alike, underpinning greater employee engagement and keeping jobs in Wales in the longer-term should the directors choose to exit at a later date.”
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