Regional offices: a real asset for GPs?

A majority of UK-based GPs are planning to be active outside of London in the coming months, according to Grant Thornton's latest Private Equity Barometer - which surveys in excess of 100 private equity executives in the UK. The South is deemed particularly attractive, with 77% of respondents expecting to ramp up their activity in the region. But the North and the Midlands are also on managers' radars, with 73% and 70% of them looking at those regions respectively.

Given the UK's current lackluster economic environment, it does make sense for GPs to suss out the best investment opportunities regardless of their locations. That said, it would seem that few of them are willing to take a further step and establish a local presence. So while the South (ex London) is a major area of focus, 80% of the GPs surveyed do not have any regional offices there - and a mere 1% of them plan to open one.

"More than half our respondents expect to be active in regions outside of London while very few are prepared to open offices there," says Mo Merali, head of private equity at Grant Thornton UK. "Having people on the ground would dramatically improve their chances of generating proprietary dealflow outside London. Just being in a region means that you pick up local intelligence on interesting companies."

Eyes on the ground
The advantages of operating regional branches have long been apparent to some players. LDC is a prime example, having 11 offices throughout the UK in cities like Aberdeen, Leeds, Bristol and London. Perhaps unsurprisingly, the firm tops unquote's league table for this year's UK buyout activity with eight deals worth a combined £449.7m.

LDC investment director Jonathan Caswell confirms that regional offices are a strong asset when it comes to sourcing proprietary deals: "The regional network is a key strength for LDC, and it is critical to the way we do business. In terms of deal origination, it enables us to identify strong companies in local markets, get close to those businesses, meet the individuals and understand what is important to them - often before the actual processes start."

The benefits are also reaped further down the line, argues Caswell: "When it comes to working with a portfolio company, being close to where the business is based means that you can be on call and react quickly if needed, rather than doing everything by phone and just going there for board meetings."

Reaching out
But some GPs are adamant that being exclusively based in London doesn't prevent them from sourcing good deals all over Britain: "Having regional offices can of course be an asset. But I don't think it's the only way to build an interesting national portfolio, and not having a regional presence has not held us back from investing outside London," says Lyceum Capital partner Dan Adler. Indeed the firm, active since 1999, has made the vast majority of its investments outside the capital.

While effective when looking at Lyceum's portfolio, this approach does involve a lot of in-depth research into local markets as well as frequent trips around the country. "We have a methodical approach to researching investment opportunities in the UK's major cities and their vicinity," details Adler. "We allocate all the key geographies between team members and we make sure we have somebody in every key city on a monthly basis, ready to meet local businesses and intermediaries."

Adler also points out that the centralised approach can have its upsides, sometimes lost when operating from a scattered network of offices: "We function well as a team because we have a very collegiate way of sharing knowledge. Having all of the people in one place works really for us in that regard. In addition, many of our portfolio companies throughout the country view our office as their base while in London - which creates a nice community feel with the team at Lyceum but also with other businesses in our portfolio."

Regardless of their respective stances when it comes to regional focus, UK-based GPs now have to cope with a fresh contender: the Business Growth Fund (BGF), which is in the process of establishing a local presence around the country. Established PE houses seem to be aware of the threat, as 37% of the barometer's respondents expect to see increased competition from the government-backed newcomer going forward.

• Tweet  
• Facebook  
• LinkedIn  
• Google plus  
• Send to  

• Topics
• UK / Ireland
• Southern Europe
• Benelux
• Nordics
• DACH
• France
• Industry
• United Kingdom
• LDC
• Grant Thornton
• Horizon Capital (formerly Lyceum Capital)