West Coast Capital established with £200m fund pool

Serial entrepreneur Tom Hunter and former PricewaterhouseCoopers corporate finance advisor Jim McMahon have established a £200m vehicle, West Coast Capital, in order to invest in the retail, property, leisure/branding and technology sectors in Scotland.

Tom Hunter, described by the official sources as ‘a passionate supporter of entrepreneurship’, founded Sports Division, which he later exited through a £290m trade sale to JJB Sports in 1998. Since selling Sports Division, he has invested £20m in high growth businesses through his investment vehicle TBH Trading. The majority of these businesses will be rolled over into the new vehicle. Jim McMahon has spent the past sixteen years with PricewaterhouseCoopers as a tax partner, and has for the last five years headed up a team that advises UK entrepreneurs and their businesses.

Commenting on the firm’s sector focus, McMahon remarks that the partners will consider a range of opportunities. In the property sector, for example, the partners will look at secondary city sites in order to re-develop and re-classify usage. Furthermore, the partners are interested in healthcare-related investment as they see great opportunities in this growing market. According to official sources the firm will adopt an investment strategy akin to that employed by West Coast US firms. Evidence of this can be seen in the organisational structure of the firm, as there is a 1:1 ratio of investment manager to PA, which is a little reminiscent of the structure employed by Benchmark Capital.

However, as West Coast Capital is funded by Hunter and McMahon, without external commitments, the fund is structurally very different from a traditional vehicle. As the firm is not driven by the need to satisfy institutional investors McMahon remarks that the partners will have few restraints on the use of the money and that there will be great flexibility in the application of the fund.

Given that the firm will possess limited human resources, participation in larger deals will be an essential part of the partners’ strategy and so investments are likely to be made in conjunction with both VCs and angel investors in deals with a value of £5m or more. As part of a syndicate, the firm is likely to invest a minimum of £250,000 up to an absolute maximum of £50m. The equity stake secured in return for its investments would vary according to all the circumstances surrounding the deal, although McMahon comments that for £50m a ‘significant stake would be secured’. In relation to exit strategy, McMahon goes on to comment: ‘there will be more trade sales than floats, although dependant on market conditions, flotations are not ruled out’. Additionally, secondary purchases would also be considered, although again, this would be dependent on all the circumstances surrounding the deal.

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• UK / Ireland
• Consumer
• Healthcare