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Draper Esprit acquires Elderstreet

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UK venture capital firm Draper Esprit has taken a 30.77% stake in Elderstreet Holdings, the holding company of Elderstreet Investments, which is listed on the London Stock Exchange.

The deal includes an option to acquire the balance of Eldestreet's shares "in due course," Draper Esprit said in a statement. Elderstreet manages Elderstreet Venture Capital Trust (VCT), which focuses on the software and computer services sectors and currently has more than £25m in assets under management.

The initial offer includes the issue of 73,667 new ordinary shares worth 1 pence apiece and is subject to an 18-month lock-in period. Trading is expected to start on 29 November 2016. Including the newly issued shares, the company's share capital will amount to over 40.7 million.

Following the acquisition, Simon Cook, CEO of Draper Esprit, will be joining Elderstreet's board and investment committee.

The acquisition will enable Draper Esprit to offer its investors a wider access to growth technology companies through a range of different vehicle types, the GP said in statement.

As for Elderstreet, the co-investment agreement now binding both firms is hoped to bring "enhanced dealflow and the ability to invest [...] in larger, more established and fast-growing businesses," company chairperson Michael Jackson said.

The merger comes in response to regulatory changes to the UK's VCT rules brought about over the past year. The new regulations, introduced in order to comply with European state aid rules, mean VCT and EIS funds can no longer take ownership stakes, are limited to investing a maximum of £12m per asset – £20m where the business is judged to be "knowledge-intensive" – and can only invest in companies under a certain age.

Many VCT managers have raised institutional funds in response to the changes, including YFM Equity Partners and Mobeus Equity Partners. Meanwhile, Albion Ventures has acquired Close Brothers Group's UK quoted equities fund manager OLIM Investment Managers, which focuses on charities, trusts and private clients.