AIB, Foresight launch SME Impact Fund with EUR 75m target

The fund is intended to back Ireland and Northern Ireland-based SMEs that are supporting Ireland's transition towards a low-carbon economy, according to a statement.

The vehicle has a EUR 100m hard-cap and is expected to hold a final close shortly.

A&L Goodbody is providing legal advice on the fund, while KPMG is providing tax advisory services.

AIB has 2.8 million customers and aims to have green and transition lending accounting for 70% of its new lending by 2030, according to a statement. The firm said in the same statement that its partnership with Foresight is in part due to the GP's ESG focus and its importance for small companies.

The partnership will see Foresight open a new office in Dublin, according to a statement. Livingston told Unquote that the GP is actively recruiting in Dublin, although the eventual size of the office will depend on the fund size.

Foresight manages a range of SME-focused buyout, growth and infrastructure funds, including its Scottish Growth Fund and East of England strategies. The firm (Foresight Group Holdings Limited) is listed on the main market of the London Stock Exchange. It has 12 offices in six countries and has GBP 8.7bn in AUM.

"Alongside our core SME private equity experience, we'll be borrowing from our infrastructure and venture and technology expertise to get the best for the fund," Livingston told Unquote. "And we try to use all of our offices as a point of local access. We have infrastructure funds with Ireland capabilities, which will become more active there following this mandate, and we have a director who is already largely based in Dublin already. Some of our existing PE and venture mandates can also invest in Ireland, so we think there will be more activity."

The fund's impact angle means that it will be setting KPIs for the companies it invests in, Livingston said. "The fund is an Article 8 fund, which we chose as the Article 9 taxonomy is still being written so it was hard to see it in full," he said. "Part of the fund's carry is also driven by the achievement of impact metrics."

Investors
AIB Foresight SME Impact Fund has received a EUR 30m commitment from AIB, according to a statement. Irish corporates and institutional investors with an Irish or European focus are also expected to join the LP base as the fundraise continues, Livingston said.

Investments
The fund will generally deploy equity tickets of EUR 2m-5m, although it can make both larger and smaller investments. The vehicle will generally invest in established companies with profit of at least EUR 1m and typical EVs of EUR 5m-15m, targeting around 15 businesses.

The vehicle will make buyout and growth capital deals but has the option to make a select number of venture deals, too, according to Livingston.

"Companies we are looking at now include a wind turbine maintenance firm that is looking to expand and to be bought out from its parent company," said Livingston of the strategy's current deal pipeline. "On the VC side, we are looking at a computer chip designer for the smart meter industry. Ultimately, we will look at profitable smaller companies that might need a bit of shareholder restructuring, such as buying out a co-founder or an angel shareholder."

The fund will invest aacross a broad range of sectors, according to Livingston. "Our focus is quite broad as all SMEs need to move on their journey to be more sustainable and to become positive corporate entities, but not all of them are at this stage of being forward thinking yet," Livingston said. "Some examples we will look at include industrials services and energy production, as well as building products, since construction is a huge part of CO2 generation. Technology solutions can also play a massive part in energy reduction. We are open to consumer businesses such as alternative meats, but only at sensible valuations."

Asked about the fund's deal sourcing process, Livingston told Unquote: "We are sourcing deals through advisory network and direct origination. Nothing can replace having feet on the ground, so our focus for the next few months will be getting a good team up and running in Dublin."

Although the fund is at an early stage and expects to make its first deals in Q3 2022, the GP has considered potential exit options for the types of businesses that it will target. "There seems to be quite an active segment of the PE mid-market with an impact focus, so I would not be surprised if a number of the companies we invest in might go to these mid-market players, as has been the case with existing investments in other strategies," Livingston told Unquote. "US trade players are also still very hungry for technology. It's hard to say, but I don't see impact-focused mid-market PE going anywhere, and there will be plenty of trade appetite in the long term."

PE-backed impact consultancies could be a further potential buyer, Livingston said. "There should also be some significant European rollup plays – some sponsors are looking at consultancies that are advising people on how to drive positive impact, so an exit of some companies to these could be a good possibility."

People
Foresight Group – James Livingston (partner).
AIB – Cathy Bryce (managing director of capital markets).

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

• Topics
• Buyout
• UK / Ireland
• Technology
• Consumer
• Industrials
• Support services
• Exclusive
• United Kingdom
• Ireland
• Foresight Group