30/06/2008
Niche venture capital provider B.P. Marsh & Partners, which provides finance and follow-on funding to emerging financial services concerns, was set up back in 1990 with funding of £2.5 million. Since then, it has delivered an annual compound growth rate of 15.2 per cent in net asset value (NAV), excluding £10.1 million raised at the time of its IPO on AIM in 2006. Despite turmoil in financial services markets, strong asset growth looks set to continue, based on management’s experience and an astute investment strategy.
Crudely put, B.P. Marsh is basically a portfolio of equity investments and loans, investing in early-stage businesses based in the UK, Europe, North America and elsewhere. However, this characterisation ignores the added value its experienced management team can bring to portfolio companies.
B.P. Marsh is the brainchild of founder, 58.5 per cent shareholder and chairman Brian Marsh OBE, who started his career in insurance broking and underwriting in the Lloyd’s market more than 40 years ago and boasts years of experience in building, buying and selling financial services concerns.
The company invests amounts of up to £2.5 million in ‘people businesses with good management’, taking minority positions (and insisting on minority protections) of between 15 and 40 per cent. Adding value through the provision of follow-on funding, boardroom representation and strategic advice, B.P. Marsh is in no hurry for an exit. Rather, it prefers flexibility, working alongside management in order to find a mutually beneficial exit route.
Results for the year to January were very encouraging, with NAV increasing by 12.3 per cent to £45.6 million (equating to 156p per share) despite turbulent times for financial services, with portfolio companies making steady progress. Profit after tax grew to £4.8 million (2007: £4.5 million), buoyed by £5.2 million of investment gains (realised and unrealised), while underlying profit before tax, stripping out unrealised gains, rose to £500,000 (2007: £200,000) as a result of gains on investment disposals.
Investment highlights included the acquisition of 25 per cent of City-based ‘accelerated’ insurance premium collection service JMD for £600,000 (and the provision of a further £250,000 in loans). B.P. Marsh also bought a 22.5 per cent interest in established IFA LEBC for £2.07 million. A key event was the participation in a £5.5 million rights issue for Hyperion Insurance (B.P. Marsh contributed £1.55 million to maintain its 27.9 per cent share), as well as further funding, in the form of loans and equity for Summa, a consolidator of brokerages in Spain, which increased the group’s stake in Summa, also backed by an astute Spanish private investor, to 48.6 per cent (from 35 per cent).
B.P. Marsh remains busy, having acquired a 35 per cent slice of ‘business sales platform’ Amberglobe and 25 per cent of Trillium, an IFA serving the European media and information sector, since the year-end. Significantly, the first disposal as an AIM business has completed, with B.P. Marsh selling its 18.22 per cent equity in asset manager Principal to Sanlam Group for £7.25 million, a transaction immediately bringing £5.97 million of cash into the coffers.
Furthermore, private equity giant 3i recently invested £50 million in and agreed to provide follow-on funding to Hyperion, in return for a 29.7 per cent stake, valuing the insurance group at £120 million. B.P. Marsh’s stake reduced to 21.4 per cent, but with this growing business now backed by a true investment powerhouse, substantial asset value accretion looks likely.
While some investors may baulk at backing any business investing in financial services, given the fall-out from the credit crunch, B.P. Marsh represents a special case. Its portfolio has, thus far, escaped the adverse effects of the US sub-prime crisis and the downturn in the UK and US economies. As Marsh eloquently puts it, ‘We’re in the path of the credit crunch tornado, but everything is hammered down properly and the first winds haven’t hurt us yet.’
Moreover, restricted credit should throw up favourable investment opportunities for the company, which has funds to invest, is filling an equity gap at the smaller end of its chosen sector and trades at an unwarranted discount to asset value.
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| AIM | £19.77m |
67.50p
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-5.00p
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