Lower Risk Investment Strategy
The VCT Boards seek to reduce risk for investors in a number of ways. The Matrix investment approach involves a conservative strategy designed to reduce the risks of investing in smaller companies, whilst still offering the opportunity for attractive upside returns. This is achieved through:
• Size of the company
As one of the larger VCT managers advising VCTs, Matrix is able to co-invest VCT capital, making investments of up to £6 million. This enables Matrix to invest in lower risk larger transactions and larger more mature companies than many other VCTs.
• Type of Company
All target companies must be established, profitable (at the EBITA level) and cash generative at the point of investment. These target companies generally represent less risky investments than early stage or unprofitable companies. The focus is on privately owned businesses. Investments in AIM-Listed companies currently represent less than 2.6% by value of the total assets of the Companies, of which five of the six quoted investments were originally made by former managers of the Companies.
• Type of transaction
Matrix has a particular focus on and expertise in backing MBO transactions that are considered lower risk because of the Companies’ alignment of interest with target company MBO teams who:
have a unique and privileged understanding of the financial opportunities and risks within their businesses;
are prepared to put at risk significant personal capital to purchase shares at the same time as the Companies; and
are seeking to buy their business alongside the Companies on the most attractive terms with the mutual objective of realising maximum value through selling the business in the medium term.
• Structure of the transaction
Investing in MBOs of profitable companies enables Matrix to structure investments to reduce the level of risk through downside protection. This is achieved by each VCT investment being structured to maximise the amount which may be invested as loan stock which has income and capital rights in priority over all equity and also generates an income yield. Furthermore, upside return potential is also secured by an equity shareholding that holds the potential for being profitably realised through an eventual trade sale of the target company.
Stability of the Matrix Team
Matrix has one of the largest and most experienced teams focused on VCT investment. The VCT Boards believe that there are four key features that make Matrix one of the leading UK VCT investment teams:
• Experience – the investment team of nine private equity investment managers includes six partners who each have greater than 10 years experience in both UK private equity and VCT investment;
• Stability – the four partners who originally formed the team have worked and invested together for 13 years;
• Commitment – as owners of their fund management business and with their entire focus on VCTs, the team has a clear, vested and aligned interest with Shareholders in making VCT investments a success; and
• VCT realisations track record – the team has a strong and consistent record of delivering profitable cash on cash realisations, primarily from trade sales.
The Matrix team and businesses in the Companies’ portfolios have also won numerous investment industry awards, including:
• 2011 – Insider Dealmakers – South East Private Equity House of the Year
• 2010 – BVCA Portfolio Company Management Awards – Winner of International Impact Management Team of the Year for DiGiCo Europe Limited
• 2010 – M&A awards – Small Deal of the Year for Tottel Publishing
• 2009 – BVCA awards – Woman CEO of the Year for PastaKing
• 2008 – Unquote awards – VCT Manager of the Year
• 2006 – Investor Allstars awards – VCT Manager of the Year
• 2005 – Investor Allstars awards – VCT Manager of the Year
