New Equity Model for Growing businesses

Australian Business Growth Fund (“ABGF”)

What is it?

The ABGF is an independent initiative designed to provide equity support to growing Australian owned trading business.

Established in 2020, the fund comprises seed investment of $540M from the major four banks plus Macquarie and HSBC.

Purpose

In essence, the fund provides a bridge between senior debt and late stage venture capital. It is ideal for business that need expansion capital beyond responsible debt ceilings, though want support that is not overly intrusive or expensive to access.

The context is to also provide support for entrepreneurial and innovation activity in Australia and it follows successful models from overseas.

Eligible Businesses

The fund parameters for investment are relatively broad and they are largely industry agnostic, with key criteria that includes:

• Operating Revenue between $2 - $100 Million
• Australian headquarters
• Have a demonstrable unique proposition and growth potential
• Must be established, not start-up enterprise

How it Works?

The ABGF operates in a minority equity capacity, key criteria includes:

• Equity stake of up to 49% (lower thresholds generally preferred)
• Initial investment of between $5 - $15 Million
• A position on the Board of Directors

The focus is on supporting active trading businesses, and excludes straight asset investment or speculative ventures (e.g. real estate, mining etc).

How much does it “Cost”?

For the ownership, there is a very material cost in terms of relinquishing a portion of equity in a successful business. Most owners will not enter into this position lightly and consider the opportunity cost of continuing on with other sources of capital.

This said, there are some attractive potential benefits that include:

• De-risking from the rising cost of debt and increasing bank covenants
• An expectation of a Return on Equity that sits at a significant discount to other external investment options

Since launch in 2020, there have been a handful of transactions completed and the fund has appetite for more opportunities. Additional data on the workings of the ABGF can be found at abgf.com.au

More Information?

The team at MCP Financial Services deals with credit providers with the experience to support ABGF connections.

For a confidential discussion around the applicability of your business to participate please contact us:

P – (03) 9620 2001
E – mcpnews@mcpgroup.com.au