Private equity-backed companies have shown growth rates significantly faster than other companies, Malta Enterprise chairman Alan Camilleri told an equity finance seminar last week.
The seminar was targeted at potential investors interested in privately financing businesses, as well as businesses who are at a stage where they can leap on a potentially successful project but lack the funds to bring it to life.
Mr Camilleri said the financing needs of most local enterprises are met by personal funding sources, bank loans or overdrafts. Malta Enterprise also offers various forms of financial assistance which may include soft loans, interest rate subsidies or loan guarantees and tax credits. The recently launched European Regional Development Funds schemes which will allocate €20 million to selected local SMEs over the next five years were also mentioned.
However, there are local companies for which this funding may not be enough to sustain ambitious growth plans and internationalisation efforts. Private equity is medium- to long-term finance provided in return for an equity stake in potentially high growth unquoted companies. Private equity firms and business 'angels' continue to look for investment opportunities where a business has a proven potential for realistic growth in an expanding market, backed by a well-researched and documented business plan and led by an experienced management team.
Private equity is invested in exchange for a stake in a company as shareholding. The investor's returns would be dependent on the business's growth and profitability.
Provided there is a real growth potential, the private equity industry may be interested in any stage of a company from start-up to buy-out.
Private equity backed companies have shown growth rates significantly faster than other companies. This is made possible by the provision of a combination of capital and experienced personal input from the private equity executives, which sets equity funding apart from other forms of finance. The programme Malta Enterprise is organising has the overall objective of assisting local companies to access equity finance.
Business angels and equity finance firms do not invest unless they are fully convinced the company has the right product with a growing market and a competent management team capable of realizing the company's expansions plans.
Mr Camilleri pointed out that it will be Malta Enterprise's task to help local SMEs attract investors, and the first step is by launching the Equity Financing Programme to support local businesses with the development of their business proposals and to help with their initial investor search.
Danish company InvestorNet has been selected to help Malta Enterprise with the programme implementation. CEO Uffe Bundgaard-Jorgensen continues to be responsible for advisory services for EU entrepreneurs and companies seeking equity financing.