Growth Fund - Loans & Equity Case Study

Finance Yorkshire Equity Team Investment Director Andrew Burton with Peratech Chief Financial and Operations Officer Doug Balderston

The Company

Innovative technology business Peratech, which has its headquarters in Brompton on Swale near Richmond, is the world leader in Quantum Tunnelling Composite technology, which was invented by David Lussey, Chief Technical Officer.

QTC™ Materials are a unique class of materials developed to advance the capability of switching and sensing systems and are already widely used in robotics, defence and telecommunications.

Peratech recently won in the Innovation category at the Queen’s Awards for Enterprise for its QTC™ Technology. It also took the title of British Venture Capital Association (BVCA) Regional Management team of the year award 2012 for the north east.

The Challenge

Chief Financial and Operations Officer Doug Balderston said: “We’re in a strong position in that we don’t need the money now as we’re capable of organic growth through the customers and contracts we currently have.

“But the technology sector grows very fast so leaving it to organic growth alone puts us at a disadvantage because it risks being left behind by competitors. At the moment, we don’t have any competitors, but that’s not to say we won’t have in the future.”

The Solution

A £1.2 million investment from Finance Yorkshire’s Equity Linked Fund will be used to expand the company’s North Yorkshire operations, build new laboratory facilities and secure new contracts.

It was the flexibility of Finance Yorkshire’s portfolio of funding options that helped agree the £1.2 million mezzanine deal – a loan investment deal with an equity-linked exit bonus which suited the company’s current requirements and future expectations.

The Investment Rationale

Doug said: “We have used equity or loan investments in the past, but the mezzanine investment deal helps take into account where we will be in the next three to five years and was therefore a better fit for our business model and strategy than perhaps a straightforward equity investment may have been.”

Finance Yorkshire Investment Director Ash Chopra said: “The funding provided by Finance Yorkshire demonstrates the breadth of our offering. Peratech is a profitable, established business and has an excellent management team. As such a mezzanine funding option was appropriate for the business rather than a straight equity deal.”

Future Expectations

Said Doug: “In the next three to five years, we expect to grow our customer base and increase the value of the business to in excess of £100m.

“We already have a number of significant contracts around the world including Japan and the U.S which are being managed by our in-house team very effectively. However, we have a desire to grow further and attract more contracts and to do that we need to expand our operations and invest in resources, staff and research and development.

“The Finance Yorkshire investment will help us take on more staff and expand further into our office space. We are also building an advanced laboratory to facilitate enhanced production.”

Note: this case study is from Finance Yorkshire’s previous fund. Read more about Finance Yorkshire

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