Eurobridge advises investors seeking good returns and manageable risks to look at the Low Countries
Finance is the art of allocating scarce resources to infinite opportunities. So the problem facing Eurobridge Business Exchange Limited (EBEL) is not sourcing possible transactions. The real challenge is to attract investment capital to seize the best opportunities the company is seeing.
EBEL is seeking family offices, high net worth individuals, private equity funds and institutional investors - pension funds and insurance companies - interested in backing well-established, high quality businesses seeking capital to expand. Interestingly, almost all of the opportunities EBEL is pursuing are in the Low Countries.
The reason for the geographic focus is less odd that it looks at first sight. The capital markets in Belgium, Luxembourg and the Netherlands are shallower and less aggressive than their equivalent in the United Kingdom. The Netherlands in particular also has a powerful entrepreneurial culture, especially in small and medium sized enterprises (SMEs), many of which are still privately owned and looking to expand locally, regionally and globally.
A challenge these businesses face is finding the right-sized investor. Once the investment required clears €10-15 million, the initial investors tend to lack the requisite resources, while the banks are apt to demand onerous or unworkable terms. Yet the sum is still too small for the major private equity funds and trade buyers.
"We do not see anybody servicing this part of the market," says David Bilbe, managing director of EBEL. "What we are doing is matching the supply to the demand. Our real skill is raising capital for good, investable companies that are finding it hard to raise the capital they need to grow their businesses. Our job is to ensure that the investment plans and growth strategies of our clients cannot be ripped apart by investors."
The funding gap for SMEs is not a new opportunity, but it still takes experience and credibility to profit from bridging it. David Bilbe first spotted the opportunity when he was working for a Dutch family office that was looking to invest in SMEs in the Netherlands. It helped that his brother Roy, who has worked in the petrochemicals industry in the Netherlands for 25 years, was interested to source deals and investors locally. He also became the first investor in the fund.
EBEL now has five investor-directors based in the Netherlands, and four from the United Kingdom. Their backgrounds are suitably varied in terms of industries (data and technology, banking, real estate, pharmaceuticals, energy, agriculture, healthcare, leisure and recruitment) and roles (heads of operations, chief executives, directors of strategy and entrepreneurs). "You would be hard pushed to find a sector or role where one of us does not have relevant experience," says David Bilbe.
Bilbe himself is a former banker at Chase Manhattan (where he ran the financial markets group), Chemical Bank (where he ran investor services), and State Street (where he was managing director of the trust company in EMEA). He also had spells at the London Stock Exchange (where he was responsible for secondary market trading and information services) and Thomson, prior to the merger with Reuters.
"It is intellectually fascinating to be working with companies that are looking to get things done, create something new and employ people," he explains. "This is not high finance, in which we are creating and trading derivatives of derivatives, or creating something complicated out of nothing, but helping firms build and grow real businesses by getting investors comfortable with making the investments. On the other side, we want to bring good risk-return projects to investors in the United Kingdom. If we add value, we get paid. If we do not, we do not get paid."
EBEL is currently looking at a €20 million investment in a leisure company looking to invest in the Netherlands and Germany. The investors are based in London. United Kingdom investors are also the early backers of a $100 million investment in a government-backed real estate and leisure development in the Caribbean. A third opportunity is to inject up to €35 million in working and refinancing capital for a data mining company.
"We have 20 opportunities we are exploring at the moment, and our pipeline of deals is around €200 million already, and growing rapidly," says Bilbe. "Our steady state is probably to be looking at €350-400 million of prospects at any one time. We think that is manageable. If we over-commit, it will be hard to maintain quality, and we will end up damaging our reputation."
That said, EBEL is looking to recruit associates not just to work on deals, but to bring transactions and investors. The structure of the business will nevertheless remain relatively loose. "We have all worked in the corporate world, and we know who stodgy it can be," explains Bilbe. "We want to be unbureaucratic, and candid in terms of telling businesses what they need to do to attract investment, but also easy people for them to work with. We do not want to be patronising. We do not want anything to be beneath our consideration. If a company needs new management as well as new finance, we will find that too."
What EBEL needs most of all now is investors. The company web site - www.eurobridgebusiness.com - is being adapted to open some of its opportunities to a private network of accredited investors. "We can be contacted, and we want to be contacted," says Bilbe. "If you want to access quality investment opportunities with good returns, contact us. Nobody else is looking at this area at the market. If you are not investing in it, you are missing out."