The inaugural CEO of the Australian Business Growth Fund has outlined further details of the newly incorporated fund.
The $540-million government-backed Australian Business Growth Fund (BGF) was first announced last year in a bid to help Australian businesses apply for long-term equity capital investments between $5 million and $15 million.
Launched by Treasury at the Australian Chamber of Commerce and Industry in November 2019, the fund has seen ANZ, CBA, NAB and Westpac all committing $100 million – matching the federal government’s pledge.
HSBC and Macquarie have also contributed $20 million to the fund, which aims to “significantly enhance the ability of SMEs to access funding, filling a gap in the market that is preventing them from reaching their full potential”, according to the Treasury.
It is hoped that the fund could grow to $1 billion as it matures.
The BGF has now been officially incorporated, with the shareholders agreement now signed by all seven shareholders and the first CEO being appointed.
Fund expected to start investing in 2021
Anthony Healy, the former chief customer officer, business and private banking (who stepped down earlier this year), has been appointed as the inaugural chief executive officer of the BGF.
This follows the appointment of the chairman of the BGF, Will Hodgman, former Premier of Tasmania, earlier this year.
Speaking to The Adviser, Mr Healy outlined that while the shareholders agreement has been signed and the first tranche of capital has been placed into the fund, work will now start on hiring the team before the fund starts investing next year.
Mr Healy told The Adviser: “We have marked the signing of the shareholders agreement, which brings into incorporation the fund, and we are now operational, at least as an entity.
“As the CEO, I now have to go out and hire the senior team, the investment team, the analysts – all those who will work with all the SMEs on the ground when we make investments. We’re now doing that and setting up all the tech technology requirements, the premises etc, as well as building a talent network external to the fund (entrepreneurs, ex-business owners, consultants etc), who can bring their expertise in when we invest in that business – and maybe even work in that business over time.”
He added: “I would say that we will be ready to start investing in the first quarter of 2021.”
Mr Healy outlined that the fund, which will operate independently of government, will provide funding over a five-year period.
The BGF will be available to businesses who have generated annual revenue between $2 million and $100 million and can demonstrate three years of revenue growth and profitability, allowing for the impact of COVID-19 on recent business performance.
According to the new BGF CEO, the fund will have a “broad SME appetite” across all sectors.
He told The Adviser: “As an investor, you need to look for certain characteristics in each business. The characteristics we’ll be looking for will be:
- The business has to have strong growth prospects (because that’s the reason for needing the capital);
- It’s got to have a two- to three-year track record of revenue growth and profitability (but, of course, with the downturn in COVID, we’ll adjust for that, so we’ll have to look through the COVID lockdown and see if the business was profitable and had strong growth prospects prior to COVID and whether it can return to profitability post-COVID); and
- We’ll also be looking for quality management teams and owners that are committed and aligned and committed to growing the business.
“There will obviously be more due diligence done once we are looking at the specific businesses,” he said.
Mr Healy added that the opportunities for investments will come through a range of channels, including the BGF investment team, bank referrals, chambers of commerce and in-bound applications from SMEs directly.
Noting that the fund is initially capitalised to $540 million, Mr Healy said he hoped that the fund could invest in hundreds of businesses over the next decade (if extended out).
Looking forward, he said: “We hope the fund has a really significant impact on the recovery of the SME sector from the current pandemic and lockdown and economic downturn, and that we play a really meaningful role in helping support the growth and success of the SME sector, which accounts for 99 per cent of all businesses in Australia and accounts for about 60 per cent of the GDP of the country.
“We are an SME economy, and they have a big impact on not only the economy, but also on communities, regions and on the economic wellbeing of the country.
“So, hopefully, through the investments we can support innovation and support entrepreneurs to grow their businesses and help employ more people, generating more economic benefit for the country,” he told The Adviser.
Treasurer welcomes CEO appointment
Noting Mr Healy’s appointment, Treasurer Josh Frydenberg commented: “Mr Healy has had a senior commercial banking career with a focus on assisting SME customers to grow and succeed.”
Mr Frydenberg added: “The Morrison government will work alongside participating banks to ensure that small and medium-sized businesses (SMEs) have access to the equity finance they need as we move into the recovery phase of the COVID-19 pandemic…
“The government’s investment in the BGF is part of its ongoing commitment to support SMEs as they seek to innovate, expand and create new jobs on the other side of the coronavirus crisis.”
NAB’s group executive for business and private banking, Andrew Irvine, congratulated Mr Healy on being appointed CEO of the fund, stating: “Anthony has been one of the strongest supporters of the Business Growth Fund’s establishment.
“We are pleased that someone with Anthony’s extensive experience will be leading the fund, and we look forward to working with him to support entrepreneurs right across Australia.”
Mr Irvine said that the fund would be “particularly important to small businesses right now as governments and industry work together to support Australia’s economic rebound”.
Nathan Goonan, NAB’s group executive, strategy and innovation, has been appointed as the major bank’s representative on the board.
The Commonwealth Bank of Australia (CBA) has also announced that its nominated board director of the BGF is Grant Cairns, CBA’s executive general manager, regional and agribusiness banking.
Speaking of the fund, CBA CEO Matt Comyn the bank was “pleased” to have been involved in helping set up the fund, adding: “We are strong supporters of the fund and believe it can make a real difference to help businesses achieve their full potential.
“The success of similar funds in Canada and the United Kingdom makes it clear that this model of support can provide a powerful boost for small businesses, with the potential to deliver big impacts and help them grow and prosper into the future.
Meanwhile, ANZ’s managing director, commercial and private banking, Isaac Rankin, will be appointed to the BGF board as the bank’s representative.
Mr Rankin said: “ANZ is supporting small to medium businesses in a range of ways, and the establishment of this fund will provide another avenue for them to take advantage of growth and expansion opportunities, particularly as the national economy recovers from the impacts of COVID-19.
“I’m pleased to represent ANZ on the board and congratulate Anthony Healy on his appointment as the inaugural chief executive officer.”
Rounding out the big four, the Westpac Group’s board member will be Macgregor Duncan, Westpac’s general manager, corporate and business development.
Guil Lima, chief executive of the business division, said Westpac was proud to be a founding member of the fund to scale up SMEs, adding: “Equity funding provided at the critical scale-up stage will enable more Australian SMEs to pursue new opportunities, expand and fulfil their potential.”
He continued: “Westpac has over 700,000 small-business customers, and we recognise that many find it difficult to attract passive and patient equity investment that can help them grow without taking on additional debt or giving up control of their business.
“These businesses are our future, and we look forward to seeing the impact these funds have as business owners make the most of the opportunities in their markets.”