Review: Maven Income and Growth VCTs 3 & 4
This is a top-up offer for the Maven Income and Growth 3 and 4 VCTs, raising up to £40 million. The Maven team is highly regarded and has a strong regional focus, allowing access to deals more London-centric VCTs might miss. The two VCTs have a good track record. Each is raising up to £15 million with the option of an over-allotment of £10 million across both. Investment is available in the 2017/18 and 2018/19 tax years.
- Portfolio of around 40 dynamic small and medium businesses
- Broad selection of mature investments, which should support dividend payments, plus portfolio of younger companies offering growth potential
- Strong regional network – expanded further in 2017
- Co-invest with other Maven VCTs
- Maven has been one of the most active VCT managers since rules became more restrictive, with 12 investments completed since April 2016
- Investors can split their money across both VCTs or choose just one
- Minimum investment £5,000. You can apply online
Read important documents and apply
Seasoned VCT investors will be familiar with Maven Capital Partners. It is a specialist manager of venture capital, private equity and unquoted investments, headed by managing partner Bill Nixon.
Maven began life as the private equity and VCT arm of Aberdeen Asset Management before Bill Nixon and the senior team led a management buyout in 2009.
Maven has nationwide coverage through its ten offices in Aberdeen, Birmingham, Bristol, Durham, Edinburgh, Glasgow, London, Manchester, Newcastle and Preston. The 25-strong team is well resourced and fully committed to its range of six VCTs. In total Maven manages over £415 million across all its investments.
The Maven Income and Growth 3 and 4 VCTs trace their roots back to Aberdeen. The team has managed them since inception, initially as Aberdeen Growth Opportunities VCT and Aberdeen Growth Opportunities VCT 2.
One of the attractions of this top-up offer is it provides access to an established VCT portfolio of around 40 companies, as well as exposure to newer growth investments.
Changes to VCT legislation in 2015 mean VCTs now need to focus on growth capital investments into younger companies, rather than financing management buyouts and acquisitions. This affects new investments but not the existing assets.
Investors in Maven 3 and 4 can expect a blended portfolio of existing investments, which should support dividend payments, plus newer investments in younger and more dynamic companies.
Maven has been one of the more active VCT managers since the rule changes and has a healthy pipeline of growth deals. The boards of Maven 3 and 4 deem the outlook for entrepreneurial private companies positive. In spite of the uncertainty prompted by Brexit, the majority of portfolio companies have performed well and a number of exporting businesses have enjoyed the short-term benefits of the devaluation of sterling.
The VCTs will co-invest in new private company transactions with Maven’s other VCTs. This enables them to invest collectively in larger transactions than if investing on behalf of a single VCT, target more substantial businesses which have already achieved scale, and support their growth through to exit on the back of access to finance. Co-investment can also allow them to spread any risk associated with the increased focus on smaller, less mature businesses resulting from the new VCT regulations, and to complete a larger number of investments in order to diversify – although there are no guarantees.
Every transaction is subject to a structured three-stage investment approval process, led by the relevant Maven regional deal executives yet also harnessing the collective knowledge and expertise of Maven’s UK-wide team. The goal is to ensure the Maven VCTs ultimately invest only in businesses offering the prospect of a strong capital return on exit, and that each investment is secured on the best terms.
Dividends and performance
There is a progressive dividend policy on this offer rather than a specific pence per share target. Income generation as well as capital profits will be key to this.
The dividend track record is good, as the chart below shows (note this shows dividends paid in the calendar year, not per VCT year end).
Maven’s investment team applies the same investment strategy across all the Maven VCTs. It targets established, entrepreneurial businesses, led by proven management teams which Maven believes have robust growth prospects. It concentrates on companies available at attractive entry multiples, which can generate regular income and have the potential to achieve medium to long-term capital appreciation.
Maven’s UK-wide coverage and investment resources enable it to access a wide range of suitable private company opportunities. It generates introductions to approximately 350 new transaction opportunities each year across the regions. These are then subject to filtering. The Maven team meets weekly to discuss all new potential opportunities. Its investment process is detailed and thorough, and senior members of the team are involved at all stages of any potential new deal. Having a large team also enables sector specialism.
Typically Maven invests £2 million to £8 million per deal and benefits from non-VCT money to invest alongside. This enables larger deals and allows the VCTs to occasionally invest in more mature businesses. Many of the deals completed in the last five or so years have been development capital deals so the recent VCT restrictions should have a lesser impact than on some other VCTs.
Investors can expect the majority of the portfolios to be initially made up of management buyout, development capital, acquisition finance and replacement capital deals. The make up of the portfolio will change as more earlier-stage investments are made.
Examples of portfolio companies
Three recent growth deals made by the Maven VCTs are shown below.
The GP Service
It takes, on average, up to 10 working days to see a GP. Convenient appointments are a rare breed. Surgeries are not usually open in the evenings or at the weekend. That’s where The GP Service comes in. It provides an online service for general medical consultations and prescriptions.
Founded in 2015 by a group of pharmacists, the service was launched for patients looking for “private medical treatment at their convenience and at a cost that everyone can afford”. The business is led by Atul Devani who was the founder of United Clearing, which listed on AIM in 2004 before being sold in 2006 for £25 million. Maven has backed him previously.
The process is simple. Patients consult with qualified Doctors via online questionnaires or through a secured video link. Prescriptions can then be collected from any pharmacy registered with GP Service. Doctors can also provide referral letters and fit notes. The service is open from 7:00 until 20:00 daily.
Maven invested £2.5 million in May 2016 to enable The GP Service to reach new geographical locations and develop additional products and services.
Rockar is an innovative car dealership. It is the brainchild of Simon Dixon, who spent 20 years building the UK’s third largest car retail group, Dixon Motors plc. He sold Dixon Motors to RBS in 2004 for £110 million.
Nobody really likes the traditional process of buying a car: it’s something to be endured rather than relished. Dealing with car salespeople is an aspect we love to hate. Rockar aims to turn this car-buying experience on its head.
Firstly, its stores are in shopping centres, rather than the more traditional out-of-town areas. This might seem odd, but the sites attract high footfall. Rockar has two stores and estimates a total of 52 million people have walked past them. They are designed as boutiques, akin to an Apple Store for cars, with few cars on display and interactive touchscreen tablets so customers can browse the product range independently, book test drives or even buy a car in a matter of minutes.
There are no pushy salespeople. Instead, there are Rockar Angels: knowledgeable staff whose job is to serve rather than to sell. You can buy in-store or complete the whole car buying process online: finding information about a car, ordering it to your exact specifications, booking a test drive, paying for it, part-exchanging your old car or arranging finance.
The first car manufacturer to sign up was Hyundai in 2014 with an outlet in the Bluewater shopping centre in Kent. Within three weeks it had become the most visited Hyundai dealer in the UK. A second Rockar location was added in 2015 at the Westfield shopping centre in west London. In the 18 months to January 2017, almost 2,000 people bought a car from Rockar. Jaguar Land Rover followed as Rockar’s first premium franchise at Westfield in October 2016.
In June 2017 Rockar announced it is “actively engaged” with four other franchises and is close to developing a used car concept. It is also planning the launch of new Tesco Express-style Hyundai local dealerships on busy shopping streets.
The real key to Rockar’s success, and a likely source of future growth, is its innovative online technology that facilitates the vehicle purchase. This has potential to be licensed to other manufacturers and dealer groups.
Maven VCTs invested £2.5 million of development capital in July 2016 alongside NVM (Manager of the Northern VCTs) who also invested £2.5 million. If successful, the investment will enable Rockar to partner with new car manufacturers, open more stores in high footfall shopping areas and grow its technology platform.
Chic Lifestyle, operating under the brand Chic Retreats
Three months after completing the Rockar deal, Maven invested in a cloud-based inventory management platform for boutique hotels.
A growing number of discerning travellers prefer small, unique hotels, often off the beaten track, to large chain establishments. Boutique hotels can benefit from this shift in behaviour. However, many smaller hotels or luxury villa operators lack the resources to manage their own IT and marketing.
Chic Retreats provides a solution. Hotel owners use it to optimise the distribution of their rooms, manage rates and availability in real time online. Listing on the platform is by invitation only; all the venues on the platform are exclusive to Chic Retreats.
Maven’s investment will help the development of the core technology, improve the web and mobile offering and expand the service geographically.
Before Maven agrees to invest in a company, it determines the likely exit route and price. Maven has a particularly strong track record of exits – 11 across its six VCT portfolios since November 2014, including trade sales to German and US buyers, as well as three secondary market disposals to other private equity houses. However, there is no guarantee the same will happen in future.
Two examples of recent exits are shown below.
Maven clients originally funded the management buyout of Cash Bases in 2004. The company developed the SMARTtill™ Solution, the first intelligent cash drawer in the world. The drawer counts all the notes and coins automatically as soon as it’s closed and sends alerts when approaching the minimum or maximum levels.
For customers, this solves a negligible irritation. The seemingly age-old question of ‘do you have anything smaller?’ disappears. For retailers, Cash Bases Solution is a godsend. For Maven and its investors, it proved a lucrative investment.
Maven worked closely with the senior management team to accelerate the company’s growth, by targeting new clients and specialist opportunities and extending the product offering. Maven executives also supported the team in completing a key strategic acquisition which helped expand the business into new markets.
23 out of the top 25 European retailers use Cash Bases Products and in July 2013 the business secured a multi-million pound contract with Tesco for the integration of SMARTtill™ technology across 25,000 of its UK cash tills. Two years later, in September 2015, Maven realised the investment, achieving a 7.1x total investor return following the merger with US group APG Cash Drawer LLC.
In 2009 Maven backed Westway when its turnover was less than £10 million and the business employed 38 people. At the time, it operated from a single office in West London. Six years later, Maven VCTs exited the investment via a trade sale to US-based ABM. At that point, turnover exceeded £50 million per annum and the business employed 535 people in five locations.
There is very little that’s glamorous about this business (other than the growth). It provides clients with a plethora of technical building services across mechanical and electrical engineering services for heating, ventilation, air conditioning and electrics.
Maven’s investment – first made in 2009 and then again in 2014 – helped the business expand its presence in the UK and widen the product offering.
Please remember your capital is at risk. VCTs are high risk investments and are not suitable for everyone: they are long term and illiquid. Investors should not invest money they cannot afford to lose.
Tax rules can change and tax benefits depend on individual circumstances.
Venture capital schemes, including VCTs, are currently the subject of a Treasury consultation. The “Patient Capital” review is designed to review the options for ensuring access to long-term investment for young, innovative firms. The proposals are expected to be announced in the Autumn budget. This could have an effect on the investment policies of the VCTs, and on the levels of tax reliefs that are available.
The charge to invest in both VCTs through Wealth Club is 2.5% (normally 5%).
In addition to this saving, there is an early bird discount on the initial charge of 1.25% for new investors – or 1.5% for existing Maven investors – for investment before 2 February 2018, making the net initial charge through Wealth Club 1.25% or 1.0% respectively.
Both VCTs have an annual management fee of 2.5%, plus annual fees of £89,000 for Maven 3 and £78,000 for Maven 4. Annual fees for Maven 3 are subject to a cap of 3.8%, and for Maven 4 a cap of 3.5%, excluding performance fees.
A performance fee applies to both VCTs: this is 15% for Maven 3 and 20% for Maven 4.
Maven also receives fees from investee companies for arranging transactions, monitoring business progress and providing non-executive directors for their boards. Please see the Securities Note for full details on fees.
There’s a lot to like about Maven and this offer. It has a strong, well resourced team managing a mature portfolio of diverse investments. We like the strong regional presence; it means that deal flow is unlikely to be a problem. Some of the more recent deals have been very encouraging. Moreover the managers have proved themselves capable of delivering exits and consistent dividends to date; however, please remember past performance is not a guide to the future and there are no guarantees.
Wealth Club aims to highlight investments we believe have merit, but you should form your own view. You should decide based on the provider's documents and ensure you have read and fully understand them before investing. This review is a marketing communication. It is not advice or a personal or research recommendation to buy the investment mentioned. It does not satisfy legal requirements promoting investment research independence and is thus not subject to prohibitions on dealing ahead of its dissemination. 25.09.2017