Want to exit from an investment in a company but there’s no IPO or sale on the horizon? The duo behind Asset Match offer an alternative solution to sitting and waiting
Alternative finance channels such as crowdfunding have made it easier than ever to invest in private companies. What these shareholders may not know, however, is how hard it can be to exit from an investment
With most companies offering only two exit options, IPO or trade sale, investors could face a long wait before being able to take money out of the business.
But now there’s another option. Emerging from the UK’s fast-growing fintech scene is London-based Asset Match, an online platform for buying and selling private company shares.
Launched in 2011 by former City traders Stuart Lucas and Iain Baillie, the business idea was born out of necessity, or to be more specific, the frustration of trying to exit a private equity investment one of them had made several years earlier.
It is a challenge that thousands of private company investors are facing, and the solution could release billions of pounds of equity. Director met the pair to find out more…
What is Asset Match and how does it work?
Iain Baillie It is an online marketplace that helps shareholders in private companies to gain liquidity in their holdings by matching up potential sellers and potential buyers. The model we use is based on periodic auctions.
Sellers name the price they’d like to get for their shares and buyers indicate the price they’re prepared to pay. An algorithm crunches the data and calculates the price it thinks most shares will trade at by the end of auction.
Auctions can be weekly, monthly or quarterly, and the frequency can be changed. This gives the shareholders and the companies better control over the process and, crucially, allows the management team to focus on running the business.
Some companies go to AIM for liquidity, but it ends up costing them a lot more and they don’t have the same control. This is a low-cost alternative. And as a basic principle, if you have something that is fundamentally illiquid it is far better to have the buyers and sellers present at the same time.
How and why did you get the business started?
Stuart Lucas It was necessity born out of frustration. I’d made some private equity investments, which should have been three- to five-year investment periods but became 10 years plus. There were no equity events and no viable alternatives to a trade sale or IPO.
It was clear that there was a demand from other shareholders in private companies for a better way of taking some of the chips off the table. We estimate there are around 2,500 such companies, with an equity value totalling some £300bn.
We looked around, found one or two matched bargain businesses, but nothing that was focused on helping later stage companies, where people would want liquidity.
We both had backgrounds in trading and had both used e-platforms in the past. In 2012 we acquired ShareMark, an online stockmarket for smaller listed and non-listed companies, which handles the transactions, and secured seed funding from friends and family, and in 2013 we raised close to £300,000 on CrowdCube.
Three years ago there were just the two of us. Now we have six full-time and three part-time staff members, while turnover, in terms of shares changing hands, has reached £18m since 2013.
What types of business does the platform appeal to, and how does it help them?
Iain Baillie Interest comes from across the board. The one prerequisite is that the company must have multiple shareholders. They come to us in different ways. It could be a 200-year-old family firm that has managed to acquire 150 shareholders, or a three-year-old crowdfunded business that has 100 shareholders.
When a business is aiming to raise funds, the main focus is on finding the cash to fulfil its strategic and operational objectives. In the process of securing that capital, and acquiring a number of shareholders along the way, things like liquidity and the eventual exit are not always thought through properly.
Being able to demonstrate a means of providing liquidity to investors will make it easier to raise further funding rounds. An experienced investor’s main concern is whether they will actually get a return on their investment and when.
Which companies has Asset Match helped so far, and how has it helped them?
Stuart Lucas We currently have 24 companies on the platform, ranging from the brewery business BrewDog to the Isles of Scilly Steamship Company.
Following its latest round of financing, BrewDog is valued at £305m, while the Scilly Steamship Company has around a thousand shareholders and a market cap of £5m. Countrywide Farmers, which started as a farming co-operative, has 2,000 shareholders and a market cap of £8m.
BrewDog was one of the first companies we worked with. After their first big crowdfunding campaign in 2012 they said they would provide a platform for some liquidity for those shareholders. We provide it.
What next for Asset Match, and for private company shareholders looking to exit from investments?
Iain Baillie We’re at a stage where companies see us as a platform of choice – five of the last 10 companies left AIM to come to us. Interest is growing in certain sectors; brewing for example. Brewery businesses typically have big followings and significant numbers of shareholders. We are also excited about the prospect of three high-profile brand names that will be joining us very soon.
As more private companies raise capital from new alternative finance options such as crowdfunding, there’ll be more private shareholders eventually wanting to release some of the value from their investments. There will be a significant secondary market for buying and selling shares in British businesses.
Who Iain Baillie and Stuart Lucas
Roles Co-founders of Asset Match
Previous positions Both are City veterans with experience of the London Stock Exchange and bond markets. Lucas held senior roles at Bear Stearns and Nomura, while Baillie was a managing director at Salomon Brothers
Did you know? In the 1980s the traders at Salomon Brothers likened themselves to Millwall FC supporters – in other words: “No one likes us, we don’t care.”
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