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Matrix focuses on buy-outs

Matrix Money Management is raising up to 20m for the Matrix income & growth VCT, a venture capital trust focusing on management buy-outs.

This is a generalist VCT aiming to provide a growing income stream of tax-free dividends along with capital growth. It will typically invest in established unquoted companies which supply services and products used in everyday life. It will have a value driven investment approach across a broad range of industries and the main focus will be management buy-outs supporting management teams to acquire businesses they manage but do not own.

According to Matrix, management buy-outs form a large proportion of UK private equity financing and are attractive because the management teams behind the companies have a unique understanding of the financial risks and opportunities within their businesses. The management teams are also willing to invest personally in their businesses and their interests are aligned to that of the VCT in that they want to buy their companies at the lowest price.

The VCT will be managed by Matrix Private Equity Partners team of eight VCT managers. The core of this team was formed in 1998 when four of the managers worked together at GLE Development Capital. This company was acquired by the Matrix Group in 2004.

The team currently advises on the original Matrix income & growth VCT, TriVen and Trivest, which provides co-investment opportunities for the new VCT.

When selecting companies for the new VCT the team will consider the quality of management, the track record of profitability, evidence that the company has a competitive advantage in its field and whether its valuation is reasonable at the time of investment. The companies must also have the ability to deliver regular income for the VCT and provide an exit usually a sale within an appropriate time. Up to 70 per cent of assets will be structured as loan stock and preference shares which will enhance the ability to pay dividends.
Investors looking for the tax advantages of a VCT may go for this because of the generalist approach and experience of the manager.

However, it may face competition from top ups to existing VCTs which allow new investor access to an existing portfolio of investments rather than starting from scratch.

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