Impact case study database

Impact significance and reach

The research has had a significant impact on policy in the UK and EU. It has led to improved practice and organisational ability and capacity via its effects on Equistone Equity Partners, Investec Bank, the ICEAW, the BVCA and NESTA. These impacts are discussed in turn below.

Impact on policy to close the equity gap

CMBOR’s equity gap report, produced for HM Treasury, and subsequently published as Ref 2, had a direct impact on EU state aid policy and hence the ability of the UK government to change policy towards the EIS and VCT schemes. These schemes are designed to support funding for knowledge intensive smaller businesses by offering tax breaks to investors. The research provided clear evidence that there was a market failure inhibiting access to equity for these firms and the scale of the gap. Sue Catchpole, Deputy Director, Enterprise and Property Tax Team, HM Treasury comments that: “ *Professor Mike Wright, along with Professor Nick Wilson of Leeds University Business School, provided a comprehensive report on the size and scale of the equity gap in the UK, with a particular focus on knowledge intensive firms, to a very demanding timescale. The UK ‘s proposed limits for EIS and VCT were directly based on estimates provided in the report, which was submitted to the EU Commission. This analysis enabled the UK to be the first Member State to gain State aid approval for limits to the schemes which went beyond the basic EU rules.*” (Source 5.1). The subsequent Finance Act 2018 incorporated provisions, which increased the annual amount a qualifying knowledge intensive company could raise under the EIS and VCT schemes from £5 million to £10 million for shares issued on or after 6 April 2018. The EU report setting out the relevant change in state aid regulations specifically refers to the CMBOR report (Source 5.11: page 3 and footnote 7).

NESTA and accelerators

CMBOR’s Report on Accelerators to NESTA - ‘A Look Inside Accelerators’ - was also published as an academic paper (Ref 1). Its impact included shaping NESTA’s own understanding and behaviour as a national organization in this area. It demonstrated the different types of accelerators and their programmes, and significantly influenced the industry guidance that NESTA produced (Source 5.2). The impact here was both in terms of improving practical management advice through NESTA’s advisory role but also in enhancing the position and effectiveness of NESTA itself. Dr Christopher Haley, Head of New Technology & Stakeholder Research at NESTA writes, “The beneficiaries of this report and practice guide included both policymakers and accelerator managers, as well as NESTA itself. It helped shape NESTA’s own thinking on accelerators and has received 5,507 unique views since publication on 11/02/15 […] it made an important contribution to shaping our understanding of the role and operation of accelerators, especially regarding the differences in potential models and sources of funding. Drafts were influential in shaping our ‘Startup Accelerator Programmes: A practice guide’ (NESTA 2014), […] which has also been downloaded several thousand times”. He also writes that “the report and the subsequent practice guide had an important impact in enhancing NESTA’s standing both as a source of informed research-based advice, and of guidelines for practical implementation in the accelerator space.” (Source 5.2).

BVCA

The research and data development carried out by Mike Wright at CMBOR has had an important impact on BVCA generally. Dr Joe Steer, former research director at the BVCA defines this impact “in terms of the BVCA’s capacity to engage with its stakeholders across Government including ministers, their shadows, MPs of various stripes, civil servants in HM Treasury and elsewhere and regulators in several agencies.” Moreover, he writes it has been “seminal to the wider understanding of the private equity space….the BVCA would have been far less effective without this material.” (Source 5.4). Dr Tim Hames, Director General of BVCA writes that CMBOR research “formed a cornerstone of the BVCA’s response to consultation documents from both UK and European governments and regulators… work around the growth of private equity-backed businesses in the North of the UK provided evidence backing then Chancellor George Osborne’s initiative to strengthen regional growth in the UK through the Northern Powerhouse – that this initiative understood the place of non-bank finance in helping businesses grow was in large part because of Professor Wright and Professor Wilson’s work”. (Source 5.6) Moreover, he writes that research on failure and resilience in private equity-backed business “ *helped inform EU-wide moves to tighten the financial regulatory framework in the wake of the financial crisis… and meant that it did not start from a point of believing that the industry was a net negative, and (the Directive) was therefore not as damaging to the industry as it might otherwise have been.*” (Source 5.6).

Private equity firms

The CMBOR research driven database has had significant impacts on the strategic positioning, effectiveness and standing of Equistone and Investec.

Equistone has a core focus on change of ownership deals in which it has invested over £8.5 billion (Source 5.13). Christiian Marriott, Director and Head of External Relations at Equistone writes, “ *We have always been keen to ensure that we consider the issue of good citizenship in terms of how we operate. This means being transparent, being open to scrutiny from stakeholders, and ensuring that we play our part in the private equity ecosystem by attempting to increase public understanding of the asset class. In this latter aspect, we believe that we have hugely benefited from our association with CMBOR. …. CMBOR has had a significant impact on Equistone, our global investors, and the wider business community with whom we work.*” (Source 5.8).

Investec is a bank and fund manager with approximately 10,000 employees and hundreds of millions of pounds lent to private equity sponsors and their portfolio companies (Source 5.7). The impact of Mike Wright’s work through CMBOR has been to strengthen its position in the field and its services to its clients. Luke O’Mahony, Head of PR at Investec writes, “ CMBOR activity was a key element of our strategic marketing to the private equity industry, and we found the data interesting, timely and of great relevance to the industry. ” (Source 5.7).*

ICEAW and private equity demystified

The third edition of “Private Equity Demystified” (Ref 3), drawing extensively on Wright’s research programme and co-written with John Gilligan a partner in BDO, was published by ICEAW in 2014. It had the impact that ICAEW were able to raise awareness and improve understanding across a wide constituency of practice and policymakers nationally and internationally. It did this by informing institute members, MPs and civil servants, and European Commission officials, as well as ICAEW members. It enhanced their capacity to develop policy positions on private equity-type investments. It was cited in the recent UK Government Patient Capital Review (Source 5.5). The book is widely used to raise awareness and understanding nationally and internationally through teaching at universities and training in industry (Evidence 5.3). Mr David Petrie, Head of Corporate Finance at ICAEW writes, “ICAEW’s Corporate Finance Faculty has used the book to promote good practice, and to share findings within the wider ICAEW membership of over 156,000 and the private equity sector itself…. In 2014, the Abstract edition was printed and distributed to every member of ICAEW’s Corporate Finance Faculty of 7,000 members and 80 member organisations….the book has had a significant impact on ICAEW’s ability to attract the attention of and inform a wide range of policymakers and practitioners and on our ability to meet our obligation to serve the public interest, to explain and inform”. (Evidence 5.3 ) “Taken together these impacts across the policy spectrum and a wide range of practitioner firms and associations bodies are of wide ranging reach and significance.” (Evidence 5.3). He also writes, “It is difficult to overestimate the importance of his work to both private equity and the wider business community.” (Source 5.14).