JMMB Securities Limited (JMMBSL), is the latest entrant in the private equity space, with the recent introduction of Vertex SME Holdings, the first JMMB-managed private equity investment company.
This innovative private equity investment vehicle comes in response to the need for increased financing and technical expertise to support the growth of small and medium-sized enterprises (SMEs).
Kareem Tomlinson, general manager of JMMBSL shared that a number of debt and equity financing options exist for large companies through venture funding grants and these same options are needed for SMEs.
“Given the scale and stage of development of small and medium-sized companies, they generally do not have ready access to well-structured growth funding and so a vehicle such as Vertex is particularly important in helping to bridge this gap by providing ‘patient’ equity funding to these businesses,” said Tomlinson.
Vertex raised J$1.5 billion in its first tranche of fundraising efforts, with plans to continue to raise funds during the new financial year, as the investment vehicle looks to begin tapping its pipeline to fund companies with high growth potential.
The private equity vehicle is funded by external investors including the Development Bank of Jamaica (DBJ), a key government-led player in the private equity ecosystem. As a strong demonstration of its
commitment to this initiative, JMMBSL has invested approximately 10 per cent of Vertex’ total funding contribution.
“By forging this win-win partnership, by investing in the growth of these businesses through Vertex, these
investors will efficiently gain exposure to the attractive private equity asset class that offers diversification
from other more traditional asset classes,” shared Tomlinson.
The JMMBSL exec in sharing details on Vertex SME Holdings outlined: “This offer has been structured to replicate the features and benefits typical of international private equity funds and provides a clear exit
strategy for investors with a medium-term investment horizon. Investors will also benefit from and the depth and breadth of the JMMB network in getting access to high quality investment opportunities.”
Selected portfolio companies will received between J$150 million and J$500 million to be invested in their operations. Additional expertise will also be provided to the companies’ management team, through the option of appointment of directors on the boards of each of the companies in which it has invested.
“Vertex will select directors from its vast pool of available professionals that best satisfy the required needs of the individual company, thereby bolstering its corporate governance and providing increased capabilities to scale the businesses. This is seen as a key ingredient to growth and ability to attract additional funding,” Tomlinson explained.
Vertex will invest in SMEs with high growth potential, a proven business model, strong management teams and demonstrated sustainable competitive advantages from across a range of industries, with a focus on Jamaica and the Caribbean.
The DBJ, the government arm responsible for development financing, capacity building, public private partnership and privatisation solutions through its various programmes, has committed to invest a significant amount of funding in Vertex SME Holdings, following to its call for proposals under the DBJ’s Social and Economic Recovery and Vaccine (SERVE) Programme.
Audrey Richards, private capital specialist at DBJ, shared that the DBJ is proud of this public-private
partnership with JMMBSL through Vertex SME Holdings “because of the fund manager’s commitment to SMEs and its overall dedication to this sector.”
Additionally, Richards highlighted that in selecting fund managers for investment as part of the DBJ SERVE programme, Vertex demonstrated a solid team of experts, strategy of working closely with businesses selected and JMMB Group’s infrastructure to work with these businesses. The
JMMB-managed investment company is one of the two private equity proposals selected by DBJ.
Private equity public-private partnership provides avenue for economic growth
For Richards, building the capacity of private sector-led funds provides an avenue for the creation of value in companies.
She notes that as more private equity funding is provided to the market she expects to see “continued growth of businesses as the fund (managers) work with these SMEs to better improve their markets and develop their networks (in a bid) to grow these businesses to the point where they can also look
to list on the stock exchange.”
Internationally, the benchmark of private equity funding is approximately 1% of gross domestic product (GDP). Although Jamaica’s private equity funding is well below this standard, Richards believes this move of an additional entrant to the foray is a positive one that will enable growth in this area, as the Jamaican economy grows and more businesses are established, with the need for equity capital to fund growth prospects.
In touting the value of this private equity vehicle, Keith Duncan, JMMB Group CEO, said JMMB Group is committed to ensuring the sustainability of the business community.
“With a history rooted on a similar path of some of these companies, JMMB is familiar with the needs of this sector and remains committed to moving Jamaica forward by fostering entrepreneurship through financing, capacity building and other supporting service,” said the JMMB Group CEO.
He continued: “This commitment to value-added service is evident in our partnership with FirstAngelsJA, which has seen us investing in a number of early stage companies; building out of our SME unit and SME resource centre; the innovative deals structured by our capital markets team and now the most recent introduction of Vertex SME Holdings, which is managed by JMMBSL.”
Duncan, also shared that JMMBSL as the fund manager for Vertex, is in keeping with the Group’s strategic direction to increase focus on capital efficient growth, as well as opportunistic growth in the investment portfolio to leverage more opportunities, even as the Group actively explores and further capitalizes on opportunities for future growth throughout across the region.