The drive to develop sustainable agriculture solutions has led to the emergence of pioneering and novel agri-tech products. Expansion of such highly technical businesses can require a significant injection of cash to enable research, investment in capital equipment and the attraction of staff with specialist skills. One option is to seek investment from third parties investors. Here are some key areas to consider before seeking investment.
Investors will be undertaking their own due diligence to evaluate the business. It is important for business owners to pre-empt that and be alive to any issues that may arise. Time should be spent considering the legal, financial and technical aspects of the business and identifying any glaring issues that may put investors off; these are normally easily remedied. This can be done by carrying out a high level strategic review of the business or a more formal pre-investment due diligence exercise.
Mapping all the risks from the outset will give the opportunity to pre-empt any problem areas and enable any easily rectifiable issue to be resolved. If issues are identified that are not rectifiable, business owners will at least be on the front foot and able to give full and frank disclosure of any potential weaknesses to investors in the best light possible.
Investors are keen to see a solid, well thought through and realistic business plan so the business needs a plan, which is updated regularly.
Investors also need access to frequent and reliable financial information, so if not already being done, monthly management accounts should be prepared, which are specific to the area of the business, for which investment is sought. The business will also need robust financial forecasts readily available, as this will help to build confidence in potential investors.
Any business seeking investment should ensure that it has a trusted team of advisors who understand the business and are equipped to assist in getting it investor-ready. The consulting team could include accountants, commercial advisers, legal advisers and others who have experience in scaling a business.
Any business tendering for investment will naturally share information about the business with potential investors. Would-be investors will rely on and be influenced by this information. Any communication or inducement to engage in investment activity (including sharing information about the business with investors) is very likely to be classed as a “Financial Promotion”, which is a heavily regulated area. It is easy to be caught out by the law on financial promotions and falling foul of the legislation is a criminal offence, punishable by a fine and/or prison sentence. It is important for businesses to understand how best to present information about the business within the confines of the law.
Michelmores are looking forward to putting on another Agriculture Roadshow, between 3-7 February 2025. Following the success of our tour last year, we are going...
