West Hill Capital

The Partners of West Hill have collectively advised on, structured and originated transactions grossing tens of £billions including multiple successful IPOs and some landmark deals in the financial services sector. These transactions have returned £billions in profits to capital providers.

West Hill Capital was established in order to leverage the significant network and contact base arising from this experience and to source and execute smaller transactions of £1-20m for very high quality and fast growing businesses. Over the last decade, West Hill has identified and backed world leading technology companies with some stellar results, where investors in some instances have made substantial multiple returns.

 

  • £4.4m $400m sale generated returns of up to 17.5x
  • £13.5m IPO valuation generated an uplift of up to 22.5x
  • £45m Seed investors up 30x at the current valuation
  • £4m £50m sale generated returns of around 12.5x
  • £4.2m Two partial exits generating returns of up to 6.1x
  • £1.8m Partial exit generated an undisclosed multiple return
  • £2.5m Cash exit and undisclosed multiple return
  • £2.5m Profitable exit and Internal Rate of return in excess of 15%

The partners of West Hill source these opportunities from a proprietary network in industries that they know best, where they have enjoyed the most success and have the strongest connections. A network of institutional and private investors are offered access to these opportunities and invest in each business on a case by case basis.

In recent years, West Hill has raised around £500m for a portfolio of innovative financial services businesses and pioneering technology companies with global potential.

The partners of West Hill obtain an equity interest in investee companies and have also personally invested millions of pounds into these businesses on exactly the same terms as investors.

 

  • Investment Strategy

  • Exit Planning

  • Tax Breaks

Investment Strategy

What we look for

West Hill Corporate Finance have access to an impressive pipeline of businesses, at different stages of development and in a variety of sectors. Some common characteristics include;

  • Innovative products with genuine USP and global application
  • Significant growth potential
  • Strong intellectual Property, patents and know how
  • Significant scalability
  • Credible Management teams
  • Recurring revenue potential
  • Skin in the game from management
  • EIS qualifying status
  • Clear route to exit

Deal Sourcing

West Hill Corporate Finance source investment opportunities from a substantial network built up over 30 years

  • Proprietary sources, partners of West Hill have over 100 years combined experience
  • Access to University spin outs sourced from leading global institutions
  • Relationships with highly successful European technology incubators
  • High level connections in Lloyds and the London insurance markets
  • Well diversified international focus

Aligning our interests

The Principals of West Hill have made significant  personal investments in our portfolio companies  companies on exactly the same terms as our investors

  • West Hill have an equity interest in all Investee Companies
  • Non-Executive directors are appointed where applicable
  • Principals of West Hill also provide shareholder representation
  • Companies obtain valuable introductions to contacts of West Hill
  • These include; Private Equity Houses, Institutional Investors and Financial Buyers

Research & Documentation

Extensive due diligence is carried out by a team of corporate finance professionals prior to each capital raise.

  • Thorough research on product and management
  • Rigorous review of the Business Plan and Financial projections
  • Legal and accounting work outsourced to top tier law and accountancy firms
  • Independent third party verification sought where required
  • Specific terms of each deal negotiated including valuation
  • Information presented in an AIM standard Private Offer Document
  • Offer Document describes the business plan, capital structure, investment terms, risks, upside case and exit strategy

Flexible Investing

West Hill Capital provide both capital growth and income opportunities via equity, debt or combined structures.

  • Investments are made into individual companies on a case-by-case basis
  • Primarily growth opportunities in EIS equity
  • Investors have a level of control over where money is invested
  • The principle of diversification remains
  • Investors progressively build a bespoke, tax efficient portfolio of self-selected investments

Strong Management

Business plans are of course important but it is people that ultimately make companies successful.

  • West Hill identify Management teams with a demonstrable track record of success
  • Executive teams are supplemented with West Hill appointed Non-executive directors
  • Ventures are often backed by known, successful and high-profile entrepreneurs
  • Executive teams are committed both financially and in terms of their enthusiasm
  • Investor interests are aligned with those of management
  • Management have a clear and credible exit strategy to realise a profitable return for shareholders

Monitoring & Reporting

West Hill provide a high level of transparency so as investors feel involved in the growth and success of their portfolio

  • West Hill partners and Company NEDs provide Shareholder representation from entry to exit
  • Investee Companies write to Shareholders to keep them informed of progress
  • Periodic commentaries from West Hill provide insight into developments
  • An Annual Conference enables investors to meet with management teams
  • Management are often available to talk to investors directly
  • Investee companies also host individual investor presentations periodically
What we look for
Monitoring & Reporting

Exit Planning

West Hill consider exit possibilities prior to funding a business and periodically refines these exit plans post investment.

  • West Hill Partners thoroughly assess how and when a realisation may be achieved
  • Investor returns are generally targeted in a 3-5 year timeframe
  • Exits come via a trade-sale to a larger company, a financial buyer or via a stock market quotation facilitating a sale of the shareholding
  • West Hill can in some instances engineer exits by introducing contacts that may potentially acquire investee companies
  • West Hill understand the requirements of institutional investors meaning that businesses selected operate in attractive growth markets

Tax Breaks

Enterprise Investment Scheme

The Enterprise Investment Scheme (EIS) is a government-backed initiative designed to incentivise investment into small and emerging growth businesses in the UK. There are various highly attractive tax breaks for investors to benefit from, including 30% income tax relief, capital gains tax relief (CGT), inheritance tax (IHT) exemption, CGT deferral and loss relief.

However, our view is that the EIS tax incentives should be considered purely as an added benefit and not the primary reason to invest in venture capital. EIS is a useful tool where investors can look to maximise their profits but also shelter their tax burden and benefit from limited net exposure in what are regarded as high-risk investments.

Knowledge Intensive Status

Effective as of April 2018, the annual limit for individuals investing in EIS companies and obtaining the EIS tax reliefs, has effectively increased. Up to £2m can now be invested per individual, per tax year ,on the basis that £1m of this is invested in EIS Knowledge-Intensive companies.

A range of innovative businesses are expected to qualify for Knowledge-Intensive status. Those companies that do qualify shall also obtain a number of additional benefits including an increase in the annual limit that can raised under the scheme to £10m from what has traditionally been £5m per annum.

The majority of the West Hill Capital portfolio is expected to qualify for EIS Knowledge Intensive Status.

Income Tax Relief

An individual can reduce their income tax liability by 30% of the amount invested, regardless of an individual’s tax rate but assuming they have enough taxable income. If an individual has not used their EIS allowance in the previous tax year they can carry back up to 100% of their investment to the previous year for purposes of income tax relief.

This relief is available against a UK income tax liability regardless of whether the investor is resident in the UK. In order to receive income tax relief, the maximum level of investment into EIS qualifying companies is £1million per investor per tax year. The investment must be held for a minimum of 3 years from the date of issue.

Income Tax relief of 30% of the amount invested.

Gross investment£100,000
Less: Income tax relief at 30%£30,000
Net investment cost£70,000

Capital Gains Tax Deferral Relief

Investors who have realised a capital gain on another investment within the last 3 years or expect to incur a taxable gain in the next year can benefit from capital gains tax deferral relief.

This class of relief is unlimited but investors must be resident in the UK.

Capital gains tax liability assumed to be at the current 24% rate based on a gain of £100,000.

Gross investment £100,000
Less: Income tax relief at 30%£30,000
Investment cost£70,000
Capital gains tax liability deferred£24,000
Net investment cost£46,000

Capital Gains Tax Exemption

Assuming shares are held for a minimum of 3 years and retain their EIS status, no Capital Gains Tax is payable on sale of the shares. If the EIS investment is held at death, then the CGT liability is eliminated enabling the full value of the EIS investment to be passed on to the beneficiaries.
If the EIS investment is held at death, then the CGT liability is eliminated enabling the full value of the EIS investment to be passed on to the beneficiaries.

Loss Relief

Any loss suffered on disposal of an investment (after allowing for the income tax relief received) can be offset against an individual’s income or capital gains tax in the current or previous tax year.

With EIS investments, each individual holding is assessed separately for loss relief. This means that any holding that has fallen in value at the time of sale will qualify for loss relief irrespective of the overall portfolio performance. Even if only one holding within a portfolio of ten investments falls in value, investors are entitled to loss relief on that one holding. Gains offset against income tax have the net effect of limiting the investment exposure to 42.5% of the amount invested for a 45% taxpayer if the investor realises a total loss. Alternatively, losses can be offset against Capital Gains Tax at the current rate of up to 24%.

Loss relief based upon an individual’s maximum 45% income tax rate and full loss of investment.

Realised value of shares£0
Gross investment£100,000
Less: Income tax relief at 30%£30,000
Loss before loss relief£70,000
Tax relief at 45%£31,500
Net Loss£38,500

Inheritance Tax Exemption

Investments are typically exempt from Inheritance Tax after 2 years up to a lifetime limit of £1million. Beyond £1million, 50% IHT relief will apply.

An EIS investment becomes a particularly attractive proposition when an investor can benefit from two or more of these incentives as they can all be used in conjunction. For example, an investor can use EIS to defer a capital gain, whilst also making an investment that’s free from IHT and even enable an income tax saving to be made as well.

Business Investment Relief

UK resident non-doms taxed on the remittance basis are generally chargeable to UK tax on overseas income and gains when remitted to the UK. However non-doms, along with their related offshore trust structures, are now able to bring overseas income and gains to the UK free of UK tax for the purposes of making a commercial business investment in an unlisted trading company.

Business Investment Relief (BIR) can be combined with tax efficient schemes such as the Enterprise Investment Scheme (EIS) or Seed Enterprise Investment Scheme (SEIS).

West Hill Capital investments fit these conditions and are able to take BIR investments from UK resident non-domiciled individuals looking to repatriate their offshore wealth into the UK in a tax efficient manner.

Funds need to be invested within 45 days of the remittance and a claim needs to be made in the tax return for the year the investment is made.

Entrepreneurs Relief

Entrepreneurs’ relief (ER) will be extended to external investors in unlisted trading companies. This new investors’ relief will apply a 10% rate of Capital Gains Tax (CGT) to gains accruing on the disposal of ordinary shares in an unlisted trading company held by individuals, that were newly issued to the claimant and acquired for new consideration on or after 17 March 2016, and have been held for a period of at least three years starting from 6 April 2016.
A person’s qualifying gains for investors’ relief will be subject to a lifetime cap of £1 million. This is particularly attractive for investors when an investment has been made into a non-EIS qualifying private company because the rate of tax one pays on a gain is still relatively low.

Enterprise Investment Scheme
Entrepreneurs Relief

Advisors

Help your clients make tax-efficient investments directly into private companies through West Hill Capital.  We are able to help administer investments made via an individual’s SIPP or indeed via a fund manager or wealth managers own discretionary fund.

Entrepreneur Visa

If you are looking to obtain an entrepreneur’s visa, West Hill Capital is able to assist.  Please contact one of our associates to discuss how we may be able to help.