Investing through uncertain times: why the right investment partner can help a business get ahead

If there is one thing business leaders have become accustomed to over recent years, it is uncertainty.

Inflation, higher interest rates, elections, geopolitical tensions, changing trade relationships and fluctuating consumer confidence have all given management teams plenty of reasons to be cautious. For many, the natural response has been to defer investment and wait for greater visibility.

The problem is that certainty rarely arrives.

There is always another Budget, election, economic forecast or geopolitical event on the horizon. Businesses that wait for perfect conditions can find that several years have passed – and competitors have moved ahead.

At Endless, we spend a lot of time meeting business owners and management teams across Yorkshire and the wider UK. One characteristic we regularly see in the most successful is a willingness to keep investing through the cycle.

That does not mean ignoring risk or pursuing growth at any cost. It means having confidence in the long-term potential of the business and being prepared to make considered investments when others may be retreating.

It is also where the right investment partner can make a real difference.

Capital matters, but so does confidence

Private equity is often viewed simply as a source of funding. Access to capital is clearly important, particularly when a business is considering significant investment in facilities, people or acquisitions.

But in periods of uncertainty, the value of a supportive investor can go beyond providing the cheque.

A good investment partner can give a management team the confidence to make decisions based on the long-term opportunity rather than short-term noise. It can bring experience, challenge assumptions and provide additional resource when assessing major strategic decisions.

A good example from our own portfolio was Sewtec Automation, a Yorkshire-based specialist in bespoke industrial automation.

We invested in Sewtec in 2017 and supported the management team as it embarked on an ambitious growth plan.

In early 2020, as the economic environment became especially uncertain, Sewtec relocated into a new 75,000 sq ft design and manufacturing facility in Wakefield – more than double the size of its previous premises.

That represented a significant commitment to the future of the business.

Large capital projects inevitably involve risk, and uncertainty can make it tempting to delay. But the strategic rationale remained compelling. Sewtec needed additional capacity to support its growth ambitions and serve an increasingly international customer base.

Having an investor aligned behind that strategy meant the business could continue investing with a longer-term perspective. By the time Endless exited in 2024, Sewtec employed more than 170 people – more than double the number at the point of our original investment.

It is a useful reminder that the best investment decisions are not always made when economic conditions feel most comfortable.

Investment can also mean strategic acquisition

For the right business, M&A can accelerate a strategy that might otherwise take years to deliver organically. It can provide access to new customers, products, capabilities, geographies or talent.

We saw this with Yorkshire Premier Meat, a leading processor and supplier of meat ingredients, which Endless acquired in 2022.

Despite a difficult backdrop for food manufacturing, including significant inflation and supply-chain pressures, we continued to invest in the business and its management team.

In 2023, Endless provided additional capital to support the acquisition of Smithfield Murray, a leading processor of value-added poultry products. The two businesses were subsequently brought together to form Karnova Food Group, creating a significantly larger UK supplier of value-added protein ingredients.

This was exactly the type of decision where a supportive shareholder can add value.

Acquisitions require conviction. They also require funding, management time and an ability to assess both the opportunity and the downside. In uncertain markets, those hurdles can feel even higher.

An experienced investor can help management teams work through those decisions, provide the capital to execute them and support the business through integration.

Being prepared to act

The best businesses distinguish between being cautious and being inactive.

They know where they have a competitive advantage and have a clear view of where they want to be in three or five years. That preparation allows them to act decisively when the right opportunity appears.

For Yorkshire businesses, that might mean investing in additional capacity, strengthening the leadership team, improving technology or making a strategic acquisition.

A good private equity partner should combine capital with experience, challenge and a willingness to invest behind a management team’s ambitions.

There will undoubtedly be more uncertainty ahead.

The companies that emerge strongest will not necessarily be those that predicted every economic twist and turn correctly. They will be those that understood their long-term direction, continued to invest behind it and had the confidence and backing to act when opportunities arose.

Sometimes the biggest risk is not investing in an uncertain market, it is standing still while somebody else does.