Section one: Contracting authority
one.1) Name and addresses
THE NORTH EAST FUND LIMITED
Fifth Floor, West One, Forth Banks
NEWCASTLE-UPON-TYNE
NE13PA
Country
United Kingdom
Region code
UKC22 - Tyneside
Companies House
10441614
Internet address(es)
Main address
https://www.northeastfund.org/
one.3) Communication
The procurement documents are available for unrestricted and full direct access, free of charge, at
https://www.northeastfund.org/business-guidance-support/
Additional information can be obtained from the above-mentioned address
Tenders or requests to participate must be submitted electronically via
https://www.northeastfund.org/business-guidance-support/
one.4) Type of the contracting authority
Other type
Company Owned by Local Authorities
one.5) Main activity
Economic and financial affairs
Section two: Object
two.1) Scope of the procurement
two.1.1) Title
Procurement of Fund Management Services for North East Mezzanine and Loan Fund
Reference number
TNEFL/2024/03
two.1.2) Main CPV code
- 66100000 - Banking and investment services
two.1.3) Type of contract
Services
two.1.4) Short description
The North East Fund seeks to appoint a professional, FCA authorised fund management organisation to deliver an SME investment fund which will make predominantly debt-based investments in revenue-generating SMEs based in the North East of England. The fund will address the persistent market gap in the provision of relatively small amounts of growth finance for SMEs in the North East of England, including unsecured loans and mezzanine / quasi-equity investment. In so doing, it will help to unlock regional growth, build confidence in the SME business base and ensure the region is a great place to start-up and scale-up a business.
The Fund has the working title of "Later Stage / Mezzanine Fund" but its final name will be agreed with the appointed fund manager.
TNEFL expects to make an initial commitment of investment capital to the Fund of £35m, which will be invested over an Initial Investment Period of c.5 years - equating to an average annual investment by the Fund of £7m during its first five years of operation. This quantum of investment, and the Fund's investment policy is consistent with and will address the funding gaps identified by a market evaluation exercise which was undertaken during the first half of 2024.
In a significant development compared to previous regional investment funds, the profile of this Fund has been developed with a view to facilitating a more 'patient capital' approach to investment - by making provision for the initial 5 year investment period to be followed by further periods of new (and follow-on) investments which can potentially extend to a further 10 years. This period of up to 15 years in which the Fund can make both new and portfolio investments will be followed by a Realisation Period of up to 10 years, giving a potential contract duration of 25 years in total.
This will enable the manager to provide support over a longer period than previous funds, which should be beneficial for the Fund's investee companies and should also help to maximise the financial returns to the Fund, particularly in relation to mezzanine or quasi-equity investments as it will allow for a longer holding period of share options or warrants, which should give a greater prospect of achieving additional upside liquidity from those instruments.
Although the fund is required to be deployed predominantly via amortizing debt instruments (which must comprise 80% of the Fund's investment by value), it also has the scope to take equity positions where appropriate in companies with high growth potential and thereby to target a good number of potential high-cash-multiple / equity returns.
The Fund is also required to complete a number of smaller loans, of an average value of £70k. This will enable the Fund to help those SMEs which are seeking to achieve more modest organic growth and are not suited to equity investment but which require a loan (perhaps with a short capital repayment holiday) to help them take-on new contracts and bridge the gap between delivering them and receiving payment from new customers.
The Fund's returns, and potentially other sources of capital which may be available to TNEFL (for example, from the regional legacy funds overseen by NEA2F) will be used to facilitate the extension of the Fund's investment activity after the initial investment capital commitment of £35m is fully invested.
two.1.5) Estimated total value
Value excluding VAT: £16,700,000
two.1.6) Information about lots
This contract is divided into lots: No
two.2) Description
two.2.2) Additional CPV code(s)
- 66122000 - Corporate finance and venture capital services
two.2.3) Place of performance
NUTS codes
- UKC - North East (England)
Main site or place of performance
The North East of England, being the seven Local Authority areas of: Northumberland; North Tyneside; South Tyneside; Newcastle; Gateshead; Sunderland and County Durham.
two.2.4) Description of the procurement
Please see Section II.1.4 above for a summary of the contract and the Information Memorandum, which can be downloaded from The North East Fund's website, for details.
The procurement process will be conducted in accordance with the Public Contracts Regulations 2015 (as amended) using the Competitive Procedure with Negotiation as detailed in Regulation 29 of those Regulations.
The purpose of this procurement is to procure the services of an FCA regulated fund manager. As outlined in Section II.1.4 above, the contract is expected to have an initial duration of 10 years and can be extended by up to a further 15 years, to 25 years in total.
Please note that the contract value stated in this Contract Notice is an estimate based on assumptions regarding: the fund management fees tendered; the overall quantum of capital which will be committed to the fund; the duration of the contract and the profile of exits from and impairments to portfolio companies. As such, the ultimate fees paid under the contract could be lower or higher than the estimated contract value stated in this Contract Notice.
two.2.5) Award criteria
Price is not the only award criterion and all criteria are stated only in the procurement documents
two.2.6) Estimated value
Value excluding VAT: £16,700,000
two.2.7) Duration of the contract, framework agreement or dynamic purchasing system
Duration in months
300
This contract is subject to renewal
Yes
Description of renewals
The contract can potentially last for 25 years, based on its being extended during its term, which will initially be for 10 years but - subject to performance, market demand and availability of capital - is expected to be extended by at least 10 years, on the basis set out in the Information Memorandum and draft contract documents.
two.2.10) Information about variants
Variants will be accepted: Yes
two.2.11) Information about options
Options: No
Section three. Legal, economic, financial and technical information
three.1) Conditions for participation
three.1.1) Suitability to pursue the professional activity, including requirements relating to enrolment on professional or trade registers
List and brief description of conditions
Participants must be authorised and registered with the Financial Conduct Authority, or must be able to explain how they will become authorised in time to deliver the contract - as detailed in the Selection Questionnaire.
three.2) Conditions related to the contract
three.2.3) Information about staff responsible for the performance of the contract
Obligation to indicate the names and professional qualifications of the staff assigned to performing the contract
Section four. Procedure
four.1) Description
four.1.1) Type of procedure
Competitive procedure with negotiation
four.1.4) Information about reduction of the number of solutions or tenders during negotiation or dialogue
Recourse to staged procedure to gradually reduce the number of solutions to be discussed or tenders to be negotiated
four.1.5) Information about negotiation
The contracting authority reserves the right to award the contract on the basis of the initial tenders without conducting negotiations
four.1.8) Information about the Government Procurement Agreement (GPA)
The procurement is covered by the Government Procurement Agreement: Yes
four.2) Administrative information
four.2.2) Time limit for receipt of tenders or requests to participate
Date
22 November 2024
Local time
12:00pm
four.2.3) Estimated date of dispatch of invitations to tender or to participate to selected candidates
4 December 2024
four.2.4) Languages in which tenders or requests to participate may be submitted
English
four.2.6) Minimum time frame during which the tenderer must maintain the tender
Duration in months: 6 (from the date stated for receipt of tender)
Section six. Complementary information
six.1) Information about recurrence
This is a recurrent procurement: No
six.4) Procedures for review
six.4.1) Review body
High Court of England & Wales
London
Country
United Kingdom