Octopus Intermediate Capital, which specialises in providing mezzanine finance to VCT-qualifying companies, has made its first investment. The fund backed Midlands-based Funeral Services Partnership (FSP) with £2.75 million as part of a funding round of £3.75 million in total.

Octopus Intermediate Capital, which specialises in providing mezzanine finance to VCT-qualifying companies, has made its first investment. The fund backed Midlands-based Funeral Services Partnership (FSP) with £2.75 million as part of a funding round of £3.75 million in total.

The balance of the funding came from existing backer Aberdeen Asset Managers Growth Capital, which invested £4 million in the company earlier this year.

The financing has enabled FSP to complete the acquisition of five funeral businesses in the south of England, which it adds to its core base of seven funeral services firms in the Midlands and South Yorkshire. The group is already eyeing further acquisitions, and expects to see ‘many opportunities before April 2008’ due to the proposed changes to capital gains tax.

Phillip Greenfield, chief executive of FSP, says the backing from Octopus and Aberdeen ‘has enabled us to make rapid progress in implementing our “buy and build” strategy, based on acquiring funeral services firms and associated suppliers with strong local reputations’.

He adds: ‘The firms within our group will continue to operate as independent funeral services businesses that are well-established in their local communities but will also be able to access a range of our own associated services, such as the supply of headstones.’

Octopus Intermediate Capital has £45 million to invest in deal sizes of between £1 million and £4 million in VCT-qualifying companies. In addition to providing mezzanine finance (which seeks a risk/return profile above senior debt but below equity), it will consider refinancing senior debt in a manner that does not require capital repayment for the first five years of the investment.