With an increase in investment in UK film production, SMB’s Media Team share their top tips for preparing for and securing investment opportunities

The official figures published this month by the BFI’s Research and Statistics Unit show significant growth in UK film and high-end TV (HETV) production with a record level of spend contributing to the UK economy and the recovery of the sector.

The combined spend by film and high-end television production during 2022 reached £6.27 billion, the highest ever reported and £1.83 billion higher than for the pre-pandemic year 2019 with the largest share of the spending coming from HETV production.

With the increase in investment and spending, production companies will want to make the most of the growing investment in the UK film industry.

1. Get your finance, IP and operational documents investment ready

When approaching investors, especially larger, corporate investors, expect them to ask for relatively extensive financial and legal documentation including copies of your accounts, management accounts and other financial documents, business plans and annual budgets, details of key commercial arrangements including copies of your principal contracts, to help them to get a view of your production company and the health of the business.

Having your key financial, contractual and other legal information organised, robust and ready to share will make each investment round much smoother and reassure investors that your production company is in good shape and in a position to begin work on the production as soon as the funding is in place.

In particular, investors want to see documents which establish a clear chain of title over the intellectual property rights in the production – ie that your production company has all the necessary rights required to make and to exploit the production. This is key for investors and is likely to be a make or break requirement.

If in doubt, get these documents reviewed by your legal advisers well ahead of approaching investors so that any remedial work can be undertaken before then.

2. Get ready for key negotiation points

Once you’ve entered into discussions with one or more potential investors, be prepared to negotiate the terms of that investment.

A key provision will be on recoupment of investment, setting out the order in which various investments, loans and other costs are to be paid or repaid. These provisions will also contain details of the stake in the profits which your investor will get in return for their investment which will depend largely on the level of investment and your bargaining position.

Investors often want to retain rights to make or approve certain decisions of the board in relation to the production, or even to have a seat on the board as a director or an observer. Commonly investors will want certain matters to require their specific consent – such as the approval of salaries over a certain amount, seeking further investment, or seeking debt investment.

You will also be expected to give certain warranties about your business (these are much easier to negotiate if your financial and contractual documentation is in order) and investors may look for assurances and safeguards around particular key individuals in the business who they perceive are essential to the success of the production. Such safeguards may include restrictions on what other business interests these key individuals can have, as well as incentivisation for managers and employees to remain with the company for the duration of the production.

It’s important to consider your position in relation to these matters ahead of time so that you are prepared for negotiation. SMB’s media team can assist at any stage of investment from advising on deal terms, to drafting and negotiating investment documentation as well as dealing with queries and disputes.

3. Consider your exit plan

It is also important to think ahead and to consider provisions relating to an eventual exit from the production company.  Your shareholders’ agreement or articles of association will need to cater for what happens when one shareholder wants to sell their shares to a third party, or where the majority shareholders have been offered a buy out and want to ensure that the minority shareholders are obliged to participate in that buy out.

You should also consider certain protections for yourself and the company in the event of a dispute or misunderstanding in relation to the investment monies or the direction of the production.

Additional support

SMB’s media team have extensive experience in assisting and advising production companies with financing and investment rounds. We are on hand to support your organisation, whether you are looking for small-scale investments from contacts, friends and family, or larger scale investments from media funds, strategic investors, or private equity funds.