Newcastle’s Sapphire HR buys Manchester firm after Northern Powerhouse funding

The company which aims to remove the burden of HR services has had its second round of funding from the Smaller Loans fund

A North East HR firm has acquired a company in Manchester after securing a second round of investment from a Northern Powerhouse fund. Newcastle-based Sapphire HR has received a six-figure sum from the NPIF – NEL Smaller Loans fund, which managed by NEL Fund Managers as part of the Northern Powerhouse Investment Fund II (NPIF II).

The sum has led to the deal for Sapphire to buy Manchester-based Heads HR Limited, as well as refining its marketing strategy in a bid to accelerate expansion. Sapphire HR, which provides HR solutions designed to alleviate the stress of HR management for small business owners, received its first round of investment in 2024.

Since then, the business has recruited two new HR advisers and significantly grown its client base. It is now looking to accelerate its next phase of growth in the education sector and to develop specialist teams within primary care, social care, the NHS and education.

Michael Dobson, founder and managing director at Sapphire HR, said: “I’m delighted to have worked with the teams at NEL Fund Managers, Clive Owen and Swinburne Maddison on this funding round. The unfailing support and guidance throughout the process have been invaluable, enabling us to realise our growth ambitions, and expand by acquiring another specialist team to provide HR services to the education sector and schools across the country from this team’s base in Manchester.

“The team at Heads HR have built a loyal client base over the last 10+ years and we look forward to working closely with the team over the coming months as the business moves forward with this exciting new chapter. This acquisition positions us to capitalise on the significant opportunities ahead as we continue to strengthen as a business and deliver HR solutions to a UK-wide client-base.”

Susan Snowdon, NEL investment executive, said: “As a previous investee, I was delighted to work with Michael and the team again and continue our strategic partnership. With this new investment, the business is well positioned to drive sustainable revenue growth, and I wish them all the best.”

The company was introduced to NEL Fund Managers by Michael Cantwell, corporate finance partner at Clive Owen LLP, who oversaw the transaction alongside Craig Malarkey, partner at Swinburne Maddison LLP. They were supported by Joe Vera-Sanso, corporate finance executive, and Sophie Ayre, corporate associate solicitor.

The £660m Northern Powerhouse Investment Fund II, which is operated by British Business Bank, covers the entire North and provides loans from £25,000 to £2m and equity investment up to £5m to help a range of small and medium sized businesses to start up, scale up or stay ahead.

Sarah Newbould, senior investment manager at the British Business Bank said: “Having initially supported Sapphire HR at the end of 2024, we’re proud to see NEL providing further funding to this ambitious business through NPIF II. NPIF II is committed to backing businesses throughout their growth journey, allowing them to pursue new opportunities. It’s investments like this that can help to broaden a business’s reach, unlock new markets, create high-quality jobs and, ultimately, build a stronger Northern economy.”