We talk to an experienced CEO about the lessons he has learned from taking a business into and out of private equity ownership

Ian Beswetherick has been through a variety of M&A transactions in the last decade with a mixture of private equity ownership, coming out of and going back into large listed corporates and driving growth both organically and acquisitively in the UK and internationally.

We asked Ian to share the experiences of an executive going through their first Buyout and moving from a large corporate environment to a private equity backed structure.

1) How did your Buyout opportunity come about?

Our business was owned by the advertising and creative division of Havas, Euro RSCG.  This sector had experienced tough times as brands cut spend and the market became more competitive.  So Havas decided to sell off the less core businesses in its portfolio and we were one of them.

2) How involved were the management team in the process and what were the expectations & concerns of the team?

In reality we were passengers in this process, it was something that happened to us rather than being driven by us.  Understandably there was a lot of anxiety about the situation and the expectations of the new owners – we had never been in this situation before and did not have people we could turn to for advice.

Our naivety meant we became overly focussed on the diligence process to the detriment of running the business day-to-day.  In subsequent processes, our CFO led proceedings and we only involved the wider team as and when their area came under review.

3) How did life change following the Buyout?

Our new investors, ECI Partners, were a good fit for us and were empathetic to our challenges and the changes we needed to make.  The first year was tough, as we had to shift the business into growth mode, but we had a good team and a strong Chairman in Peter Chappelow so by year two everything began to click.

4) Under private equity ownership what were the key drivers of growth and transformational changes in the business and how involved was the private equity house in initiating & leading these initiatives?

The biggest driver of change under ECI was picking the right Chairman and then creating the right environment in the boardroom.  We moved to monthly board meetings and everyone was clear about their accountability  which delivered a step change in momentum and creativity.

When you are growing a business, 50% of the success comes from getting the strategy right in the first place and the other 50% comes from how you react to the inevitable challenges you will meet along the way.

5) How did the private equity ownership experience change the culture and outlook of the business and management?

For us it was very positive; the business was able to take on bigger and bigger challenges and anyone involved in the management team became more accomplished business people going on to further their careers to a greater extent than they probably would have done without the experience.

The key learning was that you don’t grow a business by only focusing on the money aspects.  You will be considerably more successful if you understand what your business means to its customers & stakeholders and get great at delivering that.

6) Having enjoyed the growth and challenges how did the exit then come about, what was the outcome of the sale process and did management approach this process differently?

We were acquired by a Canadian online company, Kaboose. They had been on a digital acquisition spree for a number years.  They were listed on the Toronto Stock Exchange and were very skilled at raising funds.  They owned a number of small online companies in the parenting space in North America and needed our off to online capabilities to balance their group

During the process we kept the team focused on growing the businesses and sometimes pushed back on due diligence requirements if we felt they went beyond the brief.  Our main concern as a management team was the pressure to transfer our proceeds into the stock of the acquiring company - we knew very little about them and could have been passing over significant value.   We eventually agreed a deal that everyone was happy with but it does again reinforce the need for independent management advice, as there will always be a point in a deal where the interests of the seller/buyer and management diverge.

7) In conclusion, what key tips would you give to management teams considering a buyout or being sold by private equity?

Buckle up!  The rewards are there but it will never be an easy ride.  You will need to drive more momentum and creativity then you ever have before.  If that’s not what you want to do, go and try something else.  Not everyone that starts the journey is guaranteed to finish it.

Simplify your business and prioritise.  You will be heavily focused on a growth agenda, but profit and cash-flow are paramount at all times.  So make sure you are clear about where growth will come from, what the KPI's are and how you will track them.

You have more influence than you think, but don’t expect the world.  Seek independent management advice separate from the deal advisors.  There will be terms you are asked to sign up to that will worry you at first, but are quite normal in a buy-out – an experienced advisor will give you the reassurance you need.