Peter Chappelow is an experienced Chairman who has worked with a number of private equity backed businesses.
Having initially enjoyed a successful executive career in the direct marketing and consumer brand space he then moved into the private equity arena as a non-executive Chairman supporting management and private equity houses in developing and growing their businesses towards exit.
Since 2002, when he started his private equity Chairman career, he has had many notable successes which include M&M Direct, Bounty, Education Travel Group and Hotter Shoes.
During this time he has worked with 3i, ECI, Gresham, Bowmark, Rutland, Dunedin and Electra and has become well known and respected in the private equity community.
Peter is currently Chairman of OKA Furniture (an online luxury furniture retailer) and CVS (the largest corporate rates advisor in UK).
1) What led you to become a Chairman and what attracted you to the private equity arena?
As a CEO I had done a turnaround for 3i which was quick, stimulating, quite easy and very lucrative. When I left TTG I thought of retiring (aged 54) but got bored very quickly!!!
I liked Private Equity because it would give me a series of interesting challenges, link my primary reward with that of the main equity holders, and I would be working with very, very bright focused people.
However, it is not easy to get on their radars as there are no meaningful central databases; you simply have to get networking. I saw 156 people before I got my first Chair position, not easy when you live "oop North", but probably testament to my persistence and determination!! Then it was like buses coming along and I had 8 simultaneously at one time.
2) What are the key attributes you look for in an opportunity and what are the things that raise alarm bells?
I have to trust my instincts on the prospects for the business. This has meant, of course, that I have turned down some opportunities which turned into great businesses but equally I have not had any failures.
I need to feel empathy and some chemistry with the CEO and will turn it down if I do not feel that we can create a good partnership – this happens mainly when I believe the CEO is too arrogant to listen/debate or simply too limited.
I need to feel chemistry too with the private equity house but this is rarely an issue. In retrospect I have been frustrated once or twice by signing up with people who were so "know it all" despite never having run a business that I could not understand why they had bothered to appoint a Chairman. This usually leads to an early discussion along the lines of "am I the Chairman or are you?"
Also I need to look at the potential reward on exit for myself as it is 4 or 5 years of my life I am committing too, and I am very, very focused on shareholder value.
Lastly I need to be comfortable with the leveraging and ability to deal with any stress on covenants.
3) How do you approach the period immediately post completion – agreeing the governance regime, ensuring strategy implementation and establishing communication and protocols?
This is a very busy and important period. I take time getting to know the business and key people in detail before I have any firm opinions, usually up to 6 months.
We have to agree KPIs, board pack structure and content, create a methodology to agree the detailed strategy and forecasts and establish proper corporate governance (audit committee, health and safety, etc.) It is likely that I will need to change the management team and structure, so recruitment of outstanding performers is vital and my track record is good.
The role of an independent, non-executive Chairman is self-explanatory but poorly understood. Firstly, I am truly independent and understand that the responsibilities of a company director for corporate governance take precedence over shareholder views on certain issues – I have never had a conflict situation but fully understand they could arise. Therefore I have to be respected for my wide experience and the range of difficult issues I have dealt with over the years, not that I am always right of course.
Overall my primary responsibility is to optimise shareholder value and this drives everything as nothing can be allowed to damage this, thus I am available 24/7 and insist my senior executives are likewise – it is rarely needed but sets the right culture.
4) Does this differ whether it’s a primary or later stage buyout?
Yes it does make a vast difference usually as many of the building blocks will be in place. Even so, the executives may not be suitable for the next stage of the journey.
If a business has gone from £5m EBITDA to £15m, for example, then the next investor may be looking to take it to £40m. So the executive skills needed might be different, or at least some of them.
5) As the investment progresses do you see your role change or evolve as the business and the management delivers against the strategy?
Yes it does change a lot. Usually once the strategy and key executives are in place, assuming progress is as forecast, my role becomes more external in terms of making the market aware of the success we are achieving and starting to plan for exit. When my companies become available for exit there is usually a pipeline of interested parties.
Along the way if the business hits roadblocks in performance it is my job to recognise if these are not being dealt with and formulate appropriate actions.
6) As a business nears exit, again, how does your role and particularly your relationships and protocols with both the private equity house and the management change?
My relationships with those parties don't really change but when we get to the stage of appointing advisors I become more of an onlooker, whilst still ensuring that the business performs. Also it is a fact that exits don't always come off at first so I have to keep everyone focused in case this happens.
I always have a relationship with management whereby I advise them on what they should look for with the next owner and ensure they get good, independent advice. Also I am a sounding board on the suitability of the bidders for them.
In a way it is a frustrating time for me because I have been an integral part of the journey and personally recruited many of the team and then have to walk away from what has been an enjoyable and big part of my life for the last few years.
My worst experience was when I sold Holiday Cottage Group to Cendant on behalf of TUI. I had turned the business around, been CEO and then Chairman. The final part of the exit was as protracted as usual and Cendant spent three days camped out down the road in a hotel whilst lawyers wrestled with the final details. Three days in a row I was at my desk until midnight and the deal did not go through so I went in the next morning to lead the business as usual. Then it went through at 10pm on the fourth night and I put my office bits and bats in plastic bin liners and had a very sad drive home, never to return of course.
7) Following an exit of one your companies to private equity do you tend to remain involved or is it better to move on?
I have been asked a few times if I would stay on but have never been certain if this was genuine or an attempt to influence me. In any case it is a clear conflict of interest so I do not encourage it. Also I seek stimulation and fresh challenges – but it might happen one day!!!
Conclusion – what do you see as the main attributes of being a good private equity Chairman?
The main attributes of being a good private equity Chairman are:
- Be truly independent
- Ensure you recruit great people
- Monitor the KPIs remorselessly
- Be a leader of strategy
- Always be able to resolve problems
- And, most importantly, achieve outstanding shareholder value - never lose focus that this is your whole raison d'etre!