Chris Woodhouse, who was parachuted into Homebase as finance director in March 2001 by private equity firm Permira, told Financial Director in February 2003 that management style in a VC-backed deal is based on a simple premise. “Those who are doing well eat well, and those who are doing best eat best,” he said.
The risk-and-reward culture worked well for Woodhouse. He helped increase operating profits at Homebase from £27m in 2001 to £86m in 2002, culminating in the retailer’s sale to GUS for £900m.
The slice of equity Permira gave Woodhouse and the senior management team was worth millions on his exit in May 2003.
But the Homebase deal was exceptionally successful in a business climate where deal activity has dried into a trickle. Suzzane Wood, head of financial management practice at specialist recruiters Odgers Ray & Berndtson, says that despite the attraction of a position at a private equity-backed company, the sheer number of FDs looking for work means VCs can take their pick.
“There are more FDs looking for work and private equity is a logical place to look given that VCs have the money to spend,” Wood says. “The only problem is the deals available. Many FDs have come out of the publicly quoted sector and may have had their fingers burned, so they logically may want to get out of the public arena for a while.”
Wood says there are three routes to getting involved in private equity deals. “If you have had previous experience, you make the top of the list. Further down the list is an FD who brings a deal to private equity companies. Number three is having the relevant experience and skills, which can be sector-specific.”
But with so many FDs jostling for the work, previous experience of VCs, or at least specialist-sector experience, is a must. “As soon as Chris Woodhouse was free from Homebase, he had his pick of private equity deals.
He was at the top of everyone’s list,” says Wood. “Private equity is still a viable route for FDs. The market isn’t dead. The only advice I would give is that there are so many FDs approaching VCs, unless you have something to grab their attention, you just become part of the crowd right now.”
Michael Queen, group FD at FTSE-100 venture capital company 3i, says that VCs look for a particular kind of FD. “The role I look for a finance director to play in the big buyouts we do is in many ways more challenging than the FD’s role in a big public company, where you are typically going to have very good support as an FD.
“In the deals we do, the FD has got much less support, needs to have the ability to combine a focus on the detail – the nuts and bolts of what’s actually happening in the business – with that strategic contribution. A lot of the FDs we appoint don’t have that (support), so they need a broader range of skills to do their jobs,” says Queen.
One FD trying to get into private equity deals is Oliver Robinson, who is currently looking for work after helping sell Delta plc’s electrical division to Eaton for £130m in December 2002. But Robinson is finding it difficult to get the right introductions to VCs. “It’s tough out there,” he says. “I’m using an online recruitment database, www.directorbank.com, but that seems a bit dead at the moment. One of my divisional colleagues did get a position through it, though. Apart from that, I am trying to get introductions to VCs. I don’t believe it’s worth sending in (unsolicited) letters. I am actively finding people who will put my name forward. I haven’t spoken to the VCs yet because I haven’t got enough names – only about 10 people within the VCs I can talk to. But I am nearing the point where I will pick up the phone.”
Robinson gets the names of specialists within VCs, and introductions from headhunters or referrals from people who have used VCs before and can recommend a particular person who may be interested in his experience. “Otherwise, you just waste your time and theirs,” he says.
Wood says FDs can always use headhunters and specialist recruiters, but sometimes it pays to deal directly with the VCs and put in some cold calls.
“Many private equity companies have a specialist in-house whose task is to meet with FDs who have experience that could be useful.”
Despite the market pressures, private equity deals are still the Holy Grail of jobs for Robinson.
“It’s something you sit and dream about,” he says. “The main driver is the strategic challenge of a VC-backed deal. But second, and very close to it, is being able to make some money.”
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