Posts Tagged ‘private equity’

European Operating Partners in Private Equity

Wednesday, May 9th, 2018

I am moderating a fabulous panel at today’s pre-eminent gathering of Private Equity Operating Partners in Europe. Hosted by THE industry publication, Private Equity International. We are covering a host of “hot” and provocative subjects: the GP/LP dynamic, the myths of value creation and accountability, fee transparency, when to kill the deal in an overheated market, equitable sharing of “carry” between the deal and operational members of a GP and so forth.

My “guarantee” is that some of your beliefs will be challenged, you may feel uncomfortable but you will walk away with practical insights.

Joining me is a group of diverse Limited Partners and their advisers from MAC Assets Management (a single Family Office), Clearsight Investments, Hamilton Lane and Stepstone Global.

Here is a sneak preview:

Check back later this week for a list of key learning points from this panel and the entire 1.5 days of programming including fascinating insight from Justin King, former U.K. supermarket supremo and now Terra Nova value creator  on the future of consumer retail stores.

 

 

 

 

Snow Joke

Monday, February 5th, 2018

Climbing out of a snow drift back onto a piste for a first-time skier is hard if you have never done it before, “raising money” from investors is equally hard for a first-time entrepreneur or private equity manager if you have never done it before. I have helped tens of people with both challenges. Yet I run into smart people weekly, who have been a success in the past but refuse to act today like a success when it comes to investing in their own development.

The common factors for success are do you possess the requisite combination of skills, behaviours and expertise to accomplish your goal (climbing a mountain or raising a fund)? If not, can you find someone, who has successfully accomplished what you are seeking to do, and possesses the skills and volition in the real world to help translate and transfer their success to you (qualified expert)? If you can, hire them. If you cannot or even refuse, you are seeing the problem. The pathway is either excessively risky or ambiguous for even experienced individuals or your own behaviour is contributing to your difficulties. Which is it?

© James Berkeley 2018. All Rights Reserved.

Capital Reality

Friday, December 15th, 2017

I just finished reading a quite brilliant book, Lifestorming by Alan Weiss and Marshall Goldsmith. Marshall reminds the reader of one of his most powerful learning points from arguably one of the smartest minds over the past century, American businessman, Peter Drucker. I smiled when I reflected upon how frequently I am asked to correct this behaviour in my own work, particularly amongst entrepreneurs and private equity investors building businesses.

An excessive amount of time is wasted

  • Trying to prove how right we are (brilliant idea, investment decision-taking) and how good we are (vanity) with ourselves and our key constituents when the real objective should be to maximise the positive difference we are able to make in the life we choose to lead, and the world we live in.
  • Trying to control events or issues where we have ceded or have zero power over the outcome.

The private equity or venture investor doesn’t have to invest. The entrepreneur doesn’t have to accept the investment. When they do accept majority investment, the entrepreneur ceases to have the ultimate decision-making power. Don’t whine or somehow think you retain superpowers, you really don’t, concentrate on making a positive difference within those constraints. If you don’t like the constraints, let it go and move on. The same applies to capricious General Partners feeling that the private equity model is underappreciated in the wider world or when power has shifted from their investee businesses to their customers or competitors.

A case in point, yesterday’s headline sale to Disney of large chunks of the Murdoch empire, is just that recognition that the Murdochs cease to have the power to positively impact their family’s and their assets’ future within the constraints laid down (market competition). Letting go is a common sense response, nothing more.

© James Berkeley 2017. All Rights Reserved.

It Is Really Not About You

Friday, November 10th, 2017

 

Why do so many seasoned, and less seasoned entrepreneurs seeking to attract new investment shoot themselves in the foot? They are rarely short of industry knowledge but they are woefully lacking the process skills and critical thinking to attract serious investors. Acquiring investment is about investors. An investor validating their own judgement, no one else’s.

Yet all I here at the outset, is how great the entrepreneur’s business skills and judgement are, wrapped up in their business model and growth plans.

When I push back and ask, “what” (strategy) have/are you doing to help your ideal investor validate their own skills and judgement after they are done with your investment? I am invariably met by a blank stare. That is compounded by my supplemental question, “how” (tactics) have/are you planning to help your ideal investor validate their own skills and judgement when they are done with your investment?

In the absence of a strategy and tactics for creating powerful, sustainable and profitable partnerships with  investors, an entrepreneur’s mission will never be met and manifest. Here is three powerful lessons from my most successful clients:

  1. Raising, deploying and realising capital is a “process”, not a small number of events. It has a “before” (trust, relationship building, conceptual agreement culminating in agreed terms), “during” (effective implementation, impressive value creation, robust risk mitigation) and “after” (planned disengagement, rapid realisation of committed capital plus impressive gains, efficient remittance of resources). Or to put it crudely, cash and resources “in”, cash and resources “out” / time period.
  2. Timing has a “hierarchy of priorities”. (1) the investor’s financial, intellectual, social and cultural needs (most only think about the first need and rarely consider how those are changing in the lifetime of the investment), (2) the availability of an appropriate exit to ensure the investor’s objectives are met and (3) the  future of the business.
  3. They think and act like a successful investor. An investor thinks with logic but acts on emotion, although in some cases the latter might be as heard to discern as Robert Shaw’s face in that infamous card game on the smoke-filled train carriage to Chicago, in my personal favourite, The Sting.

Uncovering The Investor’s Logic and Emotional Reasoning

  1. The reward logic behind the deal. How might it meet or exceed the investor’s need for capital preservation and capital gain, the return on the investor’s intellectual time invested, the social impact met and the cultural benefits accrued (for example, greater affinity with like-minded investors)?
  2. The risk logic behind the deal. What is the seriousness and probability of foreseen and unforeseen obstacles with the deal preventing the investor meeting or exceeding their desired outcomes? Then, what preventative and contingent actions can realistically be applied to arrive at the deal’s “ultimate net risk”?
  3. The sum of the above is the investor’s “great deal” logically. We are not finished yet!
  4. The emotional rewards behind the deal. How might the emotional imperatives of the investor (“reward”) be transformed (repute, peer recognition, trusting relationship with the General Partners and co-investors, promotion prospects, larger bonus and share of carried interest, ego, greater responsibilities, career development, future capital made available, new fund created, more impressive future dealflow presented and so on)?
  5. The emotional risks behind the deal. What is the seriousness and probability of foreseen and unforeseen obstacles with the deal preventing the investor meeting or exceeding those desired outcomes? Then, what preventative and contingent actions can realistically be applied to arrive at the deal’s “ultimate net risk”?
  6. The sum of the above is the investor’s “great deal” emotionally. That is what they are going to make their final decision based on. Are you investing sufficient time and energy in the right area? Are you thinking it through smartly? My guess is most entrepreneurs are spending 90% of their time on the logical reasoning and perhaps 10% on the emotional reasoning when it probably needs to be inverse. Why would you do that?

The smart readers will quickly grasp that a PowerPoint deck or teaser is largely worthless at addressing the latter. You need absolute credibility. You need to take time to build a peer-level trusting relationship. You need to ask powerful questions in a way that the investor is willing to reveal his or her priorities. The shorter the question, the more the investor will reveal. It crystallises it for them. “What are your hopes? Why? What are you fearful of? How did you get to your position?” Frame the question, listen and follow up in a smart way. You cannot coerce or motivate them.

Your job, as an entrepreneur, is to aggregate and connect the dots for the investor. To convert, the credibility and seductive rapport into committed capital with the use of powerful language and a compelling interface for the  investor.

After reading this you may very well panic and spot a yawning gap in your skills and techniques. That is OK, find an entrepreneur, who has done what you successfully seek to do and who can translate and transfer it to you.

A word of warning, a great many advisers don’t qualify, nor do a great many entrepreneurs, who are inept at the translation and transference. Hire qualified advice sparingly.

© James Berkeley 2017. All Rights Reserved.

 

Lifting The Cloak Of Private Equity Secrecy

Monday, June 26th, 2017

 

 

How do you tell whether a private equity investor is “absolutely credible”? Realised investments, success stories, lists of co-investors, testimonials, references etc. are all valuable but can I actually see their intellectual property? I am referring to the availability of tangible communications (articles, presentations, models, audio, video etc.) encapsulating the investor’s best ideas, experiences, education, managing cultural change etc. – their intellectual capital – synthesised or recombined  into value for the would-be seller or top management. In almost all cases, the answer is a resounding “no”. You are asked to take it on trust.

I asked a serial CEO, and now Board Chair and Senior Adviser to many of the world’s largest private equity firms, how the secrecy helps the private equity investor? He was largely at a loss to explain it apart from avoidance of past PR bloody noses.

Would you allow a surgeon to operate on your heart or the school to teach your child without a pretty clear understanding of how they think and operate, beyond the odd PowerPoint presentation or a few lunches? The time has come for more humility from private equity investors of all shades. That doesn’t require them to diminish their own worth rather to accept that greater transparency upfront is an accelerant to higher levels of trust with their key constituents and superior short and long-term performance.

© James Berkeley 2017.

In The Eye of A Private Investor

Monday, June 5th, 2017

 

You are a C-suite executive or senior manager (probably with a successful career in a mid and large organisation) flirting with future advisory roles (Operating Partners, Senior Advisers and so forth) with private investors (Family Offices, Ultra High Net Worth individuals and some funds) and their portfolio companies. I meet half a dozen a month. Are you looking through your lens or that of the investor’s? When I ask bluntly, “why would a private investor be interested in you?”, most default to regaling their past (skills, expertise, accomplishments) or they way they like to work (imparting advice, influence, guidance). Here is the tough news, most private investors really don’t care. They want to know about

  • the “transformative value” (TV) for the investor after the Adviser has applied their past to the future of their investee businesses (logical reasoning – increased revenues, stronger brand, faster growth etc.)
  • the speed and quality of the “validation” (V) for the investor’s own reasons to back or not, a specific business (emotional reasoning – “am I going to look good”, enhanced credibility, mitigate personal risks, obtain future opportunities or relationships with peers, other investors, investee businesses etc.).

TV * V = Private Investor’s return on investment or “Great Deal”

“What”, “where”, “when” do you score highest as a potential Senior Adviser? Why? How do you get to those private investors with the highest need for that value?

Keep that equation and those critical questions uppermost in mind BEFORE you walk into your first meeting with a private investor.

© James Berkeley 2017

The Uncomfortable PE Investor

Friday, May 19th, 2017

Whoever taught a young investor how to create great relationships? The thought dawned on me leaving a meeting with two forty-something European mid-market private equity investors. One was open, welcoming, used self-disclosure and possessed a mindset that actively encouraged reciprocal exchange of ideas, names and insights. The other, hid behind a corporate ethos of privacy, rarely showed interest in reciprocity and maintained a mindset that he knew everyone worth knowing. The former is a top performing fund manager running a $500M fund with over 6 closed deals in the public domain this past 18 months, the latter recently closed his first $200M fund with zero visible public success. If you were a limited partner or an entrepreneur, wouldn’t you have expected the exact opposite traits given the track record and profile?

Private equity is first and foremost a relationship business. Relationships based on trust and value. Developed by creating a seductive rapport (personal chemistry, powerful intellect, effective use of language) with entrepreneurs, limited partners and advisers. Manifest by converting that seductive rapport into deals closed, value created and profitable exits that create a “win-win” situation for the firm’s key constituents. Yet it seems a great many leaders in European private equity firms are totally complacent about their fund managers’ relationship building skills and behaviours, believing that financial acumen and capital alone will lure outstanding entrepreneurs with outstanding businesses. That is crap but hey, they’ll wait for 10 years to find the errors of their ways. In which time, the Fund Manager will have collected his monthly check, been promoted twice and sit smugly admiring his or her personal bank statement.

© James Berkeley 2017. All Rights Reserved.

 

Exclusive Invite: Private Equity International’s Operating Partners Forum

Thursday, April 13th, 2017

Intrigued by what a private equity operating partner does, the value they create and the critical issues (digital, strategic, operational) in European private equity now and the next 12 months? Here is an exclusive invitation.

I am back for a third year moderating a panel session (3/4 May, 2017 IOD London) with a great cast that includes a former CEO of one of Europe’s top-ranked private equity firms, a Cambridge-educated Austrian doing great work in infrastructure investing and an Italian transforming the fortunes of a German Family Office. If you have an iota of interest in value creation, join me at Europe’s pre-eminent event featuring 70+ operating partners and 30+ limited partners in intimate surroundings.

http://www.cvent.com/events/operating-partners-forum-europe-2017/event-summary-c2532f5d6ccc4666acd807e72568cbf0.aspx

Here is a deal, sign up using this code and receive a 15% discount off the registration fee (OPspeaker17) PLUS for the first six subscribers I am buying breakfast on Day 2. There are currently 4 seats remaining.

There is no other such gathering for the remainder of the year. If you are unable to make it but interested in receiving a quick “free” checklist of the key takeaways, drop me a note to james@elliceconsulting.com. I’ll make sure that you are on the distribution list.

© James Berkeley 2017. All Rights Reserved.

Interview With Me: Forbes

Wednesday, February 8th, 2017

Forbes contributor and former Reuters reporter, Ralph Jennings, interviewed James on the discrete “welcome mat” likely to be laid out by the Trump presidency for ultra high net worth Chinese entrepreneurs directly investing into the United States. Politics aside, expect pragmatism to prevail.

Why Trump Will Let China’s Smart Elite Invest In The U.S. 

http://www.forbes.com/sites/ralphjennings/2017/02/07/trump-is-open-to-investment-from-chinas-smart-elite/#4a7d1a135fcb

Interview with Me: Financial Times

Tuesday, September 27th, 2016

The Financial Times Wealth Correspondent, Hugo Greenhalgh, sat down with James to discuss the impact of wealth creation, investment and the stark changes occurring in parts of London’s fabric since he first arrived in 1986.

Dickens’ “Greatest Thoroughfare in London” Subsumed By Coffee Chains

https://www.ft.com/content/328a7ccc-7bfa-11e6-b837-eb4b4333ee43