Private Equity presents an opportunity for CAs
Private Equity (PE) faced a tough time in the financial crisis but now offers many opportunities for a CA with the right skill set. Ian Harper reports.
According to the British Venture Capital Association, UK Private Equity investment generated returns of 14.9% during the last decade, almost twice that of UK pension fund assets and the FTSE All-Share Index.
The PE sector covers just about everything from seed and early stage investment, to venture capital funds invested in early stage companies and to large and sometimes listed PE funds looking to build balanced portfolios.
Options and opportunities
Career options are varied and depend on the size and type of PE firm.
Andrew Carnwath CA, an Associate with Scottish Equity Partners (SEP), explained: “There are two main teams within most PE firms: investment and operations.
"Investment roles focus on identifying and evaluating opportunities, completing equity investments into companies and monitoring those investments and working closely with management teams to increase the value of the business right through to exit.
"Operations embrace a number of positions including finance and fund reporting, investor relations, legal and compliance, HR, marketing and PR.”
SEP provides venture capital of up to £20m for high-growth technology and technology-enabled companies and has invested in more than 150 companies, many of which have achieved global success.
Jane Reoch CA is Investment Director of Panoramic Growth Equity, based in London. Set up in 2009, Panoramic invests between £1m and £5m in fast-growing, entrepreneurial companies with a £1m plus turnover across a range of sectors.
She agreed: “It’s extremely varied. At larger funds, there are a number of options: deal origination, deal execution, portfolio monitoring and fund reporting . In lower mid-market PE, it’s normally a small team, working across all areas.
The skills are often kept within a small number of funds. It’s quite a unique industry in that respect.
“The best people with strong investment skills are a valuable commodity. Due to long-term profit-share arrangements, few people at a senior level are incentivised to move around the market and the skills are therefore often kept within a small number of funds. It’s quite a unique industry in that respect.”
Lynn Fordham CA is CEO of SVG Capital, a leading PE investor with net assets of more than £1bn, spread across a small portfolio of PE managers, such as Cinven and Permira, which give access to a broad cross section of investments.
She said: “PE combines the opportunity to effectively deploy capital and simultaneously work with outstanding management teams to build great businesses.
"As a leading investor in PE funds we’re fortunate to work with an exceptional portfolio of general partners who have consistently added significant value to the businesses in which they have invested.”
Mark Ligertwood CA, a Partner with Dunedin, a leading PE firm specialising in UK businesses with an enterprise value of £20m-£100m, commented: “The range of career options available and the active requirement for varied skills has increased as the private equity industry has matured.
"Alongside the more traditional investment roles, there’s now strong demand for experience in operational improvement, debt structuring, in-house legal counsel, finance, compliance, marketing, technology, HR and investor relations.”
The value of a CA
David Ovens is COO at Archangel Investors, a leading angel syndicate with 60-plus investor members which typically co-ordinates annual investments of more than £10m in early stage companies.
He said: “We have an experienced team with a range of skills encompassing domain expertise to specific financial and investment expertise.
"The CA qualification provides the foundations for the essentials of understanding how businesses operate.”
We look for commerciality, excellent communication and analytical skills, sound understanding of technology sectors and markets and exposure to high-growth businesses.
“The CA qualification teaches rigour, detail and robust risk analysis," Jane added. "These skills all have a read-across to making sound investment decisions.”
Lynn said: “I think a CA qualification is always desirable. It allows one to understand any accounts presented in a near forensic manner.
"In the industry there is a leaning towards science and engineering first degrees coupled with an MBA.”
“We look for commerciality, excellent communication and analytical skills, a sound understanding of technology sectors and markets and exposure to high-growth businesses," Andrew commented. "These qualities can transcend a number of different professional qualifications.”
The secrets of PE success
Neil Norman, Entrepreneurial Tax Partner at Chiene & Tait, said: “I’ve observed the following common themes in those who are the most successful in this space: driven, tenacious and optimistic individuals who are able to discern both opportunities and risks.”
“They tend to be tenacious, hard-working, not afraid to take calculated risks, possessing good inter-personal skills and a lot of personal charisma," added David Davidson, Corporate Finance Partner with law firm CMS.
In David Ovens’ view, the successful people are those who can align themselves with the management teams they are backing.
He said: “Knowing when to intervene is important, but letting management run the company is even more important."
The recession saw many talented, experienced investors leave the field, with the net result being a skills shortage.
Paul Munn, Partner at Par Equity and responsible for the firm’s property funds, said: “Finding the people with the skills required to pull this off is the more significant challenge.
"Simply, there are fewer people around with the skills and experience to structure a deal and follow it through. The recession saw many talented, experienced investors leave the field, with the net result being a skills shortage.”
Lynn added: “This is an industry built on long-term relationships. Integrity and reputation are important, as is the ability to identify and seize opportunities on both an individual company and an industry level.”
For Gareth Magee, a Partner at Scott-Moncrieff and an accountant who works in PE: “Private equity isn’t about the ‘all things to all men’ approach any longer. The secret to success is just the opposite – specialisation.”
Aiming to strike a gender balance
You won’t be surprised to learn that PE is male dominated.
Jane commented: “It’s fair to say there’s a low number of females in private equity. This is amplified at the smaller end of the PE market, and particularly within deal origination.”
A March 2016 article in 'The Daily Telegraph' claims that just 3% of female venture capital partners are women.
Jane said: “Those stats can be challenging both for females entering the PE industry, and progressing within it.
"There are also advantages. A diverse fund can be more approachable for management teams whose own businesses operate with mixed teams. The fund may also be viewed as a more fair and reasonable partner for the longer term.”
A diverse fund can be more approachable for management teams whose own businesses operate with mixed teams.
Gillian MacAulay, MD and Founder of the Strathclyde University Incubator, is one of the most experienced women in PE. She’s helped nurture 100 plus young businesses and is one of three women members of the Angel Syndicate.
She commented: “For me it’s important to get a balance. I haven’t got it yet, but I’m working on it.
"At the end of the day, I’m not here to make a political statement, I’m here to find investors.”
The full version of this article appears in the July/August 2016 edition of CA magazine.