Private equity portfolio Chalr Jim Faulds talks to Rachel Bridge at Drax about the joys and challenges of his role
When Jim Faulds sold his highly successful advertising business, Faulds Advertising, his first idea was to become a day trader, trading stocks and shares on his own account.
But other people quickly realised that the experience he had gained in advertising could be immensely useful to private equity. Within two months Jim had been appointed to three board roles in private equity-backed businesses, and a new career was born.
He says: “Without me knowing it, running an advertising agency was terrific training for private equity because of the skills I had developed in maintaining relationships with the Chief Executives and Chairs of client businesses. These people were challenging to deal with, so I needed to be diplomatic and persuasive and have good emotional intelligence. I also had to be very quick and adaptable in understanding the core strengths and weaknesses of a business and knowing about a lot of different sectors.”
Jim also discovered that having set up and run his own business for 16 years was immensely helpful in giving him an insight into the challenges that PE-backed CEOs face. He says: “Having set up my own business from scratch I knew the pressure they were under because I had experienced it myself. It also helped me to communicate with them and win the respect of management teams because they recognised that I had already done what they were doing.”
Since that accidental start in private equity, Jim has held 15 portfolio Chair roles, mostly in business support services, and overseen ten exits, including Jumpstart, an R&D tax consultancy, Ipes, a financial services business, and Atlas Knowledge, an online training business. He is currently Chair of FMP, an international payroll company and Chair of National Timber Group as well as Non-Executive Director of Evaluate, a data company.
As a PE-backed Chair, Jim says he particularly enjoys the challenge of managing the relationship between the private equity house and the management team of the portfolio company.
He says: “The relationship between the private equity investor and the management team is never as strong as the private equity investor thinks it is. You have to either create or maintain the harmony between those two, because as you get to exit, you need to be aligned and you need to be one team. My role is to make sure that as we get to exit, the buyers can’t see a shaft of light between the private equity company and the management team, and that everything they do is for the common good. You are dealing with very intelligent, demanding people on both sides who have strong views and most of the time you need the diplomatic skills of Henry Kissinger.”
He has learnt to balance the needs of both sides. “You need to have the sensitivity and awareness to spot issues at they arise. Sometimes I have said to private equity investors, could you back off a little bit because you are upsetting the management team. At other times I have said to the management team, stop moaning about this because it is not really material. Sometimes it is just a bit of wise counsel that is needed.”
Indeed Jim chooses his Chair roles largely on the basis of the management team, saying: “The key for me is the management team and whether I will be able to work with them. What I don’t like in a board room or in a management team is ego. Ego destroys value. So I look for teamwork and a constructive way of working, so that the sum is greater than the parts.”
He offers this advice to someone taking on a PE-backed Chair role for the first time: “You need to quickly understand where you are needed – where the company needs you, where the management team needs you, and where the investors can get comfort that you are doing the right thing. I have been in situations where I have been very involved and others where it has been appropriate to be more hands off. You can never predict where you will add the greatest value; you just have to be alive to that moment when it comes and be ready to do your bit.”
Drax sector lead: Ruby Sheera
Partner, Technology and Tech-enabled businesses
Tel: 0203 949 9555