Plural private equity Chair Paul Lester talks to Rachel Bridge at Drax about bringing balance and experience to the Chair role
Paul Lester has a simple piece of advice for anyone thinking of becoming the Chair of a PE-backed business: “Don’t take on chairmanships of businesses that you don’t understand. Stick with the markets you know.”
Unfortunately Paul himself had to find this out the hard way. Despite having spent all of his career in construction and engineering, he once agreed to chair a legal business made up of 2,500 lawyers. It was a big mistake. He says: “It was a nightmare. It drove me mad. Trying to get lawyers to change their culture and go in a different direction made Parliament look like a walk in the park.”
Before going plural, Paul had a succession of senior executive roles within the construction and engineering industries, starting with the role of CEO at Graseby, the engineering firm. He then became group Managing Director of Balfour Beatty, the construction company, before becoming CEO of VT Group, the support services firm. During this time he also gained a good understanding of how private equity worked through sitting on the advisory board of John Moulton’s private equity firm Alchemy for several years. So when VT Group was acquired, Paul decided to create a second career as a Chair for both private equity and plc companies.
Paul quickly realised that drawing on his previous industry experience and knowledge could really help add value to a PE-backed business. He says: “Private equity houses are full of very bright people who can easily pick up the dynamics of a business and an industry, but they haven’t got the depth or the knowledge and they don’t know all the players. That in-depth knowledge is what the Chair brings to the party. If you have got good contacts and know what is happening in an industry, you can really support the management team.”
He is currently Chair of three PE-backed businesses , FirstPort, Appello and ReadyPower, having recently stepped down from Forterra, the brick company, after a successful IPO. He is also Chair of two public companies, McCarthy and Stone plc and Essentra plc. Paul has so far seen through four PE exits in eight years, three of which made a considerable amount of money for the shareholders.
Paul says that the characteristics he brings to the Chair role depend largely on what the CEO is like. “I always play a role that balances with the CEO, so if I have got a very optimistic CEO who thinks that everything is fantastic, then I will be the other side of that, being more critical and saying well this could go wrong, that could go wrong. If it is the other way round and I have got a pessimistic CEO, then I will be pushing the optimistic button, saying, we can do this, or that budget is really low and we should be aiming higher.”
He explains: “If you have got two optimists running a business you will end up in trouble, but if you are both pessimistic you won’t go anywhere. Because I have got a lot of experience and have seen all sorts of management styles, I can find a good balance.”
One of the secrets of being an effective PE chair, Paul says, is understanding how to manage the relationships with the PE house and the CEO. He says: “It is important that both sides feel that you are working with them and adding value for them. The ultimate outcome is where the management feels that you are batting with them - and where the shareholder feels that you are batting with them.”
It is also important to be able to maintain good lines of communication between management team and PE investor, he says: “Obviously you chair a board once a month but it is important to have dialogue in between, so there are no surprises. I always encourage the shareholders to have access to the CEO and the management team. You have got to have a very open management style so that nobody is hiding anything and everybody is kept up to speed.”
He offers this advice to first time Chairs: “Make the private equity people feel they are part of the team so that when you are all together you can have a really open discussion. They are bright and they have good ideas and ask good questions. I always tell the CEO to see it as free consultancy and throw problems at them, because they are good problem solvers.”
Drax sector lead: Stuart Jansze
Tel: 0203 949 9536