Private equity chair Peter Manning talks to Rachel Bridge at Drax about his plural life
Peter Manning's involvement in private equity came about in an unusual way. Having enjoyed a successful career in telecoms, which culminated in the role of Chief Executive at Colt Telecom Plc, he was busy building a portfolio of high profile corporate non-executive directorships across Europe.
Then one day he received a phone call out of the blue that would completely change the direction of his career, and indeed his life. The call was from Guy Hands, the Founder and Chair of Terra Firma, one of the largest private equity firms in Europe. He told Peter he had an opportunity for him to consider.
Peter says: “Guy asked me what I thought about local authority business process outsourcing. I told him that I hadn’t a clue about local authorities or business process outsourcing because I’d been in telecoms all my life. Guy’s response was, ‘Well that is exactly why I want you. I want a businessman who has no history with the public sector. This business needs a fresh approach.’”
The opportunity was a local authority business process outsourcing business called HBS. It had a strong forward order book but had some significant operational challenges. It was also quite capital intensive and was in danger of running out of cash.
Peter agreed to come in as Chief Executive with the objective of turning the business around. He quickly persuaded Guy to re-invest in the business and, just three years later, Peter and the new team managed a successful sale of HBS to Mouchel Parkman.
Peter left the business at the age of 51 well rewarded, but more importantly, with an incredible amount of useful experience.
He says: “It gave me two things, both of which were immensely valuable - my first successful private equity exit and a new sector, business process outsourcing, particularly in the public sector. Since that time the telecoms sector and the public sector have tended to be counter cyclical, so when one is down the other is up. Both sectors have served me well over the last decade.”
Peter also found working in the private equity sector very liberating after spending many years working in big corporates. He says: “It was incredibly refreshing. Private equity operates with different values, with a different risk/reward profile, and a different level of autonomy. You are completely accountable for a company’s performance, rather than being dependent on issues, often political, that are outside your control. It is all about results.”
After leaving HBS, Peter began taking on private equity Chair roles and realised that he really loved it. He says: “I like the plural nature of being a PE Chair, the fact that you are involved in a diverse set of businesses, each with their own challenges. As Chair you are in a unique position, working with investors and diverse sets of CEOs and senior teams, with the common goal of creating shareholder value. It is a continual learning curve which I find both fascinating and challenging.”
He adds: “When I look back now I could have easily spent the last 15 years of my career still working in the corporate world, doing very well, getting a nice salary and other benefits, but I am sure I wouldn’t have had as much fun!”
Peter’s most recent Chair roles have included Marston Group Ltd, the UK’s largest judicial services company, which achieved a spectacularly successful exit in September 2017 for Inflexion Private Equity.
He is clear about the qualities needed to become a good Chair: “You need to be willing to take a risk and have good interpersonal skills: specifically you have to be a good listener. People will really respond to you and you will gain their respect if you make it very clear that you are there to learn and add value rather than to just tell."
He adds: "You also have to really understand what drives private equity, which many chairs find initially quite challenging. Investment criteria, leverage finance and exit strategy are as important as understanding the opportunities and challenges facing the business itself. You need to have empathy with the chief executive and an appreciation for what he has achieved, as well as his strengths and weaknesses, and then use this as a common base for you both to grow the business.”
Peter says that a big challenge facing today’s private equity industry is the lack of quality assets to invest in. He thinks that with the high multiples often being paid, it is more important than ever that private equity houses choose a strong and capable Chair to guide the business.
With such a strong track record, Peter is now in the enviable position of being able to be selective about the companies he decides to work with. Having sold Marston Group in 2016 and retired as the Chair of City Fibre Plc in January 2017, he is now Chair of Cablecom Networking and High Speed Office, both Telecom investments. In July 2017 he also became Chair of K2, an Inflexion investment, which is the global leader in consultative and technology-enabled recruitment.
When choosing a company he looks out for several key characteristics. He explains: “I look for companies that have an exciting product or service that is unique and difficult to emulate. I like quality assets and am not scared of paying a good price as long as there is good growth potential, solid recurring revenue streams and at least the potential for strong cash generation. Finally, I like management teams that are hungry and up for the fight! An aggressive plan that underpins a clear ambitious vision, owned by a team with energy to deliver either organic or inorganic expansion is the formula for success.”
Peter describes the relationship between the Chair, management team and private equity house as a triangle, with the Chair in one corner, the private equity house in the second corner and the management team including the CEO and the CFO in the other.
He says: “Making that triangle work is critical. And it is a triangle; it is not a line which goes from private equity house through the Chair to the management team. As the Chair I am not a buffer or a political barrier; I sit outside of that and try to use appropriate and effective communication techniques, governance and operational experience to make things happen. This arrangement avoids confrontation between the private equity house and the management team, it clarifies my role as an independent third party and it allows me to understand and respond to the needs of both the private equity investors and the management team. The triangle is really important.”
Drax chair lead: Nick Harlock
Director, Chair Network
Tel: 0203 949 9559
Drax sector lead: Ruby Sheera
Director, Technology and Tech-enabled business
Tel: 0203 178 3668