Sebastian Henkes, the Co-Founder of Sabio, talks to Rachel Bridge at Drax about taking their technology business through private equity investment and beyond
Sebastian Henkes took some time to work out what he wanted to do in life. He initially thought about becoming a doctor, then considered sports medicine, sports marketing and law, before eventually joining a communication technology company at the age of 25.
He says: “I wanted to learn more about business communication technology because I felt that it had begun to drive the way in which organisations were structured and operated.”
It was a smart move. While he was there, he and four colleagues decided to start a business together, Sabio, to provide voice and data technology solutions to business customers.
They funded the start-up on a shoestring, using a spare bedroom as an office and sharing a computer. Within a few months they realised that the real opportunity lay in providing solutions to the rapidly growing call centre market which relied on communication technology to operate effectively.
The five of them – who became four equal partners when one left after three years – expanded the company’s portfolio into providing technology solutions for a growing range of customer engagement channels. Sebastian was appointed Managing Director and the business grew entirely organically, without taking on any investment or debts.
After 16 years, the founders decided it was time to review the long-term opportunities for them and the business, but they faced a problem. Having been so externally focused on their customers and internally on their people, they had never properly considered what the business might look like to a prospective investor.
Sebastian says: “We hadn’t set the business up for how it looked to the outside investor world. We didn’t have any real understanding or experience of that world.”
So they brought in Lee Shorten as a non-executive chair to help them prepare the business, including developing a senior management team, which would enable them to explore different strategic options ranging from PE investment to taking on debt to trade sale or flotation or simply taking more of a back seat as ongoing owners. But while they were still in the middle of that process they were approached by the private equity house Lyceum Capital Partners (now Horizon Capital).
The four of them approved of Lyceum’s plan to support Sabio on its existing journey, and to back it with funds to make acquisitions and to bring in transactional experience and expertise. Sebastian says: “We liked the fact that the transaction was good for the business, its people and its customers, and that it would live on and was not going to become part of some great big beast.”
He was also pleased that the new CEO would be the existing COO who had already been with the business for 15 years.
He says: “If I had been handing over to somebody who I didn’t know and didn’t trust, and who I didn’t feel had the same values, that would have been very difficult. But I was handing the reins over to someone who I knew very well and trusted, and the Chair was staying on in his role too. All of these things made a big difference and were a key part of the transaction for me.”
They successfully sold Sabio to Lyceum in 2016 in a £50 million deal, with Sebastian staying on as an observer founder representative on the board. Having taken some time out to spend with his young children and take part in the Ironman World Championships to raise funds and awareness for charity, he now plans to use his experiences and expertise to help other businesses and organisations grow.
Sebastian has three pieces of advice to other entrepreneurs considering selling to private equity. First, be clear about why you are selling. He says: “Make sure you know why you want this to happen – don’t just do it because you can or because someone says you should. For us it was an opportunity to pursue other interests but also to ensure that the business went to the right place and was going to have a strong future.”
Second, spend time choosing the right investor partner for your business. He says: “We spent a lot of time looking into Lyceum’s track record and what Simon Hitchcock and his team had done with businesses, and how they were talked about in the market place. We wanted to make sure they were buying into what the business was actually about.”
Third, have an alternative plan and be prepared to walk away if the deal doesn’t feel right.
Sebastian says: “What was really key for us was that we had our Plan A which was to continue growing the business organically. We knew what we were doing and we were very happy doing that. Selling the business was a kind of Plan AA – if it progressed and worked out, then great, because it was a really good opportunity for the business, but if there were any issues or changes requested to the planned transaction during the process, then at any point we could step away. If the deal had fallen apart then we would have just carried on running the business and it would have been absolutely fine.”
Drax sector lead: Ruby Sheera
Partner, Technology and Tech-enabled businesses
Tel: 0203 949 9555