Tom Biddle, Partner at private equity firm CBPE, talks to Rachel Bridge at Drax about understanding businesses and adding value
Tom Biddle is not one for a quiet life. He and the team at CBPE love the challenge of dealing with complex situations that require thought, effort and ingenuity.
He says: “Most of the situations we look at have a degree of complexity about them - businesses where you think, if I could just sort that bit out then we have got a business that is really fabulous and quite a step change from where it is today. It might be a carve out, for example, or there might not be a complete management team in place. Or it might be about getting the management succession right so that the founder can step back in the way that they want to, or driving sales harder in new territories, or helping the business with a new product launch. Those are the sorts of opportunities that get us really excited.”
Tom started out as a chartered accountant before moving into corporate finance and then private equity. In his current role as Partner at private equity firm CBPE Capital he specialises in finding investments in the consumer and leisure sectors. He played a key role in CBPE’s current investments in caravan holiday home manufacturer ABI and dental group Rodericks and was previously involved in CBPE’s investments in Côte Restaurants and The Original Bowling Company.
He firmly believes that private equity can play an immensely valuable role in advising management teams if they take the time to understand the business properly. He says: “It can be pretty lonely when you are running a business. If you are the CEO of a company, you will have your CFO and your COO but no-one outside that team, so it is helpful to have people that you can bounce ideas off and determine whether you are going in the right direction or not.”
During their investment in Cote Restaurants, for example, Tom and his team would regularly go and visit potential sites for new restaurants. He says: “We wanted to understand the business better and understand what the management were thinking and what they thought the issues were, so that we could work better together on identifying the right sites to invest in and all make better decisions.”
One of the secrets to a successful investment is to ensure that both the management team and the PE house are completely honest and upfront at the outset about what they want to achieve, he says.
“If everyone is aligned and pulling in the same direction then private equity ownership works really well. The challenges come when the PE house is not properly aligned with the management team. It may be something as simple as someone from the management team saying they want to be with the business for the next ten years when actually they are really thinking that they want to be out in six months. If someone wants to leave in six months, you can deal with that, but you have got to know about it at the outset so you can create the right alignment and expectations around the transaction to deal with it.”
Tom says that as competition in the market increases, it will become increasingly important for PE Houses to be able to show businesses exactly how they can add value: “PE houses will have to be clear about what they are doing in order to be successful. They will need to have a clear strategy – whether that is being sector specific, or being a turnaround fund, or seeking out situations that have an element of complexity about them, as we do. The days of buying something in an attractive market and then sitting back and watching it grow are over. You have got to be willing to work together with a management team company to grow the business.”
With so many funds to choose from, business owners will also increasingly need to take the time to choose the right private equity house to back them, he says. “One of things that staggers me is that management teams and their advisors don’t look at the performance of private equity funds more closely. The data is out there and management teams should look at how well PE houses have performed on investments in the past and take good references. They need to do their diligence on the private equity house, because the private equity house is definitely going to do it on them.”
Drax lead: Graham Roadnight
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