ENTREPRENEUR SPOTLIGHT: Peter Roberts, Founder of Pure Gym

April 25th, 2018

ENTREPRENEUR SPOTLIGHT: Peter Roberts, Founder of Pure Gym

Peter Roberts shares the secrets of his entrepreneurial success with Rachel Bridge at Drax Peter Roberts is perhaps best known for founding the hugely successful no-frills gym chain Pure Gym. He started it in 2008 and by the time he sold a majority stake to private equity house CCMP five years later, the business already had 45 outlets across the country and 240,000 customers.  When the business was then sold in 2017 to US private equity group Leonard Green and Partners it was valued at £600 million. But before he even came up with the idea for Pure Gym Peter had already chalked up many previous successes in the leisure industry, starting businesses that encompassed holiday lodges, nightclubs, pubs, restaurants, and hotels.

During his time as an entrepreneur, he has often received backing from private equity firms for his ventures. Sometimes the partnership has worked brilliantly, sometimes less so. He says: “I have had the good, the bad, and the ugly.” As a result, he is ideally placed to advise new entrepreneurs about how to manage the involvement of private equity, something he does as often as he can. His first piece of advice is to find out as much as possible about the fund that will be providing the investment, and in particular how late on in the fund the investment of yours is, because that will determine how quickly the PE house will want to exit. He says: “You should spend a lot of time looking at the strategy of the particular fund you are in and what the timetable is. When I started I didn’t look into that nearly hard enough. I have been caught on more than one occasion when we were the last investment in the fund and the private equity house suddenly wanted to close the fund down and pay it off and so were desperate for an exit. If you go in at the later end of a funding stage it is unlikely that there will be any money left available for second and third round funding.” But being the first investment of a fund can also be tricky, he says. “If you are the first investment of a fund, ask whether the private equity team is spending their whole time getting in new investments or whether they are managing their existing ones.

If they are fundraising or exiting they can take their eye off the ball in terms of managing their investments.” He also advises entrepreneurs to make sure that the PE representative is someone they can get on with. He says: “So much depends on the person who is going to sit on your board. I have had some really great people and some really awful people.” Once you have found someone you like, the secret to managing the relationship with the PE house during the investment period is simple, he says: “Be absolutely open and honest with them. Let them have warts and all. You might be tempted to keep bad news under a hat but that doesn’t work because it will come out. You should develop a personal relationship with the PE representative on your board so you can ring them up and say, hey we have got a bit of a problem here. Then you can sit down together and work it out.

The good guys have always got time to talk to you.” Peter adds that is important to manage their expectations, saying: “Don’t over-stretch your targets. There is nothing worse than going into a board meeting and seeing red behind all the management accounts. It gets the PE investor jittery. Remember that the person who is the PE representative on your board has to then go in front of their company board - so if you are not performing, they will get it in the neck as well.” Peter says having the right PE house on board can make a big difference: “The good guys are really supportive and put an arm around the shoulder. About three months after CCMP bought Pure Gym we had a terrible month’s management accounts and thought we were in for a roasting. But they just told us to double the marketing spend and said that if it turned out to be the wrong decision it would be their fault, not ours. They were very helpful, and their advice worked too.

As an entrepreneur, you have got to expect to be questioned if you don’t perform and that is absolutely right, but the important question is how that is done.” Perhaps uniquely for an entrepreneur, Peter has actually seen for himself the other side of the process, when in the 1980s he sat on the board of the Lazard leisure fund. His job was to advise on possible investments. He says: “One of the reasons I did it was that I wanted to see what it looked like from the other side. It was a great eye-opener. I came away with the feeling that there can be a danger if everything is financially orientated because some city investors don’t really get to grips with understanding the business.” Despite the possible pitfalls, Peter firmly believes that private equity can be an immense force for good. He says: “Private equity has got a big role to play in the growth stages of businesses.

It is probably the most important source of funding and help. The good ones will help create value in your business.” He says however that there is a real need for some way of guiding entrepreneurs towards the most suitable fund for them, saying: “There are a staggering number of funds at the moment, it is a minefield. It can be really difficult for someone to find the right one.” And even though he is now 71, Peter is clearly not quite ready to hang up his entrepreneur boots just yet. As well as chairing a number of PE-backed businesses, including indoor karting business TeamSport, he has also embarked on a couple of new ventures himself. They currently remain under wraps but if his past successes are anything to go by, it is unlikely to be too long before the world hears more about them.

Drax sector lead: Mark Sherman Director, Consumer & Distribution 

Email: ms@draxexecutive.com   

Tel: 0203 949 9556

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