INVESTOR FOCUS: Humphrey Baker, Graphite Capital

October 2nd, 2019

INVESTOR FOCUS: Humphrey Baker, Graphite Capital

Humphrey Baker, Partner at Graphite Capital, talks to Rachel Bridge at Drax about the joy of working with people at the top of their industry 

Humphrey Baker may have studied History and Politics at University but he always hoped to pursue a career which involved business. He says: “I always had a fascination with what makes businesses work, and most importantly what makes businesses succeed.”

He trained as an accountant with Ernst & Young and then moved into their management consultancy practice where he worked on projects in the Far East and across Europe. After a few years, however, Humphrey realised that he wanted to get more involved in actively helping businesses rather than merely advising them, so at the age of 28 he joined private equity firm Lyceum Capital, now renamed Horizon Capital.

He says: “What I love about private equity is the opportunity to work with people at the top of their industry over an extended period of time, to build lasting relationships with them, and to have an influence and an impact over a three to five year period, rather than over a three to five week period. Having the opportunity to work with businesses and have a direct input into their strategy and performance, and a direct accountability for it, is really exciting.”

In 2014 Humphrey joined Graphite Capital, where he leads their TMT team. It is an area of specialisation that he loves. He says: “The UK economy has a long established track record of being at the forefront of tech innovation and therefore to partner with businesses to capitalise on the progress they have made and then export that capability internationally is super exciting.”

Greater competition in the market has led to a more streamlined approach towards making investments, he says. “In the last five years the market has got more and more competitive, but that doesn’t mean one is necessarily any less successful; it just demands that you approach things in a different way. In this competitive market, our scarcest commodity is our time, so we pick our battles wisely."

"We spin a lot fewer plates and we focus on opportunities where we feel there is a very strong cultural fit with the incumbent management team, and which fit with our historical experience and skillsets. We do an enormous amount of work early on to understand the key drivers in a market and we are more rigorous in our initial screening of businesses so that we align our resources to those opportunities we feel we can be competitive on.”

Graphite typically invests in businesses which are capitalised between £30 million and £175 million, writing equity cheques of between £20 million and £75 million. Recent investments include NRS Healthcare, a community healthcare business, YSC, a global leadership consulting and assessment business, and Hanson Wade, a conference and information services business.

He says: “We are looking for businesses that are performing well and which have a very clear growth strategy. That might be through internationalisation, accelerated investment and organic growth, site rollout, strategic acquisitions or buy and build.”

Every fund will also typically include a start up or growth capital opportunity. Their previous fund, fund VIII, for example, included a start up which in the space of 18 months has grown from two people camped out in Graphite’s office to a business employing over 140 staff with a run rate EBITDA of £5 million. Key to the decision of whether or not to invest is the quality of the management team, says Humphrey.

He says: “We are looking for management teams who see us as real partners in achieving their outcome and see the value that we can bring to them.” Looking at the bigger picture, Humphrey believes that private equity has an important role to play in the economy, not least because it enables business owners to de-risk by taking some money out of their business, which working alongside an experienced PE partner then frees them up to think bigger and bolder.

He says:  “We allow management teams to be more ambitious. The great strength of a PE investment is that you can take calculated risks and make calculated investments early on in a hold period, with a view to trying to accelerate the benefit. The outperformance that private equity brings means growth, higher taxes and higher employment, which bring a huge amount of benefit to the UK economy. Given the returns that PE firms continue to produce, I think the future is bright for the industry.”

Drax lead: Ruby Sheera

Partner, Technology & Technology Enabled

Tel: 0203 949 9555

Email: rs@draxexecutive.com


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