November 14th, 2018


Nicol Fraser is Partner at the private equity house Dunedin. He tells Rachel Bridge at Drax why he loves being part of the industry.

Nicol Fraser has a nice way of describing the changes he has seen in the private equity industry since he joined more than 20 years ago.

He says: “When I joined private equity it felt like playing amateur rugby. Now the game of rugby has gone professional and that is very much how private equity has gone too. The industry has grown up a lot.”

Nicol initially trained as an insolvency practitioner with an accountancy firm, but quickly realised that he would rather invest in companies than wind them up. So he joined Natwest’s private equity arm, now Bridgepoint, and never looked back. He has been with Dunedin since 2001, leading investments across Industrials, Businesses Services, and TMT. He currently leads the new investment team at Dunedin.

He says: “I absolutely love what we do. We are in the very privileged position to work with some of the most talented people around, both in the companies that we are investing in but also internally.”

Competition for good assets may be increasing but Nicol is confident that those private equity firms who are able to demonstrate skill and experience in a particular niche will continue to invest in great businesses and deliver successful returns.

For Dunedin this means helping UK firms in the business services, financial services, and smart industrials sectors expand into international markets, either organically or through acquisitions. It typically looks for deals with an enterprise value of between £20 million and £100 million.

He says: “We have built up a reputation for helping businesses with buy and build and internationalisation strategies, and when you do that, money is largely the commodity. It is what you can do to add value and help that business on its growth path that is the key. That doesn’t mean to say that you are not going to have to pay a market price for the business, but if you are very clear on what you can do to help, and are focused in what you are doing, then you can still make good returns for your investors in this market.”

Nicol says that higher prices by themselves should not be a cause for concern. He says: “If you get the growth and then generate the cash flows, it doesn’t actually matter that the price you have paid is a bit higher going in because you will still make the returns.”

However to ensure they are acquiring firms with good growth prospects, investors need to make absolutely sure that they are doing proper due diligence, Nicol says.

He says: “As prices go up, due diligence becomes even more important in order to understand if the sales revenue projections will be achieved. At Dunedin we don’t just do commercial due diligence or market due diligence, we look at the full potential of a business and consider whether we could drive that growth, not just in the UK but internationally. We do a lot of work pre-deal to understand the opportunities before we invest.”

A key part of Dunedin’s job as an investor is to help businesses strengthen their foundations, he says. “The businesses that come to us are rarely perfectly formed. They are on a growth path and part of our expertise is to look at the operations of the business and ensure that they are best in class and have firm foundations for the business to grow. That might be their human resource and the way they recruit, it might be their finance function, it might be their sales and marketing functions or their manufacturing efficiencies.”

He gives as an example Blackrock Programme Management, a professional services firm that is an expert in global construction claims management. Dunedin helped the business build out its foundations by helping it to put the right HR systems, finance function, and board governance in place. Blackrock also opened an office in Dubai under Dunedin’s ownership.

The one thing the private equity industry could improve on, Nicol says, is getting better at explaining what it does to the outside world because it is often misunderstood.

He says: “There are so many positive stories about the benefits that private equity can bring to businesses and yet it is often the negative stories that get reported. I don’t think the industry has helped itself - it has been pretty opaque in the past because it has seen itself as acting for private investors and taken the view that it is nobody else’s business. As an industry, we are getting better at that but there is a long way to go. It would be nice to create an environment in the UK where private equity is seen as a good thing. It is up to us as an industry to get the positive stories out.”

Drax lead: Graham Roadnight
Managing Partner
Email: gr@draxexecutive.com
Tel: 0203 949 9545 

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