December 4, 2019
Tim Johnson, CEO of insurance group Stackhouse Poland, now part of Gallagher, talks to Rachel Bridge at Drax about experience, acquisitions and having chats over coffee
When Tim Johnson joined the insurance industry as a graduate trainee he never imagined that he would still be working in the industry 30 years later.
After working for Royal Insurance, he worked at Aon for a decade and then spent ten years at Towergate Insurance as the CEO of their underwriting operations, as well as of their CCV and Paymentshield businesses.
But even though it was not planned, gaining all this in-depth experience meant that by the time he arrived as CEO at Stackhouse Poland in 2014, he was more than ready for the challenge.
Tim says: “We did so much at Towergate in a ten year period; it was an enormous learning curve, and I took that with me to Stackhouse Poland and applied it there. I was really confident about the game plan and I was absolutely crystal clear on what we should and shouldn’t do. I knew how to do it, because I had done it before.”
His involvement in Stackhouse Poland was due to fortuitous timing. Tim had been trying to lead a management buyout of one of Towergate’s businesses when he met up with Jeremy Cary, a former colleague from Aon and one of the three founders of Stackhouse Poland, for a post-Christmas dinner. The two of them got talking and by the end of the meal they had agreed that Tim would come into the business as CEO, replacing one of the other founders who was retiring. The three of them then did a management buyout from the existing management and refinanced the business, bringing in private equity firm Synova Capital to support their plans for rapid growth.
The knowledge Tim had already gained of the sector was particularly useful when it came to making acquisitions. While he was at Towergate it made 307 acquisitions, around 50 of which he conducted personally.
He says: “Having that depth of M&A experience in the industry meant that I knew what a good business looked like, and just as importantly, I knew what a not-so-good business looked like. It meant that when we bought 15 businesses at Stackhouse Poland, they were all absolutely perfect businesses. Normally out of every 10 businesses you buy, you buy seven good ones, a couple of ok ones and a dog, but we didn’t buy a single duff business. Every one we bought was really high quality, because we knew what to look for.”
That experience more than paid off. During Synova’s four year investment Stackhouse Poland grew its profits from £3.8 million to £17.8 million, and Tim and his team exited alongside Synova earlier this year on an incredible 16x multiple. He has stayed on as CEO to oversee the handover of the business to the new owners.
Tim offers three pieces of advice to first time CEOs of PE-backed businesses – establish a good relationship with the PE house early on, build an effective leadership team, and understand the numbers that the PE house wants to see.
He says: “If you get your PE backer onside early and deliver the results they want, then you won’t see much of them and they will let you get on with it. However if you don’t get those things in place, you will see a lot of them, and that is not so good.”
The secret to establishing a good relationship with the private equity house, he says, is to meet them regularly on an informal basis. At Stackhouse Poland he would meet the private equity Partner every couple of weeks to share information over a coffee.
He says: “All of the really good groundwork happened outside of the board meetings. You can have the tricky conversations much more easily if you are in regular dialogue swapping notes on the good bits and the not so good bits.”
Tim clearly enjoys the drive of working in PE-backed businesses. He says: “I love the private equity environment because it is a very pure model. There are all sorts of nuances around the edges but at their heart private equity firms are about providing returns for their LPs. It forces the pace a bit and I like that. If you want somebody to help sharpen the focus and turn a business into what it could be, then in my opinion PE is a really good place to be.”
Drax contact: Euan Corbett
Tel: 020 3949 9576