Following a recent article by Kirsty McDonald who discussed the understanding of a PE partnership and what to look for, Alex Thomson now explains the importance of having a strong relationship between the investment partner and a management team.
Partnership is central to our investment approach at GCP. We cannot deliver a successful investment without a strong, trusting and mutually respectful relationship with the management teams with whom we work.
Therefore, we think a lot about the nature of partnership at GCP, how we cultivate it, how to ensure that it translates into successful investments, how we manage disagreements and ultimately how we ensure a great experience working together. There are certain characteristics that we believe are vitally important in any partnership:
Alignment – we focus on ensuring that we have shared objectives with the management teams we invest alongside and that is reflected through the business plan, expectations around time horizons and through the capital structure.
Personality fit – management teams work with GCP as an investor. But more immediately they work with our partners, directors and managers. Those relationships are often forged from the first meeting and we are mindful about the trust built through those personal relationships (sometimes that might happen over a good dinner).
Consistency – the same people who lead the first engagement will stay with the business throughout the investment period. This ensures consistency, a relationship that has weathered an investment process, in-depth knowledge of the opportunity and a shared passion for the long term success of the business.
Surviving due diligence – this can be a challenging process where objectives can occasionally become misaligned. Due diligence and legal process can be time consuming, frustrating and complex. However, it can also be a useful test of how we work together to solve problems to drive the business forwards, and it often forges the relationship between managers and investor.
Working with advisors – advisors have an important role in any deal process, but, in the completion phase of a deal, their role should be one of facilitation rather than intermediation. They won’t be there the day after completion and so it’s crucial that the relationship between managers and investors is well established.
Honesty – disagreement is normal in a business partnership as in any other kind of relationship. We much prefer challenge and lively debate to superficial cordiality that isn’t driving the business forwards.
Humility – it doesn’t matter how many investments we make, we can still get things wrong. We have developed plenty of relationships over the years and each one is different in some way. It is important to us that we take learnings from each one especially when it hasn’t always gone to plan.
Over the years we have worked with a wide variety of management teams all demanding different things from their partnership with an investor. This varies from veteran teams who have led their businesses for many years and are experienced about private equity to those who are still at an early stage of their journey and taking on investment for the first time.
It doesn’t matter how far along the journey management are, the partnership is crucial. To support that, we have developed tools such as our Growth Toolkit that offers a wide range of areas where we can support, add value or get involved that managers can draw upon as they see fit. One of the privileges of our role is meeting exciting new businesses and entrepreneurial founders and managers. The excitement of seeing a business with tremendous potential and working together with its managers to help it succeed is ultimately why we do this job. We can always celebrate success but having fun along the way is probably the most important lesson for a successful investment partnership.
Read more about Alex and the outstanding growth companies he partners with.