29 Jun 21
29 Jun 21
The right stuff: how a private equity partner can accelerate growth - Tim Smallbone

Building a business successfully and sustainably is hard work, but the right private equity partner can make it more rewarding in more ways than one, according to Tim Smallbone, Partner at Inflexion Private Equity. 

The journey to growing a successful business will encounter bumps and turns along the way. These may be unexpected challenges, such as shareholder or supplier issues, or enticing opportunities, such as acquisitions or new offices. Having the right partner to share their experience and the capital to fund your plans can ensure these junctures are navigated swiftly and in a way that maximises potential. 

But while the prospects of enhanced growth are very real, the chemistry must work for it to be a success. Growth rarely goes in a straight line, so a proven culture of support and experience in difficulties and downturns is very important in charting new territory and in uncertain backdrops, such as the one we find ourselves in now.  

How PE can help

Just as each business is unique, no two private equity houses are the same. For this reason, finding the ones with the right skillsets and experience are important to align with your own growth plans. Then it’s about seeing which you get along the best with – so the bumps in the growth journey are handled well and with some laughs! 

There are a number of areas where private equity can support companies’ growth.

Geographic expansion, whether regionally, in the UK or even internationally is an area where many private equity houses can help.

At Inflexion we have built up a local presence in some of key markets, which helps our portfolio through warm introductions and local knowledge. In addition to our UK offices, we have been active in Bangalore, Shanghai and Sao Paolo for over a decade and Boston for a couple of years, with a new office in Amsterdam announced earlier this year. These help make the global opportunities more within reach. For example Halo, an optical transceivers business created by Inflexion in 2017 through the merger of two businesses in the UK and California, worked with our India office to affect a meeting which resulted in securing a major Tier 1 telecoms provider as a client the day before lockdown commenced in India. With 5G being rolled out in India this year and the telco building 100,000 new towers, Halo’s involvement could be worth over $20 million.

Acquisitions can truly transform a business, but are complex and require identifying the right targets, respectfully approaching them, negotiating tactfully, and finally integrating the businesses effectively post-deal. A backer with experience in this delicate but rewarding area can help with these aspects, and also provide funding to support. Following on from its successful carve-out, Kynetec went on to acquire five businesses during its partnership from 2016 to 2021 with Inflexion, ultimately boosting Ebitda by 200% as it strengthened operations in North and South America, Asia and Europe to create a global business operating in 30 countries. 

Digital enhancement is increasingly popular as firms realise how impactful tech can be in improving your client offering as well as generating valuable data. Our specialist team assess each firm’s capability and then work together to enhance this during the partnership. We review progress regularly with the benefit of wider knowledge-sharing and learnings gleaned from each new investment. By way of example, we have supported Virgin Experience Days to upgrade its digital offering, which has led to a lower cost of customer acquisition, higher conversion rates and greater levels of repeat purchase. We are also working with them on robotic process automation, which can efficiently carry out repetitive tasks to cut costs as well as enable employees to shift their focus to more customer-facing, higher value-add roles. 

Commercial effectiveness involves thinking about your revenues holistically – not just charging more but also selling more. It starts with defining your value proposition through a deep customer understanding – what they need, value, and are willing to pay for. We have an in-house team that focuses on firms’ go-to-market strategy, and they’ve recently worked with roofing tile specialist Marley. Already at the top end of their pricing proposition, small changes are what will drive further revenue growth from its existing base. From rebates and surcharges, it can be about changing 100 things by 1%, rather than one thing by 100%. This is an ongoing process which should be reviewed regularly. 

Talent management underpins everything in every business, because people are at the heart of every company. We have a team which reviews management teams against the firm’s growth plans to suggest additions which can enhance the leadership, and this isn’t restricted to the UK. Optical transceivers business Halo for example found itself without any local support in an important sourcing centre – China – after its supply chain manager left in 2020. It proved very helpful to have a local, on-the-ground resource when no foreigners were allowed to enter the country because of the lockdown. This led to the swift appointment of a very experienced professional and saved the hefty fees typically associated with recruitment.

Finding the right private equity firm to accelerate your growth can boost your company’s success. We have worked with more than 90 companies over the last 22 years, and many of the people involved come back to work with us in another capacity once the partnership has ended, helping us to build up a valuable network – and suggesting we are good to work with! While the growth ambitions may be similar, each journey is unique and should combine hard work with fun to generate sustainable success. 

Tim Smallbone is a Partner at Inflexion Private Equity, a member of the Investment Committee and leads the Enterprise team that focuses on lower mid-market investments. 2004. Inflexion’s family of funds allow it to provide £10 million to £300 million of equity with individual funds specialised in traditional buyouts, minority capital and smaller investments – ensuring we can provide true flexibility and tailor-made funding solutions.