Here’s the latest in BDO’s Private Equity People series, where we speak to some of the most interesting figures from across the private equity industry to hear their insights and share their experiences. Inspired by recent studies showing there is still far more to be done to encourage diversity in private equity, the aim is to create a platform to showcase a broad range of role models who are successful founders, investors, private equity professionals, Chairs and entrepreneurs.
First, we are focusing on some inspiring women across the industry, and we are delighted to be able to share our conversation with experienced Chair of private equity-backed companies, Stella Donoghue.
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“Private equity investments have the potential to transform a business, but the people on the board must also be engaged and ready to rise to the challenge,”
As current Chair of PharmaReview Ltd, (backed by Bridgepoint), Juriba Ltd, (backed by BGF) and Givepenny Ltd, Stella has significant experience in working with PE funds. Here, she shares some of the insights she has gathered throughout her impressive career.
How did you start your private equity journey?
I had an ambition to work in private equity (PE) relatively early on in my career, but I was discouraged from pursuing this at the time as I didn’t fit the mould. Instead, I started my career in hospitality and ended up finding my way back to private equity after gaining experience in PE-backed businesses.
I still find it amusing that my first interaction with PE was rejection! I was 34 when I first tried to get into the industry and essentially told I was too old, the wrong sex and from the wrong type of university. It was a pretty resounding rejection, which is why I gave up on it initially and continued in hospitality management. I like to think that private equity has come on a long way since those days and people of all backgrounds, ages and genders are welcomed.
In the end, I entered the world of PE through the client-side. I was Finance Director of Phlexglobal, a business which was acquired by a PE fund, and therefore began working closely with fund managers from the business’ side. After the investment, I became MD before undergoing two further PE fund changes – first selling to Bridgepoint Development Capital, and then to Vitruvian Partners, at which point I exited the business.
Who has inspired you most in your career?
There have been three people who have stood out to me for a variety of reasons and although not from the private equity world, taught me valuable lessons I’ve been able to carry into my career.
The first who comes to mind is the general manager at the first hotel I worked at. With a team of over 500 people, he knew everybody’s name and would spend time every day with different teams to truly understand every role. This also meant he was well respected and liked throughout the organisation.
Then, when I was FD at Claridge’s, I learned an awful lot from the CFO of the Savoy Group whose work ethic was second-to-none and always found a way to get the job done.
The third is a bit more left field. I got into buy-to let-property about 20 years ago and encountered a couple doing the same thing. The wife was a maths teacher and she worked out a formula for successful buy-to-let, and built a successful portfolio of over 1,000 properties. An incredible example of the value of never deviating from your core principles and approach.
What advice do you have around building a board?
It’s important to clearly differentiate between the board and the management team; the two have different functions and neither works as well as it should when they overlap or are confused. The role of a board director is a big responsibility and sometimes very good people are promoted to company director but without a full comprehension of the risk and responsibility that comes with it: it is never something to undertake lightly.
In my view, boards are most effective when they are made up of a few key individuals; you can bring in wider heads of department quarterly or six monthly to offer management level, operational insight. It’s important to bring in a younger, more diverse mix of people, particularly when discussing latest trends and technology; their input to the board gives a more rounded picture.
Women have some way to go in the boardroom. While things have improved overall, my view is that positive discrimination exists; I never want to be in a role because I am a woman, I want to be there because of my skills.
Is there any advice you’d offer to people considering becoming chair of a PE-backed business?
Being a Chair is a lot more work than being a Non-Executive Director (NED), and the role is quite different. A NED can have a strongly stated opinion, but a Chair must be careful not to sway the board.
Relationships are important – you have to get on with everyone, so choose your role carefully and make connections between people.
You must also be aware of how much time you can give to the role. You’ll certainly need to be able to commit to the full investment cycle, usually three to five years, and you’ll likely experience moments during those years when the company needs more of your time – so I’d recommend not committing all of your hours to various Chair positions as you need to keep a buffer to be responsive.
Given your experience of PE growth stories and exits, what advice would you give to management teams who are considering PE investment?
The management team will need to have the same goals as the PE house, and be on board with the timeframe in mind and the general approach. It’s not a cushy five years: it’s very hard work! A PE firm will always be looking at how to get better results in a quick fashion, so it helps to find ways of working harder, faster and smarter.
I’d also encourage businesses to embrace partnering with private equity. It’s fair to say that they make you up your game, particularly around reporting. What’s more, the capital takes away the difficult decisions you may have had to make if you were completely cash-strapped, which can inevitably lead you to sometimes make the wrong decisions out of necessity.
What’s the biggest misconception about private equity?
A common misconception is that investors will come in and take over running the business. Whether you view this as a positive or negative, it’s not the case. Investors will advise you on how to adjust strategic plans and they’ll be involved by sharing expertise and experience; however, they’re not going to sit down and tell you everything you need to do. The management team is still responsible for running the business.
What advice would you give your younger self?
I would do a million things differently if I could! I’d certainly have pushed back harder when I was discouraged from trying to work in private equity at the start of my career. And if the answer was still no, then I would tell myself to find another way into the industry and suggest joining a PE-backed business to see the industry from that perspective.
Private equity is a great educator throughout your working life. You work with incredibly bright people across very diverse sectors, and I wish I’d spent more of the early part of my career here.
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