We chat with ECI Partner Michael Butler about Private Equity’s biggest misconception, how the industry has changed over the past 10 years, and his ultimate dinner party guests.
Q: You’ve been at ECI for 10 years, what’s your greatest moment or memory?
Our investment in KB Associates is my greatest memory. Leading my first deal was a big career moment, and it felt like the culmination of a lot of hard work. We exited to Waystone after two and half years for a 3.8x return, so it was a great result for everyone, and looking back I’m really proud of what we achieved.
Q: Since joining ECI, what have you learned about investing?
The importance of resilience in a business is critical. When you have a resilient business, you have strong visibility on revenue, and the time that gives back to management teams, and us as an investor, to think about driving growth in the business, strategic upsides, internationalisation and M&A is huge.
Q: What advice would you give CEOs looking for private equity investment in the current environment?
I’d say two things. One is focus on your business, focus on performance, focus on delivering great results, and the investment will take care of itself.
The second thing I’d say is spend time meeting potential investors and try to build proper relationships with them. It’s a big decision and one you need to get right. The relationship between investor and founders/management team is really, really important, so make sure you’re choosing a partner you’re going to get along with, will add value, and is going to be supportive.
Q: From a management team point of view, what do you think the biggest misconception is about private equity?
The biggest misconception is that we’re all about taking cost out of businesses. We’re a growth investor, so we’re focused on driving growth in businesses, and to do that, it usually means you need to invest. So actually, for the first couple of years, we spend our time thinking about the additional cost we want to put into the business to help drive future growth through initiatives like M&A, people and culture development and tech enhancement, not cutting costs.
Q: You started out in M&A, why did you want to move into private equity?
I like doing deals, and that was something I wanted to keep. But I also wanted more exposure to actually working with businesses, working with management teams, helping businesses grow, and building relationships over a longer period. And you get that in private equity because in most cases we work with businesses for a minimum of four or five years , we sit on the board with them, we interact with them every week. So I got to keep what I liked about M&A, but also get more exposure to actually working with businesses hand-in-glove.
Q: How do you think the industry has changed over the past 10 years?
I think it’s more competitive and professional than when I joined and that definitely manifests itself in how we do deals. We’re getting to know more about businesses and meeting management teams far earlier than we were previously. That means by the time we get involved in a transaction, we hopefully understand the business better and have built our conviction.
It also means we’re more focused on the businesses we look at because we’ve decided the deals we want to run at before they come in to process, rather than as and when opportunities came in. It means that we look at fewer deals, and we are much more focused than we were when I joined.
Q: Are there any subsectors you’re passionate about?
The dynamics of niche insurance are interesting. It tends to be a resilient market because businesses are either differentiated on their ability to attract customers, or their ability to price risk more effectively. In the sectors where consumers are more discerning about the level of cover they want, rather than the cheapest product, niche providers understand customers better, can therefore be more targeted, and win greater market share.
Quick Fire with Michael:
What do you do to relax?
My young family means I get less time to relax these days, but once they’re in bed, I really value the time with my other half – having a conversation, watching a film or enjoying a glass of wine or beer is where I feel most relaxed.
Ultimate dinner party guest?
Can I have two? My first guest would be Tiger Woods. I’m a massive golf fan and in my formative years he dominated the sport. He’s also had a colourful private life so I think would make for great conversation.
The other would be Canadian comedian Norm Macdonald. He’s sadly passed away, but was an absolute raconteur and master of the shaggy dog story. If you haven’t already, I definitely recommend checking him out.
Early bird or night owl?
Definitely an early bird. Which is fortunate as our 3-month-old doesn’t yet appreciate the concept of a lie in!
Favourite album?
Radio Head’s OK Computer. I love the album and, without getting too intellectual, admire the way they were willing to reinvent themselves and take commercial risks to push the boundaries of what they were doing.
Beach or adventure holiday?
With the kids, we’re now much more likely to go beach. But with them constantly causing chaos, we actually get to do both at once!
