How private equity provides the financial springboard for the next chapter of our growth

Posted 27 September 2023 by Alex Kovach

Last year  HPS Investment Partners, the US private-equity provider, became a majority shareholder in our parent company (alongside existing shareholder Epiris). This represented a significant vote of confidence in our business and our long-term strategy to build the best retirement-focused adviser platform in the UK.

Private equity in our industry is really nothing new. Out of the 30 platforms or so out there, a large chunk have some degree of private backing.

Here’s why we believe our private equity ownership structure provides the springboard we need to deliver on our potential and to continue building strong partnerships with the advice community for the benefit of their clients.

But first, a bit about private equity

Private Equity (PE) has seen massive amounts of growth in recent years – even with a decline during last year, global private equity fundraising still totalled US$655 billion in 2022.1]. Over the last couple of decades, it’s become an increasingly popular route for investors exploring alternative avenues for their money.

But there are still a lot of misconceptions surrounding PE.

Our ownership structure came up again when we dropped in for a conversation with the lang Cat recently. One of the more common misconceptions around PE (still) is that the owners are only focused on short term returns, stripping out costs, then selling on for big profits.

It’s simply not the case.

Far from having a short-term focus, private equity investors often take a longer view on a company’s fortunes than a publicly listed company. Very often, at least in our tech enabled investment space, PE is in for five, or maybe even ten years, unlocking potential and freeing up management to deliver much greater levels of growth than would otherwise be achievable under alternative ownership structures.

Compare this to a company that decides to list on the stock market – another common way of bringing more capital into the business.

For some such companies, for example those that are still going through transformational change or needing investment in technology, listing too early could be detrimental. The requirement to meet regular obligations such as quarterly earnings reports, means that sometimes being publicly listed encourages a more short-term mentality and presents fewer opportunities to invest for growth. Sometimes, the distraction of reporting requirements means it can actually be much harder to create sustainable profit over the long term.

Building a sustainable business for the people we exist to serve over the long term

So, what positives does PE deliver?

The key point for us is this: we exist to serve people investing throughout their lives to enjoy a secure and enjoyable retirement. That’s our purpose. And we do that by working with professional advisers and planners. This is a fast paced, competitive, and tech heavy environment that requires continuous investment to keep delivering improvements that lead to better client outcomes.

PE gives us the financial backing to build a sustainable long-term business without the short-term pressures. We are then able to build the scale necessary to continue to invest in our overall proposition in line with what our advisers tell us they need.

Just recently we strengthened our Advisory Board’s role with the appointment of its first independent chair Heather Hopkins, whose career incudes founding specialist research and consultancy practice NextWealth. Under Heather’s watch, the board will continue to make sure advisers’ views, suggestions and input continue to shape what we do.

Building scale, backed by evidence

As with any business strategy, you need to have a clear purpose and evidence of delivering to a plan. Just looking at our financial results for 2022, shows this is the case.

We’ve increased revenue to £114.5 million and adjusted profits to £47.7 million (up from £7.9 million). Importantly though, in 2022 our financial and strategic backing enabled us to invest £4.5 million in improving service, £12.6 million in developing new technology and hire 130 new people across the business.

Our PE ownership structure has delivered. The evidence is clear. The plan is working.

We look forward to building on this success to grow the business even further, creating opportunities to work with more advice firms in delivering excellent products and services that deliver great customer outcomes. 

1] McKinsey Global Private Markets Review 2023

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Alex Kovach

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Alex Kovach