Consumer Market in 2020
It is now over a year since the first Covid case was identified in China and whilst we still find ourselves in lockdown in the UK, we can see the light at the end of the tunnel.
In 2020, PE deal volumes in UK CG&R businesses dropped 33.8% compared to 2019, and there is no denying it was a tough market to trade through. It would also have been unimaginable for private equity funds to look to invest in certain sectors, not least those linked to UK travel and leisure. However, the mood music has significantly shifted over the last few months, driven partly by changes to capital gains tax but more importantly by the speed and success of the vaccine deployment across the UK, which still outstrips the rest of Europe combined.
RedCat Pub Company
One of the best indicators that there is belief in the UK consumer market was the news that Rooney Anand, ex CEO of Greene King, has created RedCat Pub Company. This investment vehicle, backed by funds managed by Oaktree Capital Management, has raised at least £200m of equity to invest in the UK pub sector.
Drax has worked closely with Rooney Anand through the ‘pre deal’ phase to build out the initial team, which brought into play all of our capabilities, skills and experience. To some extent, building a team from scratch is theoretically easier than looking to develop a team that has been established organically, as often we find the latter are ‘functionally dysfunctional.’
With Rooney Anand, a proven, serial entrepreneur in the consumer leisure marketplace, there exists an almost unique opportunity to ‘cornerstone’ a leadership team and undertake a process of leadership by design. In doing so, we had two priorities; to ensure complementarity of the team with both the value creation plan they have and, crucially, with each other.
Building the RedCap Leadership Team
RedCat is a business set to go through rapid growth, both organically and via M&A, and the senior team need to be comfortable running a business in a start-up mode, as well as at considerable scale as the value creation plan unfolds. The situational expertise around the board table therefore needs to reflect both the current and the future requirements of the business and this is a fine balance to strike. This challenge is amplified if you take into account that the executive search industry is often being criticised as very reliant on a ‘black book’ approach to recruitment, but there is a lot more science involved in creating a high performing team at Drax.
Whilst we still strongly believe understanding cultural fit is key, the real challenges are in understanding complementarity and how hiring can act as an accelerant to other team members. In football terms, you wouldn’t have eleven attackers in a team or have eleven players who all have the same attitude or same background and experiences. Building a team capable of delivering an alpha return in a business setting is not any different.
The end result for the RedCat leadership team was several successful key appointments.
Rooney Anand commented: “It was a great experience working alongside Drax who played an important part in the human capital side of the deal. We are very excited about the opportunity ahead of us and looking forward to taking on the challenge of growing RedCat pubs.”
How We Used Data
Drax works closely with its proprietary data business, drxDATA, to support behind the scenes in breaking down teams via four key lenses.
Putting this into the context of the RedCat team, you can see below how this begins to take shape as the team evolves from a cornerstone individual in Rooney Anand, to a core team, and eventually to a complete management team.
This approach means that we stack the odds in the favour of success. Private Equity is in many ways much like a football game; there is a start and an end and a pre-defined timeline to deliver results within. Whilst our success will be measured at the full-time whistle, having the right players in the right roles on the pitch is a very good starting point.
Aside from building out a high-quality team, the deal is an important beacon in the market as there is a window of opportunity building for funds who are less risk averse and able to look beyond the immediate market challenges to acquire platforms across the Travel, Leisure and Hospitality sectors. We are confident these areas will rebound strongly, and we look forward to tracking how these assets that we have supported, will now perform over the coming years.
Mark Sherman
Managing Director, Consumer & Leisure
ms@draxexecutive.com
