Keeping deals flowing and generating opportunities requires innovative thinking. Marc Mullen speaks to Gillian Sharman, LDC origination director in the North West of England.
Private equity knows that the best opportunities don’t just come knocking on the door; to get them you need boots on the ground. In 2015, Gillian Sharman joined LDC – the private equity investor that is part of Lloyds Banking Group – as an origination manager. Based in Manchester, she was recruited as part of LDC’s strategy of establishing a nationwide origination footprint. At the time, LDC was recruiting for similar roles in the Midlands, Yorkshire and the North East, and Scotland.
She had started her career with Altium and then joined Zeus. Just prior to LDC, at BDO, her role was to interrogate business strategies and companies’ published acquisition criteria, but most importantly had to adopt some left-field thinking: “It was very rare that a business was a slam dunk – you had to think outside the box and be creative about what had the potential to be a strategic fit for an acquirer. And then I had to sell the idea of a broader buyer list to the business.”
She did a lot of networking and as a result got to know many businesses, VCs and private equity – the deals they’d done, how acquisitive they were, what was in their portfolio and what they were looking for. But private equity is a different beast to corporate finance. “The move into origination was an exciting prospect,” she says. “I could build on the skills I’d gained at Altium, Zeus and BDO – research and networking. I still use the same tools to identify growing businesses in the North West, and across the UK, for LDC to invest in. It might just get them on our radar. We can meet them two or three years before any process and build a relationship – it’s unusual that you email a business and they reply: ‘Let’s go.’”
When she joined LDC, corporate finance advisers and the corporate finance service lines of the big advisers already had regional origination functions, but private equity firms were only just setting them up. LDC was one of the first in the North West. In 2020, Sharman was promoted to origination director and there is now greater competition from other originators locally.
“The best entrepreneurs are approached more and more by people doing a similar job to me. So it’s about having the right message in a very tailored introductory email to grab their attention. You need to be clear about what makes you different. You need to get the information across that makes your proposal interesting to them.”
Taking the lead
Sharman will lead the initial meeting to get an understanding of what the business objectives are, the time frame and a first sight of management. At a follow-up meeting, which may be six months on, she will bring in a member of LDC’s investment team for more detailed conversations on deal structure and strategy. It may involve colleagues with the right sector experience, such as Aziz Ul-Haq for healthcare or Richard Ibbett for technology.
Sharman also identifies buy-and-build opportunities. Armed with the portfolio business’s strategy, she can see opportunities for LDC’s portfolio nationwide. For example, an acquisition opportunity in the North West may be a better fit for a portfolio company elsewhere in the UK. “There are so many different ways we can treat an investment opportunity. It could fit with one of our portfolio companies in the North West, one elsewhere in the country, or it could be a standalone investment. In a portfolio of 90 businesses, we can have similar businesses run by different teams in different regions, or at different stages of development.”
Just before the pandemic struck in March 2020, Sharman set LDC’s investment in Ellesmere Port-based Rhino Products in motion. Despite COVID-19, the deal completed in November 2020: “That was interesting – trying to keep the momentum going through the lockdowns.” With an ongoing buy-and-build strategy, Sharman continues to look at opportunities for Rhino.
Another investment process that continued through the pandemic was in occupational health group PAM, completing in June 2021. “Not getting to meet management face-to-face for several months provided challenges,” she says. “Understanding the work they did and how that would be impacted by the pandemic and lockdowns was key. Post-pandemic, everyone is putting more thought into employees and helping with mental health problems, so they need this occupational health service. Pre-investment, I was interested to hear how that issue would drive future growth and the strategy.”
She continues: “Every year we start again.” All of the firm’s funding is provided by Lloyd’s Banking Group: “That means we really spend time focused purely on investments, building relationships and working with portfolio companies rather than fundraising.”
Filling the pipeline
The nature of origination means you are always thinking about building a pipeline of deals for the investment teams. LDC is committed to investing in 100 medium-sized businesses over the next five years, and the firm’s entire national network plays a part. Last year was a record year for the North West team, with four transactions and £100m invested. In March this year, the team completed an investment in Merseyside-headquartered artificial intelligence-based talent analytics platform, Horsefly.
“To keep growing, we need to see as many new opportunities as we can,” she says. “Some people think the business might be too big for LDC, or too small, but the message is that we’d rather see everything. We can understand the business and take our own view.” There might be something that the LDC team identifies as a lever for growth, she adds: “We can help that with our value-creation team, or expertise we have from similar transactions, or as part of a buy-and-build.”
And the future? “I want to do the best I can, unlock future deals for LDC and see where the future leads,” says Sharman. “I’m always thinking of new ideas, things nobody has done before, and I love learning and evolving.”
