Driving Profitable Growth

By James Painter, Senior Investment Director at Palatine.

Driving profitable growth is the cornerstone of every PE firm.

At Palatine, creating lasting value in the businesses we back underpins all that we do. It helps us support sustainable growth and generate the strong returns our investors expect.

While every investor will have its own approach and know what works best for them, the mindset at Palatine, which we bring to every investment, is based on positivity, ambition, vision and genuine partnership.

There are a number of ways we go about driving profitable growth – all our portfolio companies must embrace ESG, but we also look at strategic M&A, Buy and Build, and deploy multiple other levers ranging from digitalisation to investing in a company’s sales function or implementing a new IT system to drive efficiencies.

As a B Corp ourselves, sustainability is a cornerstone of our investment approach. We see it as a fundamental part of the value creation process. Over the last 15 years we’ve worked with management teams to help them run their businesses in the right way for the long term – even after we’ve exited.

A lot of this is common sense and additive from the outset. For instance, why would you not want an engaged workforce, or one that is well trained and bought in to your vision?  As a company, why would you not want to treat your suppliers the right way, or not be mindful of your carbon footprint and its impact on the planet?

This is not rocket science; it’s just good business – and we always hope that the processes we embed will endure and benefit the business for the long term.

While there is never a ‘one size fits all” approach, at investment we always look at where we want to get to at exit, so setting a shared vision with the management team is important from the outset.

The investment I led last year into Bluprintx, the Liverpool-based international tech services provider, is a good example of this.

Here, we see an opportunity to create a global business of scale, providing strategic digital transformation in marketing, sales and customer service. The business is strategy focused, working with leading technology vendors in Adobe and Salesforce and supports large enterprise clients to navigate a complex and ever changing technology landscape. The ambition is to triple the size of the business over our investment period.

The ‘how’ we achieve this is the key thing. With Bluprintx this will be through investment in the business and its people to drive organic growth as well as by strategic M&A. When I think about what makes M&A strategic, the important point is that it is bringing capabilities to the group that add to the vision at exit.

Not all acquisitive strategies are the same. In some instances there will be the need for a Buy and Build approach – as is the case with the accountancy group BK Plus, where we are supporting its growth across the UK by acquiring smaller accountancy practices and then helping the experienced management team integrate them at pace to enable them to leverage the central infrastructure of the group.

Prior to making an investment we work with management teams to create a Strategic Growth Plan. This looks at the growth levers available to a business and focuses in on those that are going to contribute greatest to the shared vision we set out.  There is then a deep dive into how this will be achieved and what further support is required from Palatine or our network to enable the business to reach the targets sets out.

The businesses we back are in high growth sectors with strong management teams and so there are always numerous opportunities available to them. It is however important to be selective and focused. We ask ourselves which levers are going to move the needle and then focus on delivering them well.

Then, it’s about ensuring the whole organisation are aligned to these objectives and building KPIs and data to ensure the growth plan is on track. Experience has taught us that sometimes you need to adjust, pivot or change the plan, and this is always a collective process with management.

To drive profitable growth, I think you have to not only be agile, but forward- looking in your approach.

Sometimes it’s about helping management teams to recognise that what they have done to get the business to where it is today, won’t necessarily get it to where we all want it to be in four years.  It takes something special to get to £3m in EBITDA, but to get to £10m is not necessarily about doing the same thing – and this is where a partner like Palatine can help.

Our approach is not to simply invest and leave it to management to deliver, but to be there as a partner to support and enable them to achieve through the ups and downs as growth isn’t always linear.

At Palatine we talk about “positive equity” and I think this is about living up to our culture, values and mindset of forging genuine and trusted partnerships with management teams with a common goal of creating sustainable profitable growth, and doing business the right way.