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'Going plural' is the norm in the world of private equity.


* T'S official. I work in private equity. I know this because two weeks ago I was invited to the first drinks reception hosted by the British Private Equity and Venture Capital Association (BVCA) in Cardiff.

The BCVA is the industry body for the private equity and venture capital industry in the UK, with a membership of more than 230 private equity and venture capital firms and nearly 300 associate members who provide legal, tax and other professional services to private equity firms.

I was the sole employment lawyer in a sea of private equity firms, corporate lawyers and corporate finance people but I was not a fish out of water because I've been working in private equity for more than 10 years.

This is because a number of my clients previously employed in senior executive positions, such as chief executive, sales director or finance director, have "gone plural".

The phrase was made famous by Allan Leighton, former chief executive of Asda who, when asked what he was going to do next, would reply "I am going plural".

It means rather than working full-time for one company, you become self-employed and take a number of non-executive director positions with different companies.

And private equity is where most of the opportunities to go plural lie.

Private equity is when investors (through a private equity firm) provide funding to companies in return for shares (an equity stake).

The companies are usually private, meaning they are not quoted on any stock exchange. The private equity firm then actively manages the investment for a period (typically five to 10 years), making operational improvements to increase the value of the company.

The original management of the company is (mostly) retained and offered an equity stake in the company, so that management and the investors are singing from the same hymn sheet.

The investors get their return through exiting the deal which means floating the company on a public stock exchange (IPO - initial public offering) or a secondary buyout, where the portfolio company is sold to another private equity firm.

Venture capital or angel investment is also private equity but where the company is at a much earlier stage of development or is a start-up.

My clients who have gone plural (to a man, all men - I make no comment on that, for now) are part of the private equity firm's process of increasing the value of the companies in which they invest.

At the request of the private equity firms, they take up non-executive directorships. Usually three directorships at any one time, sometimes up to five, with one appointment being as chairman.

They bring their considerable business experience to the table and help the company grow.

Despite one school of thought that non-executives should not purchase shares in the companies so that they have no vested interest, by far the most popular school of thought is that having skin in the deal aligns the interests of the non-executive director, the private equity firm and the management.

Most of my clients are also granted share options vesting over a period of time (usually three to five years) which could net considerable returns on exit.

I advise on their appointment, the share options and any additional consultancy arrangement they enter into with the company.

They usually know someone else who is going plural and so I am introduced to another successful director working, like this employment lawyer, in private equity.


* The phrase 'going plural' was made famous by Allan Leighton, former chairman of Peacocks
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Title Annotation:Business
Publication:Western Mail (Cardiff, Wales)
Date:May 9, 2012
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