by Antony Shaw

Keith Holdt, Equity Impact Partners: Value Creation and the business of Private Equity

In a recent article in the Financial Times (UK) published on 3 October, Coronavirus triggers borrowing spree by private equity managers, journalist Chris Flood describes how demand for additional financing globally has risen during the pandemic and how private equity companies are working to support firms facing a downturn in economic activity. South African Keith Holdt, founder of Equity Impact Partners, is one of those at the forefront of managing this private capital demand – in the short term to keep firms trading and in the longer term to enable growth.

Back home in South Africa, Keith studied industrial engineering at the University of Pretoria and had a successful career in the defence and management consulting sectors. A global executive role, however, led him in to private equity whereby institutional investors (from pension funds to insurance companies) take shareholder stakes in private businesses (not traded on the stock market) with a view to selling their holding for a profit.

Fever Tree worked with Keith Holdt and the team at LDC to boost their overseas growth, build on its position as a leading premium brand and capitalise on trends in the global spirit and mixer market. (Credit: Fever Tree)

A key role for a private equity company is to help restructure companies, build finance and governance functions, while also helping structure the senior management team. “How do we get board and management alignment with shareholders to focus on a common goal?” says Keith who achieved this aim working on a series of investment deals as  Value Enhancement Director at LDC, the private equity arm of Lloyds Banking Group. Among the successes was the 18-month partnership with Fever Tree, the leading UK premium mixer drink brand, established in 2005. In 2013, Keith was part of a team that brought investment in to operational improvements, international expansion and drove strong financial growth at a critical point in the brand’s development. It was a spectacular success with the enterprise value of the business doubling and LDC exiting with the company valued at £154.4 million.

Keith went on to establish UK-based Equity Impact Partners in 2017 to begin a new chapter in his private equity ambitions. “I really wanted to advise different investors and businesses,” explains Keith, “I especially wanted to work with SMEs.” He is keen to highlight one of the biggest errors made by such enterprises: “SMEs can be so immersed in their vision of the business they overlook the investor perspective. Many completely miss what investors are looking for.” He advises any SME looking for investors to clearly articulate their message and cautions: “Investors have short attention spans!” For Keith, it is essential that a company is able to ‘nail’ precisely what they offer, what is valuable and how they will deliver a return to an investor.

The onset of the pandemic has presented further challenges for many SMEs. In a McKinsey & Co survey conducted in June 2020 for the UK, 80 per cent of responding SMEs reported stable or growing revenue for the year before the pandemic began. By the summer, 80 per cent of SMEs had their revenues declining.

Nevertheless, Keith is always looking to release potential in companies that possess the skills and mindset to navigate a business in a storm: “As an investor, I ask a company how they have operated since the pandemic began. I want to back people who don’t ‘freeze’. Even if a company has been damaged by the crisis, I will look at how they are surviving and maybe finding new business models. While some are shutting, others are asking: ‘What’s the opportunity?’”

Keith highlights this approach in wellbeing, travel and concierge company White Calm Retreats. He was working with the business as it was about to expand operations across the UK when the pandemic began. “One of the things to prepare for is the unforeseen,” says Keith, “A business needs to react fast and be adaptive.” The company not only looked to survive but to work towards becoming a market leader by substantial and timely investments to create an online wellbeing platform and customer app that utilised cutting-edge design, marketing and content strategies. Classes ranging from yoga to holistic nutrition were rapidly converted into an online format so customers could enjoy a range of experiences from their homes.

Moving beyond survival into new commercial success is also shown at Vapourcore, a UK vape retailer, established in 2016. Keith joined as an investor but eventually became chairman and is helping steer the company through the pandemic: “Pre-Covid our shops were gaining traction but when the lockdown came we quickly realised a new business model was necessary.” The company’s 9 London and 40 regional stores were deserted as the lockdown restrictions increased. “We then saw online commerce thriving,” recalls Keith, “So we put the business into another entity.”

Delivering direct to customers is a rising trend as businesses like Vapourcore are increasingly taking their businesses online. (Credit: Macau Photo Agency)

Vapourcore is now working to become one of the largest and most trusted online vape suppliers in the UK while downsizing their physical retail operations, with the online business having grown five-fold since the start of the first period lockdown in 2020. Tough choices, however, have had to be taken.

“You must take emotion out of it as you reduce the size of the business to a manageable size to cut costs,” explains Keith, “We are focusing on parts of the business with potential and putting new models in place.” As a result, the company has not only converted their store patrons to become online buyers but the business is growing profits from new e-commerce customers using the website.

Keith Holdt’s work at Equity Impact Partners certainly demonstrates that private equity has an important role to play supporting businesses navigate uncertain times while contributing in the long term to the global economic recovery that will be essential for future prosperity. Responsible professionals at the forefront of private equity are helping companies to not only navigate economic storms but to invest in brighter futures.

Previous articleAn Appreciation of George Bizos
Next articleChairman at work in the Pinotage vineyard