Why private equity works for people-led businesses

Interpath is a Business Reporter client

Only a decade ago, people-led professional services were unlikely to be on the radar for private equity and leveraged buyouts. The market couldn’t see the rationale for investors as talent could walk out of the door, and there was a fundamental misalignment of capital, debt and the partnership model. Now, that perception has changed significantly.

Since then, early transactions in accountancy and financial advisory market demonstrated that with the right strategy, structures and incentives, professional services businesses can thrive under private equity ownership.

Core to the sea-change has been a better understanding of preserving and creating value in these businesses. People need to be brought into the process through governance, modernised contracts and participation in long term equity value.

As those models have proved successful, capital has followed. Investors have refined their approaches, deepened sector specialism, and we’ve seen more sophisticated platforms and buy-and-build strategies.

Interpath’s own journey reflects that evolution. With Bridgepoint’s strong backing, building on the foundations laid during HIG’s ownership, we have demonstrated not only the power of our own model, but also that private equity can be a powerful enabler.

We’ve combined international expansion with a broadening of our capabilities. What began with a strong heritage in restructuring has since developed into a diversified platform, spanning our core capabilities in deal advisory, forensic and value creation – this is about creating truly global service lines that meet our clients’ needs wherever they are based and in increasingly complex and cross-border engagements.

The global reach of our single P&L model has required targeted investment – whether through team lifts, acquisitions, or simply taking on the best talent in the market, wherever they are based, to support business leaders as they navigate what’s next. Still in the early stages of our journey, we now have 35 locations around the world in more than a dozen countries, and over 1,000 colleagues. Furthermore, we’re proud that each of those colleagues has the opportunity to become a shareholder and part-owner of the firm.

Together, this combination of international reach and multi-disciplinary capability has positioned us as a more resilient, scalable and relevant partner, while also creating broader career opportunities for our people. Private equity has helped create our path as we challenge the status quo of the industry. Crucially, it backed a model where people remain the defining driver of value in the business.

Across sectors, businesses of varying sizes and stages of maturity are facing growing pressure to invest for the future. For people-led businesses in particular, that challenge is typically even more acute. Growth depends on capital, as well as the ability to attract, retain and motivate talent.

In our experience, the capital is there to be deployed, even in such a rapidly changing trading landscape. Success will come to those who recognise that in people-led businesses you need more than just capital. There has to be a compelling platform, an alignment of incentives with senior teams and a proposition and mission that can excite and attract the best talent. Bringing all that together is the key to unlocking private equity in this market and the extraordinary potential of professional services businesses.

For more information, please visit www.interpath.com.