A capable and passionate management team that know their business and have a clear strategy for growth - those are the most important things private equity looks for when investing in the pub sector. That’s the message from a trio of senior private equity investors who were quizzed on their views towards the industry by Peter Hansen, founder of Sapient Corporate Finance, at the MA250 conference in London. Ron Pearson of Bowmark, whose investments include Living Ventures and The Restaurant Group, lists three things that are necessary for investments: great management, a product that will appeal to customers, and something that’s “scalable”. Hugo Robinson of Kings Park Capital, a leisure sector specialist whose investments have included Las Iguanas, agreed. “We are looking to grow businesses, and businesses that can demonstrate that ability to grow.” For Bill Priestly of LGV said the decision is made “simpler” if the company has demonstrated “steady progression” already. “If we invest our own money in the deals, it has got to stack up. “It comes down to things like price. If it’s cheap and you haven’t got a good track record, you might still buy it, but if it’s expensive then you need to have all these things stacked up. There’s not one single answer. Really, all we’re looking to do is get a return on our capital.” Despite wet-led sector being in long-term structural decline, Priestly said investing in such firms isn’t necessarily a problem - Amber Taverns, the wet-led pub group, is among LGV’s investments. And size isn’t necessarily a problem, either. When asked if companies the size of MA250 members are too small, Robinson pointed out that he invested in takeaway chain Abokado when it had just five sites. As for what private equity doesn’t like, poor performing units is a “red flag” for Pearson that “things aren’t right”. Priestly said: “I don’t want a chief executive who can’t tell me the numbers sold last night. “Similarly I don’t want a finance director who doesn’t know the name of the managers in a unit. Particularly in smaller businesses, you want everybody to know the business and be passionate about the business.” On the question of private equity’s level of involvement in the business, Robinson said: “From a day to day perspective, the level of involvement very much depends on their view of the business, but the primary thing is we are not in the business of running businesses; we are in the business of backing people to run businesses. “We may be able to offer some guidance, discipline and focus but we are not trying to manage the business.” Priestly said that while it’s not true that private equity will tell people how to run their businesses, “there’s no point pretending that going to private equity you wouldn’t be giving something up because you are. That’s just a reality. “The important thing is, up front, to work out where your agenda and your partners agenda differ.” All private equity investments are subject to some kind of timescale, and Robinson suggests that three to five years is a usual period now – a few years ago it would have been two to three. Person and Pearson also go for around five years, with the latter saying this is enough time to demonstrate profitable growth – although his investments have stretched from 17 months to nine years. When it comes to return on investment, Pearson said three times is generally the target, with Priestly saying: “If we make two times-plus after costs then it works for us.” Priestly also spelt out the important of having a simple business plan. “If you’ve got a clarity of focus and a compelling story about where you will out perform the market, that’s what we like to see.” When asked by TLC Inns co-founder Steve Haslam about whether they’d recommend talking to just one private equity investor or several, the overall view is the more the better. Hansen said: “You do want to talk to people because it’s about personality and your relationship. As an advisor I would tell you that you generally get the deal you want that way. Horses run faster when there are other horses.”