From the Racing Post to buying burrito bars - Renatus Capital Partners
Meet Mark Flood, the former managing director of the Racing Post who's moved in to private equity.
Flood and his business partner Brendan Traynor are co-founders of Renatus Capital Partners, a one-year-old Irish firm that has just bought the Boojum chain of five burrito bars.
Now the plan is to open more outlets.
"The business is making good cash. It's a growing trend in the right market," Flood told the Sunday Independent.
"The existing staff are excellent and the management team who are buying in with us are very good as well. So they're good guys who are going to lead up the expansion and there's good potential to grow it.
"We'll go step by step. We'll open a few more and see how they go, and we'll revise things then. We've got a bank who's willing to back us and expand. We have to grow sensibly and we'd hope to have two more units up in the next six months."
Flood says he and his partner don't see themselves as specialists in one sector. Their goal is to find a happy medium by targeting companies that are too small to attract bigger private equity firms but big enough to absorb a sizeable investment.
"Sector-wise we're not specialists. The way we see it is you've got the top 1pc of companies who are probably worth more than €10m. And then you've got the bottom 90pc who are making probably less than €500,000.
"And we're going for that little gap in the middle where the big funds don't play - but they're still chunky enough to take a €1m-plus investment.
"The three types of deals we'll be doing are management buying out from existing owners, management buying in, or a business buying another business. They're the three catalysts for a transaction."
Flood says there's a gap in the market for Irish businesses who don't have the collateral to get everything they need from banks.
"These kind of businesses are on cashflow, there's no real assets backing them, so a bank would give 50pc or 60pc. So if management want to buy it, there's a gap - and equity is needed.
"In Ireland there is an assumption that banks are financing everything, but that's not the way it is. It's a bit like Dublin houses: you need to find a 20pc deposit. So unless you can write a check for €1m or €2m yourself, you can't do it without an equity partner.
"But we're bringing more than equity, in that we're two young guys with a lot of experience in finance and commercial and operations, and we'll get hands-on and help run it."
Both Flood and Traynor previously worked for BDO. Traynor's specialty is executing deals, and Flood's experience in commercial and operations will appeal to potential partners.
"Brendan has dealt with 50 deals in BDO with businesses valued from €5m to €10m. He's done the sell side, he's bought them, he's restructured them, he's put some of them through examinership. He was director of corporate finance in BDO so he's excellent on the deal execution.
"I worked in BDO but then worked with FL Partners, and when the Racing Post was bought I moved across full time so I've kind of eight years in commercial and operations in Racing Post.
"It helps when you're with guys that you've got commercial experience and operations experience.
"This particular one - Boojum - we're putting in new systems and structures and are going to try and put a bit of science behind the new store roll-outs, try and professionalise everything.
"There's a lot of opportunity within businesses to realise their potential - we'd much prefer this than investing in property or something, where it's a bit dry. This is kind of real, you can feel it. We just love the cut and thrust of business."
But it's not all sweetness and light - raising the money to get the business off the ground was a difficult task. The problem? Ireland's much-criticised capital gains tax arrangements.
"It's hard to raise money from private investors because at the time we were raising the money, they'd two options. They could invest in Irish property and would be capital gains tax exempt... you know, probably the biggest barrier was trying to say to someone that they're better with us than investing in property. That's holding back investment. There's no doubt about it."
But Renatus managed to get backing from a number of "successful Irish entrepreneurs and CEOs" who want to remain private.
"They're very private people. They're successful and they kind of backed us and want to remain private - but they're very influential behind the scenes because they can add a lot of business value to the business."
Boojum is the first investment, but Renatus has made offers to get involved in three other businesses: one manufacturing company, one engineering company, and one company in retail.
"We can't say too much about the offers, but we've definitely got a good response.
"Warren Buffett famously said that debt is like a dagger on your steering wheel. It keeps you honest when you're driving but if you hit a bump in the road it will kill you. So it's sensible to have 40pc to 50pc equity in the business because it can withstand the bump.
"The other message is that the banks are lending - but they're not lending everything. That's what we're seeing.
"It's good news when you see these deals happen. It's creating economic impetus and the more of it there is the better, rather than just money going into property."
Sunday Indo Business