Things don’t always become clear just because you want them to. Majority shareholder uses its voting muscle by prompting board changes but reveals no clear aim

APPOINTED AT INVITATION OF INCUMBENT BOARD MEMBER TO JOIN HIM ON THE BOARD OF A EUROPEAN LISTED “FUND OF PRIVATE EQUITY FUNDS”

My involvement

A unique ongoing experience with a listed vehicle for investment in European enterprises, with a non-European +50% shareholder flexing its muscles for an as-yet unknown purpose. I liken the role to being the chauffeur of a limousine on a journey with no revealed destination, parked up for an indefinite stop-over with the chauffeur waiting for the rear-seat passenger to emerge from his stop-over engagement and step back into the rear seat, so the limo can continue its journey to the unknown destination. But ultimately the chauffeur holds the wheel and has to show, appropriately, that he controls the car.

Launched in Europe in 2007 as a “fund of private equity funds”, with an initial fund raise and listing and a purpose of following the fortunes of selected European private equity fund managers by negotiating investment allocations in their private equity fund launches in Europe.

A unique experience in that the +50% shareholder’s stated intention was to regenerate the board before proposing a plan for board consideration, the expectation being that the board would be asked to consider a new, broader investment policy, and could be asked to consider replacing the incumbent investment adviser to the board (the original promoter) with the shareholder’s own investment management team.

A challenging experience in that the company has 1,000+ shareholders to whom the board is ultimately answerable, and the board looks to an investment adviser comprising the small team of individuals who promoted the original launch of the company which is their only client, and who, in the interests of all shareholders, need to be retained and motivated through enduring uncertainty over their own futures.

Outcome

Five years on, the journey continues with the end destination still unknown. The relationship between board and investment adviser has been flexed as necessary in order to be maintained successfully, enabling the adviser to continue doing its job even though it still has no improved clarity as to its future. The investment policy has been broadened to permit a significant proportion of the company’s assets to be held in direct investments, enabling the company to take advantage of opportunities such as IPO cornerstone or co-investment allocations where it can and does benefit from suggestions put to it by its majority shareholder. Investment performance meets expectations. Still holding the fort. So far so good.