00:00:10:20 - 00:00:28:04
Unknown
I'm going to do a quick intro to this gentleman who I have come to love, respect and admire in this space for his journey. Al, don't get up. Mate is out as a partner at Brook Mill. Your other family here today. Okay. All right. I want to take that as a personal thing.

00:00:28:08 - 00:00:52:21
Unknown
Maybe I'll temper my language. Al has already been through the search, acquire and had an exit along the way in his journey. But he's also a lawyer, having worked in both big and boozy law firms and worked in-house across the venture. And M&A scene. So the insights that Al brings and also the comedic value to the way he's going to present this far outweighs mine.

00:00:52:23 - 00:01:00:00
Unknown
So without further ado, let me hand over to Asoka. Thank you, everybody, and have a wonderful day.

00:01:00:00 - 00:01:25:32
Unknown
I'll thank you, Gareth. And thank you very much for that flattering introduction. For my sins. Gangsters. I am a lawyer. My name's also CO. I found it brought within 2022. And sort of beside that, I have had a full and varied career in M&A. So I started in the city in 2012 doing large cap deals in the city.

00:01:25:36 - 00:01:44:33
Unknown
After sort of nine years of that, I felt like I was bashing a square peg into a round hole and ended up joining a serial acquirer. At the time it was a very new VC backed business that was acquiring e-commerce businesses back in the early part of this decade when that was cool and people were pouring loads of money into the sector.

00:01:44:37 - 00:02:12:34
Unknown
While I was there, we raised some 200 million bucks, grew the business from $0 to $150 million of revenue, bought 40 businesses and then got restructured, which is part of the reason why I do what I do today, which is a mix of things I search through. But now we have done one acquisition and one exit. We did a bolt on for that and we are in the process of closing out deal three as we speak, entirely bootstrapped.

00:02:12:34 - 00:02:35:23
Unknown
And I also look after startups, scale ups founders through a legal consultancy practice and through a couple of law firms too. So that's a bit about me. And what it means is I've been around the ecosystem for a little while and hopefully have a vantage point. That means I see quite a lot of things that are going on.

00:02:35:27 - 00:03:09:31
Unknown
So Garth asked me to speak about a coming of age. Now the good news is I guess I agree with Gower's premise and what he said at the top, which is that it is coming of age and where we are a real inflection point. And gaff has already touched on quite a number of the reasons why that is a and what I'm going to try and do is sort of maybe put a bit of a human face on this by basically talking through a number of constituents, of constituency sorry, of people who are in this ecosystem and talk about the problems that they are facing and how people are trying to fix these problems.

00:03:09:35 - 00:03:25:37
Unknown
And hopefully that will start to paint a picture of kind of why this is such an interesting place to be. And I'll probably echo some of the things that Gareth has already said as well. So if we start looking at the stats and they're quite hard to come by, but I did manage to dig a few bits and pieces out.

00:03:25:41 - 00:03:45:46
Unknown
There is a real sort of impetus globally for search funds. So apparently 700 or so search lines have been founded since 1994. I think that's a bit low because I think there are a lot of people, like many of you in this room, I suspect, who are kind of below the radar and have not founded, you know, formal search funds per se, But it's really come into its own in the last couple of years.

00:03:45:46 - 00:04:10:19
Unknown
You can see from the numbers that what we're talking about, roughly 100 search funds in both the US and Canada and then outside of the US as well over the last couple of years. So some of that 700, it's really started as people have started thinking quite systematically about the sorts of things that Gareth's talking about. And you know, the gray wave is a problem in Germany, is a problem in the States, it's a problem in other places as well.

00:04:10:23 - 00:04:32:38
Unknown
So we'll move on to our first our first sort of constituency of people who are effectively off our semi founders. Now, a quick disclaimer, all these people are based on real folks. Names have been changed, industries have been changed in some cases. And all the pictures are generated, which is why we've got a man of a fish and some chickens.

00:04:32:42 - 00:04:55:18
Unknown
But they are they are representative of the sort of people that I meet in this community and in some cases clients as well. So we're going to start with Tom. Tom is a really successful businessman. He farms fish in Surrey, believe it or not. He runs the fish farm, the TARDIS. You walk in and there's hundreds and hundreds of tanks behind a very boring front door.

00:04:55:18 - 00:05:17:15
Unknown
It's wild. He's exporting fish globally, but he and his brother, who he runs his business with, are not getting any younger. And they're thinking about what they do next, the back to their church and they want to start spending more time in that community, in less time cleaning that shit out of tanks, if we're honest. So he's thinking about what comes next.

00:05:17:19 - 00:05:43:23
Unknown
Then we got Dick, who is a serial entrepreneur in his fifties, born and bred in the West Country driven shop, somewhat chaotic. He's taken money from venture, he's taken money from private equity. He's done the whole thing. And he's not necessarily have the access that he wanted to. He's also suffering from chronic illness. He has done his whole life, and he's at a stage where he wants to kind of spend more time with his children while he's still got his health.

00:05:43:27 - 00:06:13:29
Unknown
And he's hoping that his final exit in sleep AIDS is going to deliver the kind of comfortable retirement that he's always dreamed of throughout his career. And then we've got Harry, who's who's another sort of textbook case of what what an semi entrepreneur might look like. Harry is a proud Scotsman, born and bred in Aberdeen, fanatical Aberdeen FC football fan, and he spent his entire life in engineering.

00:06:13:33 - 00:06:39:43
Unknown
He has he started basically as a school leaver on the tools and 25 years or so ago he founded his own company, which has grown steadily and he's sitting on a large pile of cash but really wants to kind of release that and, you know, some more with a view to having a retirement and principally funding his kids, his grandkids, university and school education.

00:06:39:43 - 00:06:59:01
Unknown
So spending some time with them before they're too old to think about hanging out with grandpa is something worth doing. So all of these guys have one way or another. There are different ages, different stages, different industries, but they've all got the succession problem that Gareth has just described, the sitting on good businesses, but they need to to work out a way out.

00:06:59:01 - 00:07:27:04
Unknown
And they've also built successful businesses and they've built successful businesses because of one common person. And you look at those and you go, What's in common with these people? And I sort of slightly counter-intuitively think that this lady is what they have in common. I'm not talking about their voting preferences. I have no idea how they vote. But Margaret Thatcher transformed the UK's business environment for entrepreneurs.

00:07:27:04 - 00:07:55:30
Unknown
And you know, from the eighties onwards the UK became a drastically different place to do businesses to decide to do business combination of things. I put a few things up here Big Bang tax cuts for individuals, union busting, big changes to the to the legal system in terms of a reformed companies regime, reformed insolvency regime. The UK that Margaret Thatcher left was a very, very different place to do business from the from the from the country that she inherited.

00:07:55:30 - 00:08:21:04
Unknown
And that sort of borne out in the data, as you see a pretty seismic shift from employed models of work into self-employment and entrepreneurship and if you think about self-employment as a proxy for like micro entrepreneurship, you really see this in the numbers. So it's up there. You know, 1979 we were looking at 11.8%. By roughly the time Margaret Thatcher left power, we were at 40%.

00:08:21:04 - 00:08:42:40
Unknown
And interestingly, it has stayed consistent since despite everything that has happened since Thatcher has left government. And you can see see a couple of stats that I found underneath. You know, 1984 was a bumper year for people going into self-employment. And in 1981, Thatcher was claiming that 10,000 businesses were being formed each month in Latvia, which is absolutely insane.

00:08:42:40 - 00:09:15:11
Unknown
Statistic, if true, this is also borne out in the data, and I think I've got slightly different data to Gareth, and I would defer to Gareth in terms of like where things are. But directionally we're in the same place here, which is that, you know, we've gone from 2.4 million active companies on Companies House in 1980 to 5.5, 5.7 million somewhere around that today in terms of the share of employment, we've seen a roughly 20% increase since the, you know, since the Thatcher era and for turnover turnovers that we've seen about a third increase.

00:09:15:11 - 00:09:33:33
Unknown
So we're seeing a real seismic shift as people have moved from probably large manufacturing businesses and and so on into SMEs. Now that there are number of reasons why that is, but it is a boon for entrepreneurship. Whether or not you think that's a good, you know, that the policies that force that change are good or bad thing.

00:09:33:37 - 00:10:00:27
Unknown
So if you go back to thinking about our three entrepreneurs, they've been building these businesses against what actually has been, you know, an economy in a, you know, economic history that is anything but boring. You know, if we start at Big Bang, we have a major financialization of our economy. We had a crash when we fell out of the black Wednesday, rebuilding under the Blair years when it was suddenly go, go, go, and Britain was cool again.

00:10:00:31 - 00:10:35:28
Unknown
Then the financial crisis, bank nationalization, stagnant growth, declining productivity. And frankly, as Gareth again has alluded to, the the effect of zero interest rate environment on alternatives and the enormous inflation of asset prices that happened in private markets as a result, will we'll be coming back to that in a minute. And then, you know, not to mention the last five years where it has been pretty spicy with pandemic to Trump administration's war in Ukraine, war in Israel, biosecurity risk.

00:10:35:37 - 00:11:15:15
Unknown
You know, if you are building a business against this kind of background, you're building a pretty good business one way or another. These are going to be resilient businesses. So let's now move our focus to our second constituency. And in Shoreditch, we're going to meet two individuals. We're going to start with AMI building, who is a seasoned money man who grew up in venture capital during the dotcom bubble, rode out the bust and then made a second fortune at a prominent VC fund, basically by magic, as asset prices increase and increase and increase while interest rates are low, he runs a boutique firm and he basically holds the bulk of the carry.

00:11:15:19 - 00:11:43:36
Unknown
He's fine, Jack. He's doing very well. And with Bill works that young private equity guy, early thirties, nice flat cap, long term girlfriend by all accounts very comfortable. But he wouldn't describe himself as rich. And he's looking at Bill's carrying his own relative carry. And it's a bit of a source of angst because he doesn't necessarily see a way to build the kind of wealth that his boss did through the same means to build it.

00:11:43:36 - 00:12:28:48
Unknown
So he is thinking about what comes next. Whilst he's busy sourcing deals and making Bill even richer than he already is. So I think what we really have is we've got two groups of people here who live in effectively parallel universes. Since Big Bang. You've got the people who are actively out there trading, if you like, in the real economy, who have had to weather all the storms of ups and downs in the markets and pandemics and everything else, whilst Tom, Dick and Harry have basically sat while Phil and Ben sorry, have sat there and basically watched asset prices increase and increase and increases institutional capital has chased returns that they couldn't get in, you

00:12:28:48 - 00:13:05:12
Unknown
know, less risky assets and as a result the wealth of these two constituencies have diverged and sort of VXX used to be a really viable way of financing certain types of businesses. As people can see from the faces in the room, there are a number of people who've been in VC at one point or another, and many of you know this, but, you know, essentially it was a way of getting young businesses capitalized if they were in certain sectors software, biotech, consumer to a degree and so on.

00:13:05:16 - 00:13:50:10
Unknown
But life has become harder as a result of kind of changes in the economy over the last couple of years. And my view is this guy is a large part of the problem cohort. Why? Why am I talking about Putin? Well, the Ukraine war changed the game for the venture. And I'm going to give an anecdote here of the personal one, which is back in the last few months of 2021 and into the early part of 2022, the VC backed aggregator where I was working was in the process of fund raising.

00:13:50:10 - 00:14:17:26
Unknown
And the later stages of that fund fundraising were run by me and the CEO. And as we went into January and into February and we started seeing troop movements on the border of Belarus and Ukraine, we we were we started working all the way through the night, like crunching through making sure to cap table what everything, because we were very worried that if we didn't get the round closed by the start of any invasion, if it were to happen, we were going to have a problem.

00:14:17:30 - 00:14:45:24
Unknown
Now we got very lucky. We actually close around two days before the invasion happened. The money came in. We did not raise again, tellingly, and that business has since been restructured, which I think is a sort of one off. But is it symptomatic of certainly what happened across e-commerce aggregation? And I think is, you know, a little window into a lot of what has been happening inside venture over the last two or three years.

00:14:45:28 - 00:15:04:38
Unknown
And as I was preparing for this talk, I pulled a couple of slides from various reports that I think really sort of speak to different parts of the problem. If you're in venture capital and why venture is maybe less interesting than it was. And this is the first one. This came from 2024 McKinsey report on the state of private markets.

00:15:04:38 - 00:15:27:48
Unknown
And in the report there, mainly talking about the right hand side of this graph and how the performance spreads, compresses, you basically buy bigger and bigger businesses. But somebody who I spent a long time in venture is that left hand bar that really caught my eye. And it just shows that if you invest, if you're investing as an LP in a venture fund, it's a crapshoot, you know?

00:15:28:06 - 00:15:56:36
Unknown
But that's a pretty significant spread. And because the assets are so illiquid, you have no idea until sort of 5 to 10 years after you've invested whether or not you invested in a plus 52% IRR or a -10% IRR fund. And meanwhile, your fund manager has been merrily taking his 2%. And I think as interest rates have risen, if you're sitting at an LP, investing in the left hand side of that graph becomes available harder than investing in the right hand side of that graph.

00:15:56:36 - 00:16:31:25
Unknown
And so life has become, for that reason, slightly harder for the venture capital fund at the same time the funds to start returning capital. So this is a graph published a couple of weeks ago by Carter looking at I think this is probably US funds but returns on capital since inception and what you can see is year on, year on year, consistently these funds have not really been returning money as we've gone up the vintages.

00:16:31:29 - 00:16:53:05
Unknown
And so if you're sitting an LP again, you're thinking, well, I don't know if I'm going to make a fortune or I'm going to lose my share and the money's not coming of age is why would I give Bill or Ben any cash? And so William Bennett broke the money, I'll tell you that. Broke. But they have they certainly have less money around.

00:16:53:09 - 00:17:20:34
Unknown
And so they're not funding startups anymore. Now, there's an asterisk to this, which is that in a I, it's a different story. There's a massive hype cycle. People are pouring cash into a business. You know, if you're looking at consumer or SaaS or, you know, the more traditional sort of start ups, they're just not getting funded. And that's certainly what I'm seeing in my in my legal practice, where I look after a number of founders of early stage businesses.

00:17:20:38 - 00:17:43:40
Unknown
Now let's move on to our third constituency. In the pub we have my mate Barry, who is an accountant, became CFO of a VC backed business, got knocked about through the Ukraine war a bit like I did similar age and stage to me with a young family and he is sick of working for the man and wants to set up his own shop.

00:17:43:44 - 00:18:10:46
Unknown
Given his background as a sort of finance guy and with an operational overlay, he absolutely has the kind of skills required to buy out in a semi. And so he is out there in the market like many of you guys are actively searching for. Do. And he's chatting with Paul, who's this operator a bit older than Barry, late forties, early fifties, spent his career basically doing ops inside large places.

00:18:11:00 - 00:18:32:37
Unknown
But like pretty much everyone else we've seen on these slides, his priorities are starting to shift and he is he's basically decided that he wants to get into the business of owning things, not doing things because his partner has family overseas. They're not getting any younger and they need to spend a chunk of the year out of the UK looking after those guys.

00:18:32:41 - 00:18:58:43
Unknown
And Paul has got all the skills to operate but does not necessarily have the skills to structure and source these transactions. And I think the takeaway here, which is really important, is guess has a slightly bad rap in that people think that it's like Stanford or like INSEAD grads who've taken a course and think that they can do a 90% venture finance deal for no money down and the brokers will hate these people and so on and so forth.

00:18:58:44 - 00:19:38:33
Unknown
But the truth is that, you know, if we think about people like Barry and pull these all serious operators, possibly with a bit of capital behind them and certainly will have credibility to run. Tom, Dick and Harry's business is that they're the seasoned operators with track records. And this sort of leads us to where we are now. If you're Barry and Paul and you've decided that you want to do your own thing and you want to create a life for yourself that doesn't involve working for a man one way or another, or getting beaten up by investor directors on your VC board and you can't get any money out of Ben And then to start

00:19:38:33 - 00:20:03:41
Unknown
your own thing, because as we've already discussed, there's probably less money around than they will have you believe. And at the same time you have our operators who are looking for good homes for their businesses and want some kind of liquidity event, to my mind is obvious. Who would you talk to? I mean, I'm not even going to answer the question because I think it answers itself to be honest.

00:20:03:45 - 00:20:30:18
Unknown
Let's go back to Ben briefly. Ben has actually had a career pivot. Ben has gone down, the pub is resigned. His job because he recognizes he understands what I've just told you about venture, that it's it's not the game it used to be where you could just sit there and essentially watch asset values, appreciate pretty much by magic.

00:20:30:22 - 00:21:01:40
Unknown
So he's now in the pub with Barry and Paul talking about how he can facilitate the buyouts of all operators. So so that's kind of where we are. And if we sort of try and draw a few of the threads of what I'm saying together, I think it's basically this, you know, since Thatcher, SNP owners have built pretty resilient businesses with decent track records, product, you know, proven product market fit and actual cash flow for whatever reason.

00:21:01:40 - 00:21:36:35
Unknown
And it's not all about age, as we've seen with a couple of our examples. They want to sell. They want to they want to shift these businesses and go and do other things with their lives. They've got other priorities in front of them. Meanwhile, alternative asset managers have come to the end of a bull run. And so if you are an ambitious entrepreneur and you are thinking about doing your own thing, creating a different kind of life for yourself, that doesn't involve drawing a salary, talking to our operators is an obvious place to go looking for that life changing event.

00:21:36:39 - 00:22:08:09
Unknown
And, you know, to Gary's point and my star one and it might might, you know, go from there I myself am in the process of rolling various things up and I see exactly the value that Gareth talked about. The question is how capital is beginning to take an interest. We've already sort of had a bit about today and what I'm seeing in my practice be interested to hear in the Q&A if others are seeing the same, is you've really got four pools that are starting to play in this market.

00:22:08:09 - 00:22:29:32
Unknown
You've got the family offices, which if you can find them, can be quite a good option because the capital is very patient and they have different theses. And so there's a there's a huge variety of different ways of thinking about investing. If you talk to family offices and it's not all the same way as, say, VC funds, but it comes with a bit of a caveat.

00:22:29:32 - 00:22:58:48
Unknown
I've seen some operators presented with term sheets that essentially means you're buying a highly leveraged job. And so it's definitely worth modeling out what the economics look like very carefully for the right deals. We're seeing specialist lenders, both asset backed lenders and for larger transactions, cash flow lenders taking an interest. There are pluses and minuses to both models and not not every business is susceptible to to one or the other kind of debt.

00:22:59:02 - 00:23:32:35
Unknown
And particularly with the cash flow lenders, you do need to take a certain amount of risk because they will require PPG. And if you're signing or PG where there's, you know, you're basically looking at valuations based on future cash flows that can be a bit hairy. But for people who are prepared to take the bet and have that seed capital to basically fund the deposit, if you like, it can be a really compelling option if you especially if you want to try and keep as much of the equity as possible and therefore keep as much of the upside as you can.

00:23:32:39 - 00:23:56:39
Unknown
And then at the smaller end of the private equity market, you're starting to see players look at, you know, all sectors. And I'm I'm sure most of you guys know the story of like, say, water direct that was PE backed and where people did extremely well. If you don't know it, it was worth looking after some really good articles about it, but it gives you a sense of how PE can make a fortune in this space.

00:23:56:39 - 00:24:21:44
Unknown
And you know, once one person's done it, everyone else is looking at it. So they are starting to take an interest in people, you know, like our like our searches from the pub, which brings us to the question of what's the future? And I wish I had a crystal ball because I'd be a rich amount of my arm and I'm not entirely sure I know where it goes from here.

00:24:21:48 - 00:24:43:00
Unknown
But as there's currently no consensus, certainly in what I see, there's no one size fits all to these transactions. And I think that's probably a feature, to be honest, because unlike with Venture, where one size business is much like another, the economics look similar, the margins look similar. The way in which you structure a liquidity event looks broadly similar.

00:24:43:04 - 00:25:06:35
Unknown
The same is not true with businesses in the real economy. The balance sheets have looked very different. The business models are very different. They are often owned by one or two people and don't have that kind of governance structure that if you come from an institutional background, you're used to, which frankly demands a certain amount of creativity in dealmaking.

00:25:06:39 - 00:25:32:06
Unknown
So I guess my own sense of things is, is really summarized on this slide, which is to say that there's an immense energy in this space. I mean, we have a full room. We've even gone beyond the please don't sit here a line at the back, which is awesome to say, and it just shows you that there's real momentum in the space right now and it's just not the same in in other ways of funding SMEs.

00:25:32:06 - 00:25:59:22
Unknown
So I was at London Tech Week last week talking to founders and absent some very excited, I only found as it was kind of a flat vibe, you know, people are struggling on that. And part of the reason why is the searches are doing real deals for real cash flowing assets at sensible and in some cases super cheap prices like I have seen people get away with pretty much no money down deals like in my practice that they do exist.

00:25:59:26 - 00:26:28:20
Unknown
If you find somebody who just wants to shift an asset for whatever reason, they can be done. Although special situations are not for the faint of heart, I would caution people on that. And also I think this community is somewhat different from from the kind of V.C. founders space. There's a lot less hype this flight is floats a little bit below the radar and the sorts of people who end up searching are actually quite different people in that they're really the much more focused on autonomy.

00:26:28:20 - 00:26:51:22
Unknown
They're much more focused on building things that are sustainable and, you know, on custodianship really in a way that you don't get with VC founders who are often kind of either naive or, you know, very optimistic and really happy to like, swing for the fences and break a lot of rules to make that very large exit. If they possibly can.

00:26:51:22 - 00:27:13:11
Unknown
So so that's sort of where I think we are. And hopefully this has set a bit of a tone for what some of the other speakers today are going to talk about. And I'll just leave you with a parting thought from a partner, a big four firm that I met on an event earlier in the year who said, what's up there?

00:27:13:11 - 00:27:55:05
Unknown
And you know, if I pricey it, he basically said, you know, a subset of people who are smart can see that there is an immense opportunity here but we're at the very earliest stages of information sharing and building an ecosystem that enables these deals to be done efficiently. And so what's really happening is people are kind of scrabbling around and raising money here and there on whatever terms they can get you get a hold of and maybe, just maybe, something like the BBC and that sort of model of doing things might emerge over time and watching it evolve, if you like, in real time and actually pretty quickly is is quite exciting.

00:27:55:10 - 00:28:22:12
Unknown
When I started getting involved in this space 18 months or so ago, events like this were like a dozen guys and like is mainly guys in this industry. We would love to see a bit more diversity in it, but it is mainly men. It was like dozen guys in a pub chatting about deals and here we are. Yes, I'm 18 months later and we filled a conference venue in central London through, you know, the power of the community and that's just super exciting to see.

00:28:22:16 - 00:28:44:02
Unknown
And so I'm really positive about the future of AI and the future of search. And I suspect that we're going to see quite a lot of quite successful people in time coming out of events like this. So yeah, thank you very much. That's all I've got to say. Any question.