Casting his nets wide in pursuit of suitable revenue returns


Séamus FitzPatrick's CapVest believes in patient, longer-term investment in established businesses in order to maximise returns, writes Barry O'Halloran.

Whatever its religious ramifications, the Bible story of the miracle of the loaves and fishes has a particular resonance for Séamus FitzPatrick.

The Irishman is co-founder and co-head, with American Randy Shure, of CapVest, a European private equity fund, whose assets include Findus and Young's seafood businesses and the Baltic region's biggest bread baker, Vaasan & Vaasan. Hence the biblical connection.

But there's nothing miraculous about what CapVest does. In fact, when Belturbet, Co Cavan, native FitzPatrick explains it, it sounds simple. "We're looking for recurring revenue streams. We know tomorrow that people will buy bread, we know tomorrow that people will buy seafood," he says.

Its strategy is to pursue established business with strong revenue and cash flow, and in sectors where there are opportunities to make further acquisitions, or for consolidation. It does not get involved in venture capital, backing start-ups or businesses in early stages of development.

CapVest is a leveraged buyout fund (LBO), which basically means it combines investors' capital with debt to fund its purchases. It has an equity business, which FitzPatrick describes as his "day job", and a mezzanine finance outfit that provides backing to other private equity players. It generally targets deals worth between €100 million and €500 million.

LBOs were all the rage in the 1980s, when typically they bought businesses with the aim of turning them around in two to three years, delivering a quick return for their backers.

Private equity has made a comeback of late, witness deals like Eircom here and Birds Eye in Britain last year. But the dealmakers also have their critics, who claim that they never contribute anything to the companies they take over and are only in any business for a quick return.

FitzPatrick says CapVest's approach is different. "You used to be able to do buyouts in the '80s where you bought in, you paid down some debt and you sold and made three times your money. That doesn't work any more," he explains.

Now, he argues, it takes at least five years and proactive involvement in the company before you can get a return. "In terms of the private equity universe, we are more patient, longer-term investors than might typically be the case in the sector generally."

CapVest works in partnership with management and its principals take a significant stake in the business themselves. "You have to fundamentally transform the business, that's through making acquisitions, that's through investing in the business."

"We've spent a lot of time investing in the seafood business in the UK [ Youngs]. We've spent a great deal of money on new facilities and new factories to enable us to grow that business." It has increased earnings fivefold.

CapVest invested in Punch Taverns in the UK in 1999. It began with 1,400 pubs and now has almost 10,000. The business floated in 2002, raising £160 million, and giving it an enterprise value of £2 billion. CapVest did not exit totally on flotation, and in fact only disposed of its last interest in 2006.

FitzPatrick chairs Foodvest, the CapVest vehicle that holds Youngs and Findus, giving him a role in making key decisions. This approach, he says, allows CapVest to deliver absolute multiples in returns on their original investment to its backers.

But if these companies have potential for growth, why are their owners willing to sell in the first place? He explains that there are a lot of reasons. In some cases, they are family-owned operations that have been transferred from one generation to another. Other owners sell for strategic reasons. Youngs, for example, was a bit of a corporate orphan.

It processed fish and sold frozen seafood, but it was owned by United Biscuits (McVities) whose then owner, Blackstone Capital, decided that fish and biscuits didn't go well together. So in 2002, it sold to CapVest. When the fund added Scandinavian-owned Findus to its portfolio in March last year, which has sales of €450 million a year, it became one of the biggest players in the European frozen food market.

And it almost became the biggest when it bid for Birds Eye, which Anglo-Dutch giant Unilever placed on the market in March. "It was a fantastic brand, it was cash generative and fitted perfectly with Youngs and Findus. As a result we were compelled to look at it," FitzPatrick says.

One of the other players in the mix was the Kerry Group, which joined forces with two private equity firms to bid for the business. All were beaten to the punch by yet another private equity house, Permira, which offered £1.7 billion for the company.

"It was one of those things," FitzPatrick observes. But he doesn't sound like he regrets it. He shouldn't. CapVest currently has assets of close to €3 billion under its management, and the businesses are delivering turnover of €1.5 billion a year. It employs 10,000 people across Europe. In the last eight years, it's done 60 transactions.

CapVest continually looks for new opportunities, here and abroad. It has recently explored fields such as waste management and even pest control, all on the basis that the products or services are necessities and generate cash. Once the mix is right, it's "sector agnostic", FitzPatrick says. He also says that CapVest's size gives it an advantage when it comes to beating bigger players to businesses it wants to buy. "We're a pretty small team in comparison to some of the larger houses, but we know the sort of assets that we like when we see them and we tend to run after them very hard.

"We've actually beaten trade buyers for assets because we've been in a position to get the deal done, with the vendor ready to sign, before anybody else."

FitzPatrick joined forces with former colleague Shure to set up CapVest in 1999. Before that, his career had taken him from the local tech in Belturbet to Trinity College Dublin, to London, the US and back to London. During this time, he worked for Bankers Trust, JP Morgan and Morgan Stanley.

When he and Shure were seeking investors, they went to see Hank Greenberg, the tough-talking veteran of the Normandy landings and the Korean War, who led AIG, the world's biggest insurance group, for three decades.

"We said we were looking for backers for a fund for alternative investments in Europe," Fitzpatrick recalls. "He grumbled a lot and said we wouldn't make any money, the next day they gave us €250 million." With AIG as a major stakeholder, they were off, moving from the UK into Europe, where CapVest is now rated as a strong mid-market player.

Recently, FitzPatrick has switched at least part of his focus to home (the family home is in Dublin). Working with NCB, CapVest is raising €50 million from Irish institutions and high-net-worth individuals, which will form part of a €500 million debt/equity fund.

He left Ireland in 1989, when there were no jobs and no money. Things are a little different now. But he points out that Irish investors have homed in on property. He is trying to interest them in a wider opportunity. So, do they want to put their money into something else? "There's a real appetite for private equity there," he says. He's not only keen to raise money here, he'd also like to do a deal in this country. Sounds like he won't have to pray for any miracles before achieving that particular ambition.


Name: Séamus FitzPatrick.

Position: Co-head and co-founder of CapVest, the European private equity house that owns Findus and Young's frozen seafood businesses, along with a range of other assets.

Family: Married with two children.

Background: From Belturbet, Co Cavan. Graduated from Trinity College Dublin in 1989. Moved to London, where he worked with Morgan Stanley. His contemporaries there included Jim Barry of NTR and Barry O'Callaghan of Riverdeep. He then moved to the US and worked in private equity with JP Morgan. He returned to London in the late 1990s, and worked for Bankers Trust before setting up CapVest with colleague Randy Shure in 1999.

Why he is in the news: CapVest is in the process of raising €50 million from Irish investors, part of an overall €500 million investment fund.

Hobbies and interests: He sails when he can find the time.