Kestrel News

Q & A with Kestrel’s Chairman Christopher Wright

Christopher Wright – Chairman, Kestrel Partners LLP

Tell us about your professional background

My background is merchant banking, private equity and venture capital on both sides of the Atlantic. I was at Kleinwort Benson, which subsequently became Dresdner, ultimately joining its management board with global responsibility for a broad range of activities, including alternative assets, direct investments and capital allocation to third party managers. Our investments spanned three continents including the technology space, particularly software.

Since leaving Dresdner, I’ve worked with several Family Offices and Endowments around the world and I chair a venture capital platform in Shanghai. But one of my most relevant perspectives is from a US company called Roper Technologies, which has grown through a series of cash accretive acquisitions. I joined its board prior to IPO in 1990, when it was a $150m industrial pumps business. Now Roper has a $50bn market cap and 45 business units – 37 in B2B software across a variety of verticals. We’ve been a serial acquirer and, even though we don’t invest in public companies, the Roper playbook is very relevant to Kestrel. The role also keeps me informed of software company valuations around the world and what’s driving them.

Why did you join Kestrel and what is your role?

I’ve known Ari for 20 years and Max and Oliver since they launched Kestrel over 10 years ago. I’ve developed a familiarity with the firm, its approach and performance over many years. I am a long-standing investor in KOF on my own behalf and for a single family office, as well as a College Endowment on whose IC I serve. I was a pre-IPO investor in Idox, one of Kestrel’s core investee companies, and a board member of the company for almost 12 years.

Kestrel has always had a strong focus on cash flows and this is something we are obsessive about at Roper. I hope to bring to Kestrel an even greater focus on cash conversion of earnings and negative working capital, which ought to be a primary feature of a well-run software company.

You all know that activism is core to how we manage your capital and you will have seen us taking a greater number of board roles. You will also see us taking a harder view of the ‘C-suite’ and the board. I’ve spoken to a number of the KOF portfolio chairmen, directors and other board members to ensure a commonality of messaging, a clear vision and an understanding of their cost of equity.

Within our portfolio we have several companies pursuing significantly-sized acquisitions that will accelerate their growth and extend their international footprint. In so doing, we will want to make sure our portfolio companies really do understand the cost of equity and the cash- accretive dynamics of these proposals.

What is the most exciting opportunity for Kestrel’s investors?

I am particularly excited about the optionality that is embedded within Kestrel’s portfolio. Our companies can grow organically having invested well in their IP, as well as by acquisition, using their largely ungeared balance sheets. KOF is unleveraged and able to take a long-term view. The optionality as to exit strategies is further underpinned by the fact that many of our portfolio companies are trading below their private market equivalents, albeit well above our cost basis. Private equity is knocking on our doors, repeatedly in a number of cases. Notwithstanding the prevalent discount in multiples on AIM, we can see a variety of ways forward that will increase the NAV of KOF.

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