Women in PE: Foresight’s Alvarez on SME deployment plans, regional expansion drive

Foresight continues to undertake careful due diligence processes for any potential investments, but there is a “wealth of opportunity out there”, Alvarez said.

“Banks not being as available as they once were widens the equity gap for these smaller companies and makes the opportunity for Foresight even greater,” Alvarez said. “We cherry pick the companies we invest into, selecting the most promising and ambitious SMEs – we invest in about 1% of the opportunities that we see each year.”

The general partner (GP) is currently seeing various opportunities in healthcare, including consumer healthcare and consumers purchasing healthcare services, as well as business services, said Alvarez. Foresight is targeting smaller companies with equity tickets of GBP 500,000-GBP 10m across its venture, growth and buyout funds, she added.

The sponsor raised its first vehicle to focus on North West England in the form of its debut Foresight Regional Investment Fund, which held a final close in 2016 on GBP 58m (EUR 66m). The fund was fully deployed by the end of 2021, Alvarez said.

“We’ve made five exits from that fund and have made 2.1x our money in cash returns so far, averaging 7x money on the exits,” the PE executive said. “We’ve got a good pipeline of exits with advisers mandated on a number of deals. But if the offers weren’t there, we could hold back, as we have a four-year realisation period if we need it.”

The sponsor’s other recent exits include the realisation of its investments in video wall innovator Datapath, scoring a return of 11.7x; and the sale of its stake in R&D tax specialist GovGrant, generating a 4.5x return.

Regional growth
In her role, Alvarez is focused on leading Foresight’s North West, Yorkshire, and North East-focused funds. She also oversees the deployment of Foresight’s earlier stage Foresight WAE Technology investments. “We’re an ambitious team and are always looking to grow and increase our regional footprint,” she said.

The firm opened an office in Leeds (Yorkshire and Humber) in 2022 and plans to open a Newcastle office this year, with the aim of supporting its North East funds, the executive said.

The sponsor has expanded is Manchester office (North West), recruited two new team members into Leeds, and two into the Dublin office (Ireland) that it opened last year, Alvarez said. It is also looking to add another couple of people to the Edinburgh office (Scotland).

As of the end of December 2022, Foresight Group had GBP 12.3bn AUM, GBP 1.4 bn of which is comprised of private equity. Foresight invested into more than 90 SMEs over the course of the year.

Value creation
Aside from new investments and exits, the sponsor’s focus on the smaller end of the PE market means that its portfolio has significant potential for value creation, according to Alvarez.

“Smaller companies can often attract top talent,” she said, citing the example of Mowgli Street Food, which was founded by former barrister Nisha Katona. The sponsor sold its stake in the business to TriSpan in January 2023, making a return of 3.5x money, as reported.

During the investment period, the GP brought on board Dame Karen Jones, who previously held roles with Café Rouge and Prezzo. This had “a massive impact” when it comes to governance, said Alvarez, and her knowledge of “what makes a good site and what does not” assisted with the firm’s growth. Foresight supported the business in expanding its presence, growing it from three to 15 sites.

There is often room for significant growth in the businesses that Foresight backs, Alvarez said. “Even in difficult economic times, if you take a business with no external marketing and no financial director, switching on those basics means there is a lot of low hanging fruit for improvement and value creation,” she said. “With an ecommerce business, for example, there is a lot of opportunity for development.”

The GP sees add-ons as another potential avenue for value creation, she added. “Now is a good time for bolt-ons and we employ this strategy frequently. We made six bolt-ons in a portfolio of 17 in our first North West fund, so around a third of our portfolio companies did a bolt-on deal.”

Diversity push
Foresight holds a strong belief that diverse teams produce better results, which spurs the team to “go out of [its] way to source diverse candidates,” said Alvarez. “It’s about a team performance, rather than an individual, and diversity is really important in delivering that team performance.”

The firm has signed up to the Investing in Women Code and the Women in Finance Charter, meaning that it tracks its levels of diversity. “We’ve already been doing this for four years, but now we’re starting to set targets, including on attracting more business plans from female founders,” she said. “This means we’re targeting female entrepreneurs through direct origination. LPs are interested in this and it’s certainly a consideration for them for whether they will invest, so it’s important that we are making progress in that regard as well.”

There is now more awareness across the industry that team diversity leads to better outcomes, Alvarez said. “A wealth of research and literature has been there for 20-plus years, but it is now more prominent and there is also more of it. Over the last five years, it has been taken a lot more seriously, looking at how to attract more women and retain talent, especially when women have children.”

This has also affected the industry’s approach to M&A opportunities, she said. “Female founders and female entrepreneurs have become more prominent, and people are aware of the need to do deals with these groups and to bring diversity onto boards.”

Entering the industry
Alvarez described PE as an “enjoyable and all-encompassing career” that she would recommend that women pursue. “My advice would be to get into a network, and don’t be afraid to talk to other people in the sector and get their advice,” she said. “Go to events and get involved, which will give you the confidence you need and will help you to learn if it’s the right career for you.”

Alvarez joined Foresight in 2016, but her interest in business began well before this. “My parents both had their own businesses, which gave me a natural interest in this area,” she said. Having obtained a first-class degree in management, she did a placement, providing her with “confidence and structure”, although the interview processes for her first graduate role were ”really tough”. She chose to work for KPMG, starting out in the firm’s audit division and subsequently moving to its strategy team.

“I worked in corporate finance and restructuring, but I knew by that point that I wanted to move into PE and was shaping my career for that,” Alvarez said. Her experience across both disciplines helped shape her skillset, she said. “Corporate finance is more ‘glass half full’, but in restructuring you learn to spot early warning signs with more of a governance and risk hat on, which makes you very cash-focused. A recruiter approached me about joining Foresight after someone in PE recommended me to them, and it was the right move for me.”

• Tweet  
• Facebook  
• LinkedIn  
• Google plus  
• Send to  

• Topics
• GPs
• UK / Ireland
• Consumer
• Healthcare
• Technology
• Support services
• Foresight Group
• Women in Private Equity
• United Kingdom