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Riada Capital Partners - Investing In Local Businesses
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RIADA Capital Partners – Investing In Challenged & Stressed local Companies
RIADA Capital Partners might be a new name to the investment and advisory space here in Northern Ireland but the new firm’s two principals need little in the way of introduction to many in the private sector here.
What’s RIADA about? It’s a new independent advisor and private equity investor setting out, in its own words, to work with and invest in good companies facing financial difficulty and/or a high degree of current or future uncertainty.
It’s description that covers a lot of bases. Neil Adair, one of the partners in the business, takes up the story.
“We’re here to work with companies under pressure, maybe needing a financial restructuring or a turnaround plan,” he says. “Companies with the potential for further growth that would benefit from a fresh injection of capital.
“We’re here to help business owners, directors and management teams, lenders, investors and creditors to solve what might be complex and challenging problems. At the end of the day, that means delivering some certainty to all the stakeholders of a business.”
Neil Adair is a PwC-trained chartered accountant and a UK and Irish licensed insolvency practitioner with 36 years of experience under his belt. A former partner in a leading firm of chartered accountants here, he led the corporate banking operations of an Irish bank from 1996 until 2004. He’s also a director of a number of companies and an existing and long-standing private equity investor.
“So I know what it’s like to risk my own capital, to have my skin in the game,” Neil smiles. “More importantly, I like to think that I bring empathy and understanding to businesses. That probably counts for more than the years of professional experience.”
Alongside Neil Adair at RIADA Capital Partners is Gordon McElroy. A solicitor and founding partner of MKB Law in Belfast, a firm with a substantial insolvency and restructuring practice, he sits on the board of a number of NI and ROI companies advising on strategy and corporate governance. He’s also a former President of Belfast Chamber.
“I’ve built up plenty of experience dealing with secured lenders in stressed situations,” says Gordon. “It’s a skill
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that was definitely honed during the global financial crisis and I suppose it’s founded on an understanding of the commercial and practical objectives that both borrowers and lenders need to achieve. It’s important to understand both sides of the same picture.”
RIADA Capital Partners business divides into two distinct areas. Investment in stressed and challenged businesses in return for a share of the equity of those businesses and Advisory services across areas like the provision of debt, financial and operational restructuring, insolvency, sourcing finance, governance, shareholder exits and disposal, including management buyouts and buy-ins.
“From our own funds, we can make investments anywhere from £50,000 to £1 million,” explains Neil Adair. “What are our target companies? Those facing what might be called a credit crunch, in need of funding to get through an immediate working capital problem. But we’re talking about companies with the potential to turn around, transform and grow. That’s important.
“Even more crucially, we’re only interested in working with consensual shareholders, directors and management. Once that’s established, we’ll work hand in hand with existing teams or seek to bolster the management team if that’s what is required. Our aim will always be to deliver the best and fairest outcome for all stakeholders.”
Gordon McElroy emphasises the importance of connecting with a business and its directors and management. “It won’t work if we don’t see eye to eye and if we don’t connect. We can empathise, we can understand but we also have to be able to relate. It can often come down to good personal relationships. Don’t forget that we’re talking about good businesses in financial difficulty, not bad businesses.”
Both men agree that Northern Ireland companies have been historically reticent about private equity investment, but that the picture is changing, driven in part by a changing credit environment and successive economic downturns. It’s also reflective of the fact that this region has a particularly high proportion of family-owned enterprises, and family businesses have long had an aversion to equity investment.
“Change has become necessary for some companies here,” says Gordon. “And they’re a lot more accepting of the various finance options available these days.”
Access to cash and poor governance, he says, are the two main causes of business failure. “If we can plug those two holes and bring practical solutions, we can be well on our way. Many businesses experiencing a challenging problem (eg. succession issues, funding growth or financially stressed/distressed) have a solid core and the potential to grow.”
Not surprisingly, the partners in RIADA think about their own end game before they hit the start button on any deal. “We have to think about an agreed exit strategy as soon as we go in. That’s the nature of the game,” adds Neil Adair. “We make no bones about the fact that we will seek to take a significant shareholding in the investee company and that we’ll be looking for a return at the end of a period of time.
“But, at the heart of everything we say is the fact that we’re prepared to take a look under the hood of any company and, if we’re happy with what we see, we’ll put our own money where our mouth is. It’s worth emphasising, though, that we’re backing people as much as backing companies.”
“So there is a clear route ahead for directors and management teams. They can aim to transform the business and buy us out at the end of that process, but with the company in a much more positive state. In a lot of ways, companies can be getting a relatively cost effective resource at board level,” says Gordon McElroy.
“In a lot of ways, it’s like a marriage. It will work if the two parties get along with each other and take on each other’s views.”
RIADA Capital Partners won’t be concentrating on any particular areas of business, with Adair and McElroy describing their approach as ‘sector agnostic’. “It’s much more about the right businesses, the right teams and the right partnerships.
The partners expect a healthy proportion of their referrals to come via professional advisers, accountants and solicitors in particular.
“Professional advisers should see us as a welcome alternative in the advisory and investment space, another option for client companies who are going through periods of financial difficulty.”
Broadening the scope, RIADA Capital Partners can provide advice on:-
• raising all forms of finance • solvent and corporate restructuring • negotiation with incumbent funders and debt providers • statutory insolvency and restructuring • M&A opportunities • asset protection strategies
“All of those areas are potentially relevant in different circumstances, depending on the nature of the challenge facing a company, be that the onset of financial distress due to a lack of working capital or the lack of funding to deliver growth or indeed the incumbent owners and management looking to resolve a succession problem” says Neil Adair.
Both partners expect to talk to a number of potential client companies over the coming months. “There are only two of us so we can’t get overloaded,” says Gordon McElroy. “To borrow a hospital phrase, we’ll use a triage system, we’ll look for the best companies we can find and we’ll take it from there.
“We’re all too aware that there is plenty of money chasing good businesses out there. But we think we have an offering that can make a real difference for companies in certain challenging circumstances.”
