Page 315 - James Caan - The Real Deal

31 · You Win Some, You Lose Some

to spend your time on a £5 million deal. Hamilton Bradshaw has
done so well because other private equity firms have migrated
away from our turf.
One of the key things I’ve learned since starting the company is
how to structure a deal. Typically, I look to take a 60 per cent
stake in a target company, leaving the rest to the founders and
management team who will drive the venture forward. It’s
important that they still have a meaningful stake so that they are
motivated to build the company: as ever, I’m only interested in
investments where we all win. As I can’t make money unless they
do, their stake has to be sizeable. Getting the equity split right is
a delicate business: it has to be big enough to make it worth
Hamilton Bradshaw’s investment in time and money, but it has to
be small enough to leave the management team with a meaningful
stake in the company’s success. I’m rarely interested in buying 100
per cent of a company, because I believe you stand a better chance
of creating wealth as an investor if you do it in partnership with
the management teams you invest in.
One way of creating wealth is by motivating the management
teams to produce bigger profits, and so I usually look to stagger
my investment over time. So let’s say I take a 60 per cent stake in
a company that’s worth £10 million that has three founders. It
actually makes no sense for me to hand over £6 million upfront
because I want to make sure that the management team delivers
on its growth targets. So I may give each of the founders a million
each – £1 million is a good number, and people can really feel as
if they are being rewarded for their efforts thus far – and pay them
another million each if they reach their targets. This shares the risk
between us: I may only have handed over £3 million upfront, but
if the company fails I will have lost my money while they will still
have a million quid in their pockets.
The targets I usually give management teams will be something
along the lines of doubling the profits, and, if they do that, I can

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