Peter Spofforth - Head of EMEA at Qatalyst Partners

Hello listeners, my name is Moritz and welcome to another episode of the LSE Folk Ointment Podcast. Today we are delighted to be joined by Peter Spoffworth, the head of Cadillus Partners, European Team. Peter has a long-standing career in investment backing, having joined Cadillus Partners in 2011. Before that he worked at Lloyd's backing group in the Equity Capital Markets division. Peter holds a BSE in mathematics from work and diversity. He's advised on some of the most important tech deals including Ting's sale to Visa, Genesis's sale to Pamirra and Bob's sale to Doordash. Peter, welcome to the podcast. How are you doing today? I'm good. Thank you very much for having me. We're delighted to have you. Let's get started with Peter. For the benefit of our listeners, could you give us a summary of your career so far? What have the defining moments been? Yeah, absolutely. It may be a little unusual compared to some of the others that you've had on the past and that there was not a lot of intent behind it. So I was, I graduated from 2010 from University of Warwick with an undergraduate degree in mathematics and 2010 was not a great time to be getting a job anywhere in the world, particularly in finance. You had Lehman Brothers getting taken to pieces, you had best-earns, getting acquired by J.P. Morgan for a few pennies of share, not a year and a half two years earlier and what that meant was the number of graduate roles wildly decreased over the course of a couple of summers and actually I knew a lot of people who had graduate offers that were drawn in 2009 or in 2010 or in 2011 even. It was a tough time. I'll say from a personal standpoint I was also super unprepared. I went to university to mathematics with the intent of I'll figure out what I want to do later. I had a family tragedy in my first year, second year, I wasn't particularly engaged in academics, third year I thought I better figure out what I'm going to do here so I don't graduate and have nothing to do so I just went to a careers fair and applied to a bunch of different internships and honestly the only one where I made any progress was at Lloyd's and that was to do a corporate bank internship and just by luck I got put in the actual capital markets team as a summer intern that summer I'd actually been accepted to go back to work to do an MSC and financial mathematics with the intent of improving my abilities to go get a job subsequently so I took the summer internship purely by luck I got put in the team I led by a guy called Robert Pierce he was building an actual capital markets team in 2010 I spent that summer doing bailout rights issues for banks around Europe. There were not many companies going public it was mostly how do we stop the financial ecosystem from melting down and can we bail each other out because if one of the bank goes over here it could be the end of finance and that was the very beginning of my career so it seemed normal to me but people who've been around much longer remember very differently and with an even higher degree of concern and panic so I took that job work as people I really liked I found the job interesting I had done nothing at university that prepared me for any of this I was no excel skills no power with skills I hadn't done really any financial classes I think I did one accounting class so I was just kind of learning on the job if you put me in a catalyst interview today I would not have made a cut round I let alone through to the end so it was actually a really good training experience for me and at the end of that summer the guys were in the team just said hey we're actually we're trying to grow the team we have space for a full-time analyst we didn't have one join we'd like you to just stay full-time and I said I was gonna go back to university to get a job here's a job why don't I take the job so I did that so I rolled straight from that internship into a full-time job the team was growing a little bit I want to say it was maybe 10 or 12 when I joined my internship it was maybe 15 by the end of that period and again all we were doing was really using the bank's balance sheet to do the right issues and that's what I did through to December of January and then there was a new CEO at Lloyd's like I call Antonio Auto Azaria who subsequently became CEO of Credit Suisse and was in the news for various different things he came in and he said look this bank has been bailed out by the UK government and I don't think we can really be seen to be an investment banking business anymore because it's toxic from a reputational standpoint and so my entire team was laid off so that was January 2011 I think it was a few days before my birthday I was about to turn 21 and I'd had a job a good job for about five months that was taken away that was a bit of a shock as you could imagine and but the benefit of for me actually was that it had five months of really good training for people who were really engaged in teaching me how to do the job they were really thoughtful and engaged in my development and helping me along and bearing me along with the fact that I didn't really have any skills of the value of them when I joined but by the end I was trying to be helpful and I went back into a market which was recovering so actually by spring of 2011 the job market and financial industries was improving and financial services industries was improving again and I now had some training I knew who the recruiters were I've been put in touch with some my colleagues who have been in the street at the same time and ended up getting a whole bunch of interviews a number of different offers from big bulge brackets in UK M&A teams in ECM teams and corporate-breaking teams in technology M&A teams a catalyst and that's what led me to joining catalyst I happened to go at later in small detail about how I made that decision and then that yes that was May of 2011 I started that job and here I am ever since I spent the first four years working here in London as an analyst and a junior associate I moved to California in 2015 for two years which is where I met my wife worked out of our San Francisco office for two years and the powers of the B.A. catalyst asked me at the end of 2016 to move back and take over the team here in London when I was 26 years old which I did and I've been running the team here in London now for gosh was been coming up on nine years now and it's been great really enjoyed it awesome thanks so much for that let's maybe now turn our attention to catalyst partners as a firm and your specific role here for listeners who don't know what specifically catalyst M&A does could you maybe walk us through a typical deal maybe one that you've particularly enjoyed yeah it's a great question if I think about if I started the very highest level you often have the normal pleasure is the bolt brackets very big multi-product firms have a cover both markets as well as corporate finance markets being more trading corporate fans being more advisory or helping companies issue securities and the other side you typically have all people called boutiques or more focused banks I think we fit onto that side of things where you really do one thing which for us is providing advice technology companies so we only serve one sector which is a technology industry and we only have one product which is providing advice for us advice is predominantly M&A advice we also have a very successful shareholder activism defense practice I say defense because we don't work for activists trying to pick apart public companies but we help defend on the other side and the commonality between those two things is we just give advice so we're not helping companies issue securities or managing a process that results in to money coming into the bank into the company our clients it's more about helping navigate complex situations so that's what we're focused on one of the things I love about this earn and the job that I have is there isn't really a typical deal so if I think about one of the commonalities we're quite lucky that many of our clients most of our clients do not need to transact they might have an inbound interest in the company that they'd like to explore they might have a situation where they say we'd like to test the market and see if there's a buyer right now but they're very rarely in a place where the transaction needs to happen on some time I whether it's an IPO where they say once we start it in motion we've really got to get it done or for instance we very rarely work for big private equity firms who say I want to run an exit process right now to get the proceeds by this date and it's much more of kind of a process ours is much more advisory nature where we're often spending time with companies for years or even decades where we have no business relationship other than giving them ongoing over the shoulder free advice it's a very long sales cycle if you well but it's all about building relationships establishing trust and helping people avoid problems and pitfalls and we do that across many companies and technology such that when they get presented with a situation that really does require our engaged services so whether an activism to hand side or on the M&A side hopefully they come to us and say look you've given me great vice over many years and now I need to engage with you formally and then so where do you go from that there's multiple stages and again the commonalities there's no typical way of threading your way through this process is firstly figure out if there is a deal to be done at all based on our understanding of the market that might involve reaching out to potential acquires for a business it may not involve that sometimes you have one guy who comes to the company potential acquires comes to the target and makes a proposal and the right thing to do is just negotiate with them one-on-one in a very constrained situation there's no pre-determined conclusion of the right thing to run a run a big process then you try and get the best possible offer negotiated which typically takes the form of a term sheet which is a much more abbreviated version of a of the defensive agreements somewhere between two and 15 pages depending on complicated the deal is are summarizing kind of all the key components of the transaction that usually happens after the buy-as done a bit of diligence on the target they've understood the business but usually they're there because they have a sense of the business is something they want to own again because this is in technology something that's interesting or not usually you have joint customers or you have a product you can play with and so it's not again just be extreme about it as a factory in another country any factory is a factory and it can generate a certain amount of profit that's not really the business the businesses that we deal with and you're trying to agree the best deal possible and again one of the things that I love about this is that's not just priced as a whole that need other terms that go into that and we really help our clients to see around corners and avoid problems they're going to come towards the end of the deal and then you get into a much more detailed diligence negotiation phase trying to deal with and that can take anything from four to 16 weeks depending on the complexity of the deal but again what I love about the business that we're in is no two deals really look the same they always have you can have the list of 25 problems that come up in the deal there's three of those 25 happen in every deal but you don't know which three and so the different toolkits you have to pull out and the ability to be mentally agile is really important to have given your clients great advice and helping them achieve the best possible outcome which the best outcome may be to do no deal and being really confident given in the advice that you should just tell them to go you should try to buy it to go away and just go build business because this is not good value for your company. Makes sense. Another thing I was particularly interested in, many boutique investments, including countless partners, tend to have much lower turnover rates than these large bullish bracket banks. And I was wondering why you think that is what do you think makes these elite boutique banks like countless partners so much more attractive from an empty perspective? Yeah. It's a really good question and I think the first answer I'll give you again is the people from a different angle which is I think they're one of the most important reasons that people stay in a job is because they like the people they work with and I'd include both the team you work with as well as the clients you work with. And so if the clients you work with are and we're lucky they're mostly founders of technology companies. These are brilliant people. They're incredibly smart. I've been doing this job for a long time. You learn things through backless cars and you explain to these guys once and they go oh yeah, I'm excess and then they can do it immediately. And that is really gratifying to see how you impact their lives as well and impact the outcomes they have. So it's you build these really strong relationships with your clients as well as internally where you work with these people every day and the impact to us of a bad hire whether it's in terms of like quality of work output is one thing but just cultural impact as being not a good fit is so drastic because you can desabelize a team and that's the whole business is the team. And so we're very careful in the way that we hire people on the way. And so I think firstly the people that we work with and then the way that we manage people coming into the team is incredibly focused on finding people who are going to be a great fit and so people enjoy coming to work. I think then they do work that they consider to be meaningful. They enjoy it. They see the output. They see that it's again gratifying to see the impact you have on your clients and then many of the deals we do are big and they attract some coverage. And I think people like to be able to say it's an apparent hey that's a deal I worked on. I think we give people as far as we can relative autonomy in what they do and they develop a real mastery. I think the combination of like meaningful work and autonomy and mastery for many people is what makes them enjoy the actual work they're doing. So instead of just being part of the machine and people turn the crank and you do exactly what you're totally thinking about it I think that can become very tiresome. But if you're actually having to think about a developed skill set and people look to you for advice I think that's a big component of what people look for and staying in a job. Of course I think commentations are an important part of this. For all people on the other pretend that it's not. I think in general a boutique has been paying better than big banks for a while and if people feel like they're doing more interesting work with people they like better and they're being paid more. Why don't stay there? And the last thing I want to say I think boutique has had much more stability. I mentioned my beginning of my career was marked by instability at a very large bank. If you look over the course of the last few years post-COVID the layoffs the larger banks have been doing reducing the sizes of their teams. They got very big over the course of two years remote work in 2020 and 2021. They tried to get smaller again after that. But you look around the office and you see some empty seats appearing. I think that can be hard for people to mentally feel confident that they're not potentially exposed to that over some time horizon in their business. And we've never done a real for a layoff at Catalyst in our history. We never intend to. I have to the future but for us the stability is a really important part of that. And I think that is universally true of boutiques in general that they tend to be they understand that they only have one product which is what's in their people's heads. So you're going to make sure you have good people and you've got to make sure you keep them. As opposed to bigger banks where the value can be in the brand can be in access to markets or in having a big balance sheet. And people are part of the equation but they're a smaller part of the equation and therefore a bit more maybe from the bank side may feel more disposable from the people side. You may feel more disposable and therefore more inclined to take other options. That makes a lot of sense. Now let's maybe shift the focus to industry large. I was wondering obviously incoming US administration is poised to impose significant tariffs on Canada, Mexico, China, parts of Europe. How do you foresee those policies impacting investment banks on the global level maybe also this text specialization that you guys have given anticipated deregulation in that specific sector? Yeah. I'm going to give you a cup out answer which is it really remains to be seen. And I'll say for a couple of reasons what is what is threatened and what comes to pass is just so uncertain in the current world and this is not just a US comment but broadly obviously in the technology sector the US is usually the biggest sorts of customers for companies, sorts of funding. In many cases it's the biggest sorts of employees as well so it has an outsized impact on this sector but as to what policies actually get put in place which policies actually get enforced when do they get repealed three days later it's just so hard to follow and if I think back to the last Trump administration it was similar. Frankly it was sometimes hard to stay on top of the noise and find the signal to be able to again give a good advice to your clients and try and pass through with the information. So I think it remains to be seen what economic impact this all has at the last few days before we've been speaking it's been a big negative impact on the stock market, the stock market and economy are not the same thing so how that actually plays out remains to be determined. And the same with deregulation I'm not convinced yet and it remains to be seen whether the regulatory environment in the US changes over the next four years whether it's consistent with the past and terms of output. Ignore the again the noise but what are the decisions that are made is it a more friendly environment for certain big tech companies or more. I actually don't know. I actually think actually in the UK and Europe it seems that I'm making bigger strides to deregulate and then they are in the US and certainly a lot of the narrative is around particularly the UK being good for business and being predictable and getting having good process around the outcomes and doing them in a timely manner which has been a real I had a real impact on some deals in the last few years so I think that is changing on a global basis but I honestly couldn't tell you but what I could tell you is in general volatility and unpredictability is bad for the everyday business. I think it's probably bad for most deals businesses because they take deals always take some period of time to get done and if the market is moving around by 5-10-15% a week or a day like yesterday certainly over the course of a multi-month negotiation whatever price you think you agreed that was fair and no way in is unlikely to still be fair between the parties and the way out. Someone is getting a different deal there and so typically that means the deals don't get done and it's very hard to keep a deal together but even before that for an acquire a potential buyer of a business who's looking at a target trying to make plans for the next 5 years about what they're going to do with that target when they don't know what's going to happen in the world tomorrow be very difficult actually so the thought processes have become scrambled to some extent and just trying to keep the stars and moons aligned through a very volatile period is always very challenging. Weedly enough we've had a number of transactions announced in the last couple of days and weeks which has proven that to be incorrect but it feels like across a lot of our business right now that there is this sort of background anxiety which is impacting decision making. Following up on that maybe a bit more a specific question I was listening to a two to FD this morning they were speaking about similarities that they saw in recent stock price developments of these big tech firms and comparing them to the Dock on Bubble 2000. Do you see some similarities there as well or would you again say that's just too early to say? I think it's A2L you just say you'll see how it all plays out B I can see where they're coming from and I think people sometimes look they overly charged with each other and they say this looks like that the patent recognition is this I do think there are important differences and look I was but primary school child when the dot com bubble happened so I can't pretend to have been in the middle of this but I found a friend and I'll see your George and number of my partners that I work with they work through this period and they remember how these deals came together and the work that was being done how they were negotiated and that sounds like there was an exuberance which I don't feel today but also the existence of the business models was different where one of the quintessential of this at the moment is in video which is going this kind of crazy one in the public markets but in video generates an enormous amount of cash right they have a product that people want which they sell incredibly profitably and they sell a lot of it now is it true that those will all remain the case in the years ahead who knows it may be that you'll look back and say that was obviously a peak of a cycle and the demand went down which meant that the profits went down which meant the volume went down and therefore two years from now the profit is a tenth of size or it can be much bigger than it is today we just don't know how it's going to play out and the rate of technological changes so high right now that it's incredibly difficult to I think make predictions that it's also not my job to do it so if I said public markets investor I would be really struggling with this because it's very hard to have any sense of what's going to happen a month or a quarter a year from now for these very large companies which are incredibly profitable and if they're stopped gets low enough they'll start buying back their shares because it'll just look cheap from a fundamental metric standpoint and I don't think that was true in the.com era I think those companies were growing quickly but the multiples were multiples of revenue very high that weren't a multiples of profit whereas today they're actually very reasonable multiples of profit that have been paid for these companies make sense and now maybe shifting to more hypothetical question what advice would you give yourself for when leaving university from today's perspective what would you maybe have done differently and why yeah look for me through largely a combination of luck and a little bit of trying quite hard from time to time it's worked out okay so I would just say I screwed it up but I think for me if I was to just take myself out of there and think about why I say give to people I actually struggle with this quite a lot because if I was to say to someone here's how you get a job at catalyst there's going to be this interview process these the kind of TVs that we look for these types of universities and degrees and you just study for the questions and the financial modeling questions and things like this. And there's a root through. And by the way, that applies to most of the best of banks. But the background actually is quite similar. I don't know what that's actually in everyone's interests. I also think sometimes when I look at our team, I look at the partners that are offering, and if I went through the backgrounds of each of them, how many of them fit that background? These are people leaving our business. Several of them were MBAs that changed career halfway through. Some came from the absolute traditional straight down the middle financial background, some had degrees in politics or mathematics. Not necessarily that there is this archetype of this is how you, this is what you should do to be successful over time. I do think that being prepared and to the workforce is important, where being a little bit thoughtful about what that first step is going to be and where you should apply and what you're really trying to accomplish and why you're trying to accomplish it. Of course, getting good grades is a part of that. And not taking it for granted that he wants into the workforce at the end of it. But I'm actually really cautious of giving graduate advice because I think I didn't do anything right and I stumbled up into a decent place at the end of it. And I think that I could tell someone how to get a job at Catalyst. But I don't know if they'd succeed here if I told them how to do that. There's obviously a change between getting your first step in the door and then being successful afterwards or people who really focus on getting the job. And then within a month or two of joining, they realize it's just not really what I want to do with my life. And the impact that has on them over time. So I'm a little careful though. Great. I think this is an amazing point to end off on. Thank you for your inspiring advice, Peter, and your time to show your amazing insights with us. And thank you to our listeners for joining us on this episode. Stay tuned for more content. Thank you. Appreciate you having me.