21 Jun 2019

Private equity: not just about capital

Jason Katz, co-founder of private equity fund Kings Park Capital, started his business as the financial crash hit. Now, as one of the survivors of the recession, he tells us how his firm overcame the odds with a pioneering, sector-focused, ‘user-friendly’ style.

“I don’t for a minute say we foresaw what was coming, because we didn’t,” says Jason Katz.

 

Katz co-founded his London-based company with Hugo Robinson in 2007 – the year before all hell broke loose. And yet Kings Park Capital (KPC), dedicated to investing in European leisure sector businesses, raised £60m for its first fund in 2008.

 

Katz, like Robinson, was a former investment banker with UBS, and something of a prodigy. Having played a major role in the £1.8bn flotation of Thomson Travel, he was just 25 when he convinced his then-boss and mentor, David Freud – now Lord David Freud – to set up a dedicated European leisure division after predicting it would become a significant sector in its own right. Before long he was promoted to managing director level.

 

Capital. And connections.

And then came 2007. With 12 years of experience as head of a market-leading European sector coverage team advising prestigious leisure brands, he decided to strike out in style. Transforming from advisor to principal investor, he created a “truly differentiated private equity firm”. In other words, it was a complete change in job.

 

KPC was created to invest in the leisure sector encompassing hotels, travel, gaming, visitor attractions, health and wellbeing and bars and restaurants. It would be useful in other ways too: not just by providing capital but by connecting businesses to other individuals who could help and offering access to best practise. “We had advised 40 different private equity companies, so we weren’t naïve – did the world need another private equity fund?” Katz recalls. “We thought: ‘Let’s really think about how to make this one different.’” So with an “amazing network across the leisure world” to call on, it was time to raise some money.

 

“We took a risk,” says Katz, with some understatement. By the time they left UBS, the world “started to change at quite an alarming pace”. And then came the biggest economic downturn in a generation. “At that point, we had made our first two investments but had no fund, no job, lots of set-up costs, and it was quite hairy.”

 

And although their skill sets were transferable, he and Robinson had to persuade a long list of people to invest. “It’s amazing how you can have great relationships, but when you ask people to invest their hard-earned money, however much of it…” Katz’s voice trails off.

 

‘Show your faith in us’

It’s a useful life lesson, he says, raising money.

 

By the time the pair got to their first close, Northern Rock had already gone bust and Lehman Brothers was close to imploding. Investors were frantically downplaying their initial pledges. “It’s sort of like asking everyone at school: ‘Did you really like me?’ To say: ‘I’ve spent 10 years advising you, creating lots of value for you, now’s your opportunity to show your faith in us.’

 

”Ultimately, 50 senior figures from the leisure industry did. “It was remarkable,” Katz says. “It meant people thought we could do it.” Even more remarkably, they were probably the only first-time manager to get a fundraise closed in 2008.

 

“When you leave a massive organisation and start your own business, you realise how many things were done for you,” says Katz. “Starting off in a recession is quite good for your whole business ethos, in terms of setting out your cost base and planning for the future. I think we started in the right way because of that tough environment. I think also, in some sense, there’s never a good time – you’ve always got to take a risk.”

 

The risk paid off. KPC is now a team of 8 and in addition to healthy food chain Abokado (which now boasts more than two dozen stores in London), KPC’s investments include the likes of Specialist Journeys, JG Travel Group, JOA Casinos and 7Bone Burger Co., and its investors are mainly high net worth individuals and family offices.

 

KPC generally looks to invest between £5m and £15m in companies in the UK and across Europe. Among investments they’ve sold on are caravan park business Bridge Leisure Parks, pub business, Inn Collection and hotel service company IHS, which generated a 3.8 times return for the fund. “It’s about backing the right people, helping good businesses grow and become great businesses and making great returns for our investors so they keep backing us” Katz says.

 

Relationships at the core

“We only invest in businesses we’re passionate about, and which we’re confident we can add tangible value to” says Katz. “That’s certainly how we like to set out our store differently from our competition. We get close to the teams we back and roll up our sleevesto help, particularly in difficult times. We have the ability to connect a person with a problem to someone who has the solution. Within a day, we can often say: ‘Here’s the solution or here’s the person to call.’ We help them overcome obstacles quickly so that they can focus on growing their business and creating value.

 

“You get quite emotional watching a company’s growth after you’ve exited. You create a business that has 25 years of growth ahead of it, and because of the way private equity works, you need to sell it to somebody else. They get the benefit of all your hard work.” But an exit doesn’t need to mean an end of the relationship with the team, he says. “We recently had our annual drinks party and were delighted to see all the management teams of the businesses we’d sold showing up because they like us and because a number of them have opted to invest into our second fund.”

 

Part of KPC’s success comes down to the strong, loyal contact base Katz has established over his career, having developed “a style that’s very collegiate and user-friendly. We call it ‘the leisure sector investing in the leisure sector’”. Relationships, he says, are really at the core of what we do. “We only want to invest in people we want to have a beer with after the board meeting.”

 

Lysanne Currie writes about business and luxury travel for magazines including Robb Report, Luxury Plus, Glass Magazine and Meet The Leader.