Alchemy’s non-traditional approach to private equity keeps its partnership counsel Sue Woodman on her toes. Margaret Taylor reports
Private equity house Alchemy Partners shot into the public consciousness in 2000 after bidding for troubled car manufacturer Rover despite having no experience of the motor trade business.
The company’s plans for Rover were controversial from the start, with managing partner Jon Moulton looking to produce sports cars under the MG brand.
Alchemy inevitably backed down from the bid, but the fact that it entered the fray at all was a mark of its unconventional approach to its investments.
For Sue Woodman, partnership counsel at Alchemy, the company’s non-traditional ethos colours every part of her working life.
“Investors expect a traditional fund, but ours has a unique structure,” she explains. “In ours you can come and go with 12 months’ notice, and if you don’t give notice the investment just rolls on.”
The reason the fund was structured like this, says Woodman, is that Moulton wanted to start doing deals as soon as the vehicle was set up.
“In a normal fund it can take up to a year to raise funds and in that time you’re not doing any deals,” she explains. “With the Alchemy structure, as soon as you get one investor committed you’ve got the money, therefore you can do a deal. The original size was £100m, but it didn’t have to have the maximum to do the deals. Now it’s £400m and we keep it full.”
In traditional private equity funds cash is raised over a prolonged period, then the manager spends about four years investing it. At Alchemy the fundraising is ongoing and, with the 12-month notice period, the company always knows how much will be withdrawn from the vehicle so is able to market very specific amounts.
Hand in hand with this unusual fund structure, Alchemy also has an unusual approach to external counsel, instructing just one law firm on a regular basis as opposed to retaining a panel of firms.
“We use Macfarlanes for the deal work,” says Woodman. “Unlike most private equity houses we don’t use lots of different people. We don’t have a typical fund structure so there are issues that will arise that people won’t be expected to know about. We nearly fell down a couple of black holes, which led Jon [Moulton] to say we should have preferred partners.
“We decided that if we put all our work with one set of lawyers, we’d get more benefits,” she adds. “We did a beauty parade and came up with a shortlist of lawyers and accountants. Macfarlanes was the outright winner, along with accountant KPMG.”
According to Woodman, Alchemy works with Macfarlanes, where partner Charles Martin leads the relationship, as if it is an extension of its own office. In the event of a conflict, Alchemy turns to DLA Piper.
While the bulk of the private equity house’s investments are carried out in the UK, a number of its portfolio companies have subsidiaries in the US and a large proportion of its investors are US-based.
“We use White & Case in the US on arrangement with Macfarlanes,” confirms Woodman. “We don’t do a huge amount in the US, although we have done some deals that have a US element. On the last one we used DLA Piper because it had a presence where the company was. We don’t really invest there, but we do have companies that have subsidiaries there and a lot of investors are from the US. That means there are tax reporting issues and we have to make sure that documentation for investors properly reflects that.”
Investor relations is a key part of Woodman’s role, with fund management fees the most common topic of query.
“On a traditional fund you pay a percentage of the full amount invested for four years,” says Woodman. “Ours is done on an annual commitment for one year. That has to be explained to investors because the actual percentage figure is higher, but when you calculate it the amount paid is lower.”
Because of this charging structure, Alchemy has created a separate LLP for each of its investors, with proceeds from sales paid straight into the account and fees taken out of it on an annual basis.
“We have about 80 live partnerships, but 130 that we have to administer because some people have gone,” Woodman adds.
Having started her career at Clifford Turner (now Clifford Chance), Woodman joined Alchemy from Wedlake Saint more than nine years ago. During that time Alchemy has become known for being different and for being unafraid to take on difficult deals; the Rover bid, though failed, is a case in point.
That said, it recently set up a special opportunities vehicle with a traditional structure in a bid to insulate against market volatility.
“It closed in March this year and it took nine months to raise,” recalls Woodman. “The view was that there would be a downturn in the market and there would be some fallout from overleveraged deals.”
Name: Sue Woodman
Organisation: Alchemy Partners
Title: Partnership counsel
Sector: Private equity
Reporting to: Managing partner Jon Moulton
Funds under management: £2bn
Number of employees: 24
Annual legal spend: £6m-£8m
Global legal resource: One
Main law firms: Carey Olsen, DLA Piper, Macfarlanes, White & Case
Sue Woodman’s CV
Education: BA French, University of Reading; College of Law
1979-81: Trainee, Bischoff & Co
1981-88: Assistant, Clifford Turner/Clifford Chance
1988-89: Assistant, Nicholson Graham & Jones
1989-92: Partner, Barlow Lyde & Gilbert
1992-95: Partner, Edge & Ellison
1995-98: Partner, Wedlake Saint
1998-present: Partnership counsel, Alchemy Partners