In this episode we speak to Jim Strang, Chairman of HGCapital Trust.  The Trust has an outstanding track record investing in business-to-business software companies.  We discuss the evolution in private markets over Jim’s career, the benefits of specialisation and the reasons behind Hg Capital’s success.

Show notes:

[01:15] Jim discusses his early career
[02:12] HgCapital Trust’s history
[03:41] The benefits of specialisation
[05:56] The importance of controlling the capital structure
[08:02] Characteristics of typical Hg investments
[10:07] The growth model
[11:29] End market fragmentation
[13:29] Being highly selective
[16:25] Having the flexibility to own the best businesses over the long run
[18:07] Replicating Hg’s success in the US
[19:58] Why Hg is an attractive owner for entrepreneurs
[22:35] Sustaining Hg’s culture and using greater scale to drive operational improvement.
[25:25] Objectively assessing each company’s potential
[27:03] Low loss rates and a few major successes
[27:57] Why things typically go wrong
[30:22] Leverage and the capital structure
[33:33] Valuing private companies
[38:43] M&A in a higher interest rate environment
[40:54] Trust your gut