How to Set Expectations Investors Actually Trust | Profiling UK Public Leaders

Profiling UK Public Leaders, Episode 11

FRP Advisory listed on AIM in March 2020, days before lockdown. Geoff Rowley, co-founder and CEO, recalls that investor irrevocables were signed the very day markets turned on Covid; twenty-four hours later, he doubts the float would have happened at all.

Six years on, the restructuring firm has grown from around £50m of revenue and 300 people to heading towards £200m and nearly a thousand. His account of how is largely a story about pricing things honestly.

Sell the 30%, protect the 70%

Rowley is open that FRP could have told a more exciting story at IPO and achieved a higher valuation on day one. He chose not to, and his logic is worth repeating. The float sold roughly 30% of the company. Price that inflated and watch it unravel, and all you have done is damage the 70% the partners still hold, while fifty-plus colleagues watch their remaining stake fall.

His negotiating rule applies equally to IPO pricing: if everyone is slightly unhappy, it is probably the right deal.

The same thinking shapes guidance. The best steer he has had as a public CEO is to be clear about what you can deliver rather than what you hope to deliver. FRP is occasionally criticised for being too conservative, and when he asks investors directly, most tell him to carry on. Over-promising, in his experience, is punished severely and the road back to being believed is long.

Converting partners into shareholders

The harder sell was internal. As an LLP, all profit belonged to the partners. Listing meant dividends flowing to external investors and lower ongoing earnings for partners, in exchange for a capital sum. FRP sat down with every partner individually and illustrated exactly what the trade looked like, then locked them in for three years on penal terms.

The test came when the lock-in expired: no resignations. Rowley also notes that a register full of colleagues is an investor audience in its own right, arguably the more important one, since demotivated shareholder-employees will show up in the results before anything else does.

Paper as a commitment filter

Fifteen acquisitions later, FRP insists on shares forming part of almost every deal, and not primarily for balance sheet reasons. A vendor who refuses paper is telling you something: it is about the money, not the joining. Deliberately, the deals have been what he calls bite-sized. Investors initially asked when something transformational was coming, and in the current market mostly concede that bite-sized looks sensible.

The constraint he flags for other listed acquirers is transparency cutting both ways. Every deal multiple goes out in an RNS, so the next vendor knows exactly what you paid last time. With private equity currently paying multiples for professional services firms that FRP will not match, that discipline gets tested. He would rather lose the deal.

His parting observation for founders weighing a listing: it has not changed who FRP is, and it enabled growth that staying private could not have funded. The structure worked because nobody ran away with the deal, including him.