Daan Freriks is Investment Director at Committed Capital, an Amsterdam based Private Equity firm that supports entrepreneurs in achieving their business goals. Recently, Sweav had the honour to support Daan and one of its portfolio companies with their M&A activities.
The recent paradigm shift in capital markets strongly impacted the Private Equity sector. We sat down with Daan to discuss his journey into Private Equity and his take on the current market.
You started your career in consulting at PwC. What made you switch?
At PwC I worked in the Commercial Due Diligence practice. The pace of learning there is high. I was constantly learning about new markets every three weeks, which kept me excited about the job. I loved working with management teams and private equity firms.
Yet as time passed, I felt an increasing need to do something more entrepreneurial. In strategy consultancy, it's pretty common to feel slightly disconnected from the ‘real world’ of doing business. You leave the scene after your project is done, and I wanted to be involved in more tangible commercial activities.
Even though strategy consultancy might be slightly disconnected from actual business, I do recognize the value it can bring. One of the ways Committed Capital adds value to its portfolio companies is by what we call ‘squeezing timelines’ – making things possible within timeframes management cannot imagine being feasible. Hiring external support to do so is very valuable and an important facilitator.
Dynamics in capital markets recently changed drastically. Where money used to be for free and flooding, it’s much harder to raise capital now. Do you experience this in your work?
We started noticing the first effects before the summer of 2022 in our deal flow. While the volume of deal flow remained on par, the quality of the pitches was lower, and the reason entrepreneurs were looking for investments was not matching with the growth orientated settings we are typically looking to invest in. I believe that this was the time where less competitive businesses were fearing an economic downturn and started looking for strongly capitalised partners. More well positioned and growth focussed businesses took a "wait it out" approach. They had the luxury to postpone their search for a partner to more stable economic times. Those businesses are currently the majority of our deal flow.
The one thing that does worry me about the current economic climate is the decreasing appetite of banks to finance Private Equity SME deals. We have a very concentrated banking landscape. In The Netherlands, there are basically only three banks that could do business with us: ABN AMRO, ING and Rabobank. Due to regulation and increasing interest rates, it’s typically more attractive for them to finance saver assets like mortgages. Private Debt Funds do fill the gap banks leave to some extent. The development of this sector in the Netherlands is quite encouraging, despite its relative immaturity.
What is the biggest misconception about Private Equity investors?
By far, the biggest one is that we are only so-called “spreadsheet managers.” That is not the case at all. It might be true for very large Private Equity firms, but not for us.
What sets us as Committed Capital apart during deals and in the interaction with our portfolio companies, is our down-to-earth and people-driven approach. I take pride in my team's entrepreneurial and "social calculator" mentality. Authenticity and being able to contribute to our culture based on teamwork are always at the top of our list when looking for new talent to join Committed Capital.
Last but not least: what quality is essential for people working at Committed Capital?
Above anything else, the most critical aspect of my job is the capacity to build genuine relationships and connections with entrepreneurs. Whenever a new employee joins our firm, he/she will be interacting with entrepreneurs from day one.
If I need to leave a meeting for a bathroom break, I must be comfortable leaving our junior team members at the table with an experienced entrepreneur. This can only be the case when you have people around that you can count on. After all, we can train anybody to use PowerPoint and Excel, but a commercial flair and authenticity is something that must be nurtured rather than taught.
Committed Capital is also looking for new talent. They currently have open positions for interns and analysts. Check it out: Stagiair deal flow en executie | Committed Capital | LinkedIn