Jason Katz’s long relationship with the leisure industry has helped him create a ‘virtuous circle’ with his private equity business, he tells Mel Flaherty
Mixing business and pleasure is part of Jason Katz’s ‘daily grind’. In fact, to the founding partner of Kings Park Capital, the specialist private equity firm dedicated to investing in the leisure industry, they are one and the same. And that’s just how he likes it.
“In many ways the distinction between what is work and what is leisure is quite thin, particularly given some of the great personalities involved in the sector” Katz says.
These days, one of the things he enjoys most is the virtuous circle of adding value to the companies his firm backs by drawing on the experience of the senior leisure executives, both investors in the Kings Park Capital’s funds and members of the wider network developed over 17 years of focusing on the sector.
His whole career to date seems to have been one big karmic cycle – perhaps an unusual thing to say about a former investment banker, particularly in a positive way. Professionally, he has grown up not just in the leisure market, but at the same time as the sector itself, originally at UBS Investment Bank.
In the early days, he had a precocious vision for and recognition of the worth of covering leisure as a sector in its own right. At the age of 25 he persuaded UBS, with the help of his immediate boss and mentor at the time, David (now Lord) Freud, to set up a dedicated leisure division. As part of Freud’s team, he had been instrumental in the £1.8bn flotation of Thomson Travel (which UBS only agreed to get involved in because Freud’s remit included transport and he convinced them that Thomson’s charter flight arm made it relevant.) Following this, Katz championed the idea of covering the leisure sector in a holistic way, which the bank had hitherto only touched on a piecemeal basis.
Over the course of nine years, the market-leading team led by Katz completed 60 transactions worth around $40bn including, famously, the $1bn sale of lastminute.com to Sabre in 2005.
Many of the individuals among Katz’s clients during that time went on to become investors in Kings Park Capital’s private equity funds. We call it “the leisure sector investing in the leisure sector” Katz says. These days his remit covers hotels; travel; gaming; pubs and restaurants; visitor attractions; health and wellbeing, and key service providers to the industry. The firm looks to invest between £2m-£20m of equity in any one opportunity, both in the UK and across Europe.
The fact that Fund I got the backing of around 50 senior leisure industry figures surely says something not only about the professional reputation that Katz and ex-UBS colleague and co-founder Hugo Robinson developed, but also about their ability to form strong relationships with those they have worked with. Especially when you consider that they struck out on their own in 2007, just before the biggest economic downturn in a generation.
“We became very much part of the fabric of the industry,” Katz recalls of his time at UBS. “Being young, fun and aggressive very much suited the CEOs we were meeting. It wouldn’t have worked so well in insurance or ball-bearing manufacturing, I suspect.”
The focus at UBS and Kings Park Capital now is similar, he adds, with the key judgement at both being to align yourself with the right people. Notable former clients and now investors include Martin Robinson, chairman of Casual Dining Group and Grant Hearn, former chief executive of Travelodge and now chairman of the Hotel Collection. Katz also talks with great affection about the late John Cook, previously part-owner and CEO of Bourne Leisure, the UK’s largest domestic travel company, whose unwavering support he says was instrumental in the formation of Kings Park Capital.
Of course, investing is not an entirely altruistic business, but Katz says those invested in Kings Park Capital’s funds are doing so only partly for the financial returns but also because they want to be involved. As well as wanting to support Katz and the team, many like to put their money into a business they understand and can help in their own way whilst also benefitting from the networking opportunities this pan-leisure activity creates.
For the businesses invested in, this is a massive boon. For example, Bridge Leisure Parks (which Kings Park exited after four years when the business was sold to Phoenix Equity Partners for more than 2x cost earlier this year) was able to draw on Bourne Leisure’s experience when it wanted to make efficiencies in utility costs across its parks, and Inn Collection, their portfolio of pubs with rooms in the North East was able to benefit from Travelodge’s knowledge of implementing yield management systems.
Katz explains that the ability to help companies overcome strategic obstacles and to accelerate their growth plans enable him to promote Kings Park Capital as offering “intelligent, value-added capital”. It is also important to emphasise, he says, that unlike many more generalist investment firms, Kings Park Capital is able to provide tangible assistance to its portfolio companies when the going gets tough.
“In private equity, the public only sees the entry point and the exit, but not all the trials and tribulations along the way. I always say to management that selecting the right partner is absolutely critical and never more so than when you’re experiencing difficult times. You want someone who, rather than attributing blame, will roll up their sleeves and help you get through it.”
Of the seven investments made by Kings Park Capital’s £60m Fund I, five remain in the portfolio. Katz would not be drawn on which company might be the next to be sold instead focusing on the growth and value creation within the portfolio companies. He talked proudly of Abokado opening its 26th store (there were five when they invested), Fuel Juice Bars signing its 27th unit (there were nine when they invested) and the recent opening of Next Generation Clubs Australia’s sixth racquet sports and fitness centre, in Canberra, meaning the firm has fulfilled its stated ambition of helping the business double from three to six sites.
Katz relishes the opportunity to “get closer to the coalface” than his previous job allowed, but harbours no secret ambitions to get any closer. He admits the longer-term relationships he builds with businesses as an equity partner makes parting that bit more emotional compared to the more transactional-based affiliations he had when in investment banking. Next Generation will have added poignancy as the private equity firm is named after the botanical gardens location of the health club that was being built in Perth at the time Katz and Robinson were setting up their firm.
Having said that, Katz also finds it hugely rewarding, and not just financially, when Kings Park Capital’s investments come to fruition. Yes, the firm’s first exit from IHS, the global hotel services company based in Frankfurt, yielded a tasty return of 3.8x, but Katz says it was equally satisfying to have helped the business it originally bought transform into a global leader over five years and have members of its team reinvesting part of their proceeds into the firm’s second fund.
Six members of the management teams backed by Fund I have themselves put money into the firm’s Fund II. That Fund closed earlier this year after raising £85m from around 70 investors, including a handful of family offices and Kings Park Capital’s first institutional backer. Both attracting investors and securing investment opportunities have become somewhat easier as the firm’s good reputation grows, although Katz says the investing part of the equation is made more challenging by the current hot market, which has led to some eye-watering prices being paid for leisure businesses.
The first investment for Fund II was made earlier this year when Kings Park Capital backed Ian Finlay, former MD of TUI’s Education Division to acquire a material stake in Specialist Journeys, a niche tour operator focused on providing small group expert-led tours ranging from archaeological and history tours to wine tours.
The Kings Park team review nearly 200 opportunities every year with the intention to ultimately invest in two to three businesses. The constant meetings that make up much of Katz’s daily schedule are never a waste of time, he says, as there always is something new to learn about this exciting sector and some opportunities take a matter of years to develop into an investable proposition. If Katz has a mantra, it is surely this: ‘what you put in is what you get out.’