Laura Dillon smiles with pride as she tells the story of how her grandmother became an unlikely entrepreneur. Widowed with six young children during the Second World War, her granny decamped the family to the north Dublin village of Skerries to open a shop.

Every week, she travelled into the city, sourcing goods to stock the shelves. Quickly, she realised that many of the products she was buying were not available in war ravaged Britain, so she launched a mail order business sending packages across the Irish Sea.

“She needed to make ends meet,” Dillon says, “so Granny became an entrepreneur out of necessity. I think that instilled a great work ethic in the family.”

That ethic is clearly seen in Dillon’s own resume. Still in her early forties, she has worked as a management consultant with McKinsey, a charity worker in Mozambique, a vice president with the fintech WorldRemit, a strategist with Halifax and an investor with Apax Partners.

Along the way, she picked up an MBA at Harvard, competed internationally in sailing and, along with her father, launched an Irish healthcare distribution business that they subsequently sold to United Drug.

Now, she leads the Dublin office of Waterland, a European private equity giant that has backed 800 companies and has 9 billion in investment commitments.

Over the course of our lengthy interview, Dillon talks about all these things – and much more besides, including details of Waterland’s ambitious Irish strategy, the crowded private equity market, and the sectors of most interest to the fund.

Throughout it all, she is engaged, engaging and entertaining. However, she is at her happiest speaking about her entrepreneurial granny.

*****

The Dublin office of Waterland is modestly fashionable. Located on Baggot Street in Dublin city centre, it has been completed to a high specification but deliberately lacks the grandeur of some other finance houses. One large room has been neatly divided into four spaces – a small office for Dillon and Waterland’s investment director Donal Mac Nioclais, a conference room and an open plan office space.

The Dublin office opened days before the country went into lockdown in March 2020, but it still has a pleasant lived-in feeling. The walls are littered with framed press cuttings relating to the company and its Irish portfolio of businesses. There is a Sunday Independent interview with Tom Finn, the chief executive of Silver Stream Healthcare, a nursing home business backed by Waterland, and a Sunday Times profile of Writech, a Mullingar-based company that develops and manufactures fire protection systems. Waterland took a major stake in the business several months ago, and Dillon says it has ambitious plans to expand the business across Europe through acquisitions.

In many ways, both companies are typical of the sort of businesses that Waterland is looking for: profitable, cash generative and primed for international expansion.

Dillon says the fund’s investment sweet spot is businesses with Ebitda of between 3 million and 30 million, although, having recently launched a 2.5 billion European fund, it has the cash resources to breach that unofficial upper limit. Additionally, she says the firm can invest with partners if the deal is right.

Dillon happily admits that Waterland is looking for companies that don’t necessarily need their money, businesses with strong cashflow and good profits.

“Writech is a very good example. They could have just kept going. Whereas, if they really want to scale and scale to a faster pace, then we could really help bring that M&A, we can bring the network, we can help with domestic and international growth, we can innovate,” she says.

She says the firm does not have a “magic number” in terms of the number of planned Irish deals, but she expects to do “one or two platform deals” a year.

Instead, the real business is on sourcing new bolt on deals for the companies that it backs.

In the case of Writech, she says she expected the company to make a number of acquisitions in Europe and the UK early next year as part of its expansion push.

“I always say to companies: ‘If there’s a real ambition to accelerate growth and accelerate faster than you can do from your own internal resources, then we may well be the right partner for you. And if there’s not that ambition for growth there, then you don’t need us,’” she tells me.

“There’s lots of companies that we’ll talk to – some of which we are good partners for, some of which we are not. But I think very much our ambition is to partner with and have some really successful Irish companies that we’re going to help scale throughout Europe and hopefully beyond.

“We’ll look at good organic growth, but where we feel we can be distinctive, is helping companies scale through M&A both in Ireland and internationally. We bring the experience; we know we can do the heavy lifting. We can take some of that on our shoulders.”

Waterland does not invest in early stage companies but would consider buying one for a partner company if the deal was right. It uses its European network – 12 offices in ten countries – to source both deals and the right staff for partner businesses.

Dillon gives the example of United Pet Food, a large European private label manufacturer backed by Waterland. Philip Reynolds, the former head of the C&D pet food business in Longford, is now running the wet food division of United Pet Food – “and he is doing it from Mullingar,” Dillon says.

With its focus on mid-sized business with low debt and strong cash flows, Waterland is essentially looking at what might in Germany be classified as Mittelstand businesses, successful locally owned enterprises capable of weathering an economic storm. While common in Germany, various economic indicators and reports show that they are much scarcer in Ireland.

If Dillon is worried, she is not letting it show. “So, we don’t have the Mittelstand that they have in Germany. But there are a lot of great Irish businesses that are completely below the radar screen. And we are entrepreneurial individuals. We’re about 5 million people, it is a relatively small market, so you’ve got to get out there and expand internationally. And, and I think a lot of Irish business owners have really got that entrepreneurial nature and really desire to grow,” Dillon says.

“There’s not an unlimited number of businesses that we can partner with. But there’s still plenty of them.”

What sectors are on Waterland’s radar?

Waterland invests primarily in four sectors: outsourcing and digitization; leisure and luxury; ageing population; and sustainability. However, Laura Dillon admits that most good companies fall into one of those four categories.

“We look for markets that are growing. We are growth investors. That is not to say that people don’t make money from declining markets, but that’s not us. We look for markets that are growing at four to five per year organically because we feel with tailwinds, it will be easier to grow. We look for businesses that can get to at least 10 per cent Ebidta margins. They don’t need to be there today. For example, if it’s an energy-based reset or something, we can look at it over the gross margin,” according to Dillon.

“The big check for us is – is there a fragmented market where we believe there’s consolidation to be done, either within Ireland, within broader Europe or beyond. If there’s a fragmented market, then we could probably be good partners to help do that consolidation.

“If there’s a good opportunity, then we can probably make it work. There is no hard and fast rule.”

Consultancy and cosmetics: A life less ordinary

Laura Dillon studied chemical engineering in UCD and did an internship at Pfizer in Cork. However, it was immediately evident to her that she did not want to be a chemical engineer. (“Ironically, I have now joined the advisory board for the chemical engineering department,” she says.) Instead, she had a zeal for business, and always wanted to launch her own company.

Before she got around to doing just that, she went on a whirlwind tour of roles in a string of different sectors. At McKinsey in London, she got boardroom access to the management consultancy’s roster of blue-chip clients, plus a secondment stint in Sydney.

She did a four-month stint in Mozambique as a volunteer consultant doing pro bono work to try and build businesses in Mozambique and Zimbabwe, following it up with a role with Intelligent Finance, a Halifax bank of Scotland subsidiary that was essentially their internet bank. The latter experience gave her an insight in P&Ls, but a realisation that she did not want to work for a big corporation.

Still backed by McKinsey, she did a MBA in Harvard, writing an essay on how she planned to go back to Ireland and create employment by starting a business with her father.

Before she did that, however, she left McKinsey for a job in private equity with Apax Partners. “That was early 07. So, I joined them in September. We closed a 10 billion fund. We were the largest private equity fund in Europe at the time. And then the recession hit,” she said.

“I remember waking up one morning, and I was still in my serviced accommodation, and I remember looking outside and saying, ‘why is there such a big queue outside the Northern Rock branch?’

“I stayed at Apax for a couple of years. And I really enjoyed the investing side of the table. But because we were such a large firm at that stage, we were looking at partnering and investing in businesses of a billion plus enterprise value. And I really wanted to work with smaller businesses.”

So, in 2010, Dillon dusted down the Harvard essay on launching a business with her father and decided to put it into motion.

At the time her father was 70 and retired from his senior role at TP Whelehan, the sales, marketing and distribution company. But he was ready to roll up his sleeves once more, and roll out his book of contacts in the healthcare distribution business.

Together, they launched Distribution Solutions Ireland, which distributed a range of cosmetics products around the country, even supplying fake tan to Penneys.

“I literally bought a forklift, rented a warehouse in Baldoyle Industrial Estate. The sales team came (many of whom had worked with her father) and joined us and we started selling into pharmacies. And I have to say, it’s given me a huge amount of respect and empathy for all business owners and entrepreneurs – be it independent tradesmen right through to people who own shops,” she says.

“If the bathroom needed to be cleaned, I’d do that. I was going to the UK to negotiate with the brands, but I was also ringing the pharmacies to get paid as well, because that is what it takes.

“I really enjoyed running the company. It was such a privilege to be able to work with my father. We roped my mother in at that time as well. And there were 20 of us in the company in total. So it was a small company. But we were supplying nearly every pharmacy in the market. And we were also lucky that we were one of the first cosmetic suppliers into Penneys. Ireland was one of the highest per capita users of fake tan.” 

It was, in hindsight a transformative experience, a world removed from the days of management consultancy and PowerPoint presentations. “Suddenly, it was my problem to make payroll and to make sure that I had enough cash flow,” she says now.

“And a lot of our business was seasonal. So, we had a good monthly business. But about half our business was around Christmas. That was good, because we could presell it. But I had to physically buy the stock in August, September, and ship it before the October Bank Holiday weekend. Suddenly, that invoice financing invoice discounting lines that I’ve only ever looked at on the Excel file became a lot more real when I was having to put personal guarantees on the line.

“It gave me a good understanding of what entrepreneurs are going through and it can be a lonely place.”

Dillon spent some time identifying potential purchases to scale the business. In the end, however, United Drug, their largest competitors, stepped in and acquired the distribution rights for the business.

Dillon stayed with the business until her earn out was over, before moving to the UK to work with World Remit and then Riverside Private Equity, the British finance house that owned a stake in Irish security monitoring firm Netwatch. Dillon worked as a principal for the firm for five years.

And then at the end of 2019, she got a phone call saying there might be an interesting private equity opportunity in Ireland. Waterland was looking at opening an office in Dublin, and they wanted her to lead it.

Private equity is on the rise here

Private equity is on the march in Ireland.  2021 is likely to set a new record for the quantity and value of PE deals. William Fry, a firm of solicitors, reported that in 2021 the value of PE deals was up 477 per cent year on year (by far the biggest being CapVest’s sale of Valeo to another PE firm). There was an average of 21 PE deals between 2010 and 2015; between 2016 and 2021, that number jumped to 38.

As Sean has previously reported: “The growth of PE in Ireland isn’t the result of a general rise in dealmaking. PE really is unusually active here. It accounted for half of the value of deals in Ireland in the first half of 2021, compared to 18 per cent globally.”

This is an area I am keen to discuss with Dillon, given her experience in the UK and her recent arrival in Ireland. After all, Waterland is entering a crowded market, with private equity firms buying everything from pubs to insurance brokerages.

“All investing is crowded. There’s clearly a lot of great Irish private equity firms, which have really helped to develop the Irish private equity market. More entrepreneurs, when there’s more success stories, consider private equity as an option,” she says.

“And I think there’s been a number of really good success stories, which are then good references. Increasingly, people are prepared to say private equity might be an auction, you know, but I think we all know, private equity means very different things to different people. There’s a bunch of UK private equity flying in and flying out. There are a lot of US guys who are just doing Teams or Zoom at the moment. There are obviously the local people.”

Is she concerned about increasing valuations and lower returns? “In general valuations are high. Valuations are continuing to grow, particularly in healthcare and tech during Covid. Public markets are high and hence, asset allocations from LPs into private equity firms are increasing in order to keep their portfolios balanced,” according to Dillon.

“Ireland has historically not had that much formal private equity. And it’s had a lot more private investment through private families, and that has filled the gap for many years. But there has not been as much private equity institutional investors. There’s probably a bit of catch up. There are more people who are certainly entertaining it as an option.”

How can Waterland carve out a niche within the crowded market? “Waterland very much takes a long-term view of things. It’s not about this year, next year, or one, two companies. It’s very much the way that we partner with businesses throughout Europe. Is the market potential there? And do we think it has the right characteristics? If the answer to that is yes, then we very much see it as our opportunity to go and get that. We don’t see it as a numbers game. We very much see it as measured growth and wanting to partner with the right Irish businesses.”

She adds: “We really do try to steer away from very competitive auction processes. If someone’s just looking for the highest price, and they don’t actually really mind who is the person coming in, then, well, they are not for us.”