Partnering with Private Equity: Insights and perspectives from Tony Hill  at Sideshow and Dominic Graham at Waterland Private Equity

In February of 2021, Sideshow, an independent digital group, partnered with Waterland Private Equity to support its ambitious growth plans to continue building a group of highly connected digital brands. One year on we caught up with Sideshow’s Tony Hill, Founder and CEO, and Dominic Graham, Investment Director at Waterland to discuss the journey to date.

What were the fundamentals for both parties that persuaded you to explore a partnership?

Tony Hill – I liked the people. The conversations were straightforward and Waterland had good insight on the market through previous investments. It felt a natural progression from simple discussions to exploring a potential partnership in more detail. Moving forward with a strategic investor was an important decision to take and the relationship had to feel right.

Sideshow was in good health and growing fast, but I was always open to a discussion about a new chapter for the company if the right partner or investor came along.

Dominic Graham – We know and like the market. We knew Sideshow was a leading and well-respected brand in the UK market. And we liked Tony and the team. We have made over 60 investments across Europe in digital transformation businesses over the past six years. This has given us a good understanding of the long-term market fundamentals including the opportunity to partner with and acquire small companies.

What really stood out for us from the very start was Tony, he set a very positive culture of collaboration across the group, and he was able to demonstrate through case studies how the agencies work proactively together. The Sideshow team and their respective agencies and employees have strong reputations. Sideshow has the agility and flexibility of a small independent agency with scale, in the way that some of Sideshow’s larger competitors didn’t.

We thought the client base was stellar for a business of this size. At the time Sideshow had approximately 350 customers. A lot of them were larger, mid-sized enterprise and blue-chip clients. We saw those as key success factors in DEPT, a previous investment. We were also pleasantly surprised by the level of recurring revenues, which were higher than what we’ve seen in other businesses in this market.

What was the lead-up to the Sideshow conversation for Waterland?

Dominic Graham – The trigger for us to start looking at the Digital Agency market in the UK was our successful partnership with DEPT (2015 to 2019). From that experience, it was clear the underlying market trends were set to continue with the market remaining highly fragmented. In 2019, Waterland also partnered with Intracto, a performance marketing business based in the Belgian market, which has also grown incredibly quickly. This experience again confirmed the European market is large, and significant opportunities remained for Sideshow  in the UK and US.

At the end of 2019, we reached out proactively to Sideshow. Tony was already familiar with the Waterland credentials and Wouter Roduner, the Waterland partner that led the DEPT deal, was able to talk to first hand experiences in this market.

How does Waterland differentiate themselves and what are the benefits that Sideshow have experienced through the partnership so far?

Dominic Graham – A lot of people at Waterland have real life business experience. That informs how we interact with founders and entrepreneurs – we are far more empathetic. We act as a partner, and a strategic sounding board to our businesses. But what we bring and what’s different is, we can be operationally involved and hands on, but importantly, only where we are wanted. With Sideshow specifically, we supported Tony to accelerate what was already a good M&A process.

Tony Hill – Waterland has encouraged us to focus on the business structure that needs to be in place to support rapid and continued growth. Their experience as investors in companies that have been on this journey before is extremely helpful. As we look to build a large and sustainable business, there are many areas of insight that they are providing help on, such as systems, reporting and governance. Being able to talk to people that know what good looks like, and that can offer practical advice brings a lot of value.

The pace has got faster for Sideshow, and there is an increased urgency in moving forward with our plans. We are acting and thinking like a much bigger company. Specifically, we have committed to a 5-year strategic plan that will deliver significant growth, and position Sideshow as a major global challenger in the market. Our organic growth continues to be strong, and our M&A activity has accelerated with five new agencies joining the group in as many months.

For people that have been with the group a long time, maybe there is little change in the day-to-day work, but they can see and feel the ambition and fast growth.

What does the future hold for Sideshow alongside Waterland?

Tony Hill – There are many opportunities in the market due to continued disruption caused by technology and other factors. Sideshow is able to support clients that want to move fast and seize these opportunities. With Sideshow they can partner with a group that has strength in areas such as design and build, data, digital media, and creative content. Our ecosystem of agencies can support with some or all of those needs.

It’s an exciting time. We believe that we will get to around 2,000 people and £200m in revenue, in the next three to four years. The geographical priorities for expansion are currently in the UK and US. It’s about building a sustainable business, where our growth provides opportunities for everyone in the group.

We want to support the most exciting and ambitious brands in the world and help them to flourish. Our approach is to use evidence to drive better performance, develop and deploy smart technology to gain a competitive advantage, and attract and retain the most talented people in the industry.

As Sideshow’s M&A activity continues, what are the key criteria, and what red flags do you look for?

Tony Hill – We look for capabilities that we feel are in high demand and commercially important for clients now and in the future. A track record of good growth is normally a good indicator, but expertise and a distinctive offering is more important. We seek out the best agencies that provide these services and look to engage with them. Early conversations are kept free of formality, and we focus on fit and alignment. I would say that finding a natural and unforced connection is the key criteria to knowing if this will be a successful partnership.

For us, red flags would be around things like ego or internal politics. Sideshow Group has flourished by bringing together different people from different backgrounds and specialities. The common ground is that everyone is open minded and gets along well.

What advice would you give to agencies thinking about a Private Equity partnership, from both sides of the table?

Tony Hill – For anyone considering a process, I would strongly recommend working with an advisor, and ideally someone that is a specialist in the market. When you are looking for advisors, above all else, find someone that you like. Look for someone that you feel you can speak openly with and share everything about the company, good or bad. Trust and the right track record are really important.

You cannot underestimate the need to be fully prepared before going into a process. However much you feel you are ready, there is a good chance there will be additional work to be done. The more you can do up front, the more you can enjoy the process and focus on what’s important. So, I would say, find an advisor you like and benefit from their guidance, because they’ve been through it many more times than you have.

Dominic Graham – Talk to people, take counsel and advice and prepare well. I would encourage founders to explore conversations with different houses to understand different styles and approaches, investment mandates and strategies – work out what’s important for you as part of a transaction and then decide on the right partner.

We aim to support ambitious entrepreneurs and founder owners to accelerate growth through the consolidation of fragmented markets, increasingly supporting internationalisation. We have an experienced and entrepreneurial investment team and provide active support, whether strategic, operational or financial.

>>>> Read more about the deal here.