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Dunedin’s Karan Darroch on evolution of role and industry outlook

by Alice Murray 16 July 2019

Karan Darroch, finance and operations manager at Dunedin, discusses her journey from KPMG to the GP; the joys of working in a small and focused team, as well as sharing her outlook on her current role and the wider industry.

The Drawdown: What were you doing before you joined Dunedin?

Karan Darroch: After graduating from Glasgow Caledonian University, I joined KPMG’s graduate programme. I worked there for three years in the Edinburgh office, in the audit department, specialising in financial services and completing my Chartered Accountancy qualification.

Over the subsequent years, I did a two- and half-year secondment in Melbourne, with KPMG. When I came back to Edinburgh, I progressed through the ranks and became a Senior Manager specialising in asset management, PE, VC and retail funds.

TDD: How did the move to Dunedin come about? What were the main attractions to joining?

KD: I hadn’t ever considered leaving KPMG; I thought of myself as a ‘lifer’, and that one day I would become a partner. But, in 2012 I started speaking with Dunedin. It was a difficult decision having been at KPMG for such a long time.

However, private equity had always fascinated me. When working with PE clients I was excited and impressed by how much knowledge they had. I could see it was real relationship and journey between manager and portfolio company.

In terms of Dunedin itself, I was initially concerned about how I would adapt to a smaller team; it was such a big difference from KPMG to a team of 25. I had three interviews with various partners and early on it was apparent how team focused and collaborative they were but, that individual input was valued and needed. I really liked that dynamic.

The other key factor was Dunedin’s openness to being flexible. Having had my two children while at KPMG, where I had been working part-time, I was worried that moving into a new position would mean going back to full-time, but Dunedin were happy to try out a flexible approach.

TDD: Since joining in 2012, how has your role progressed?

KD: Initially I joined as financial controller and was part of a team of four. My main responsibilities were financial reporting for two of the buyout funds and portfolio analysis. This was a new function for Dunedin – having someone dedicated to getting the information from portfolio companies, centralising that information and creating one source of truth, which could be used for analysis and governance.

In 2015, I was promoted to a finance and operations role. I was still responsible for reporting but also taking care of operational matters including HR and IT, which I manage jointly with our finance director Graeme Murray.

In 2017, another colleague retired so I became full-time and took full responsibility for reporting for all of the buyout funds, which has been a natural evolution.

TDD: Can you outline your current role and responsibilities?

KD: Given the size of Dunedin, with three people in the finance department, most of the organisation is focused on investments, so anything non-deal related falls to myself and Graeme.

That includes all financial reporting, quarterly reporting to investors and performance reports. I’m the first point of contact for investors for detailed queries. Our investor relations team deal with the strategic side of the investor relationships, and I look after things like performance, tax, regulatory reporting and AML queries.

Portfolio analysis still big part of my role. When I first joined, I developed an Excel template dashboard. Today we use Qlik Sense – a visualisation tool – so I’m still liaising with the portfolio company FDs, and drilling into the figures each month to produces analyses for the senior team.

TDD: How frequently are you working with other functions of the business?

KD: The entire organisation works very closely together, we’re a small team. Right from the onset of a deal, we’re all thinking about the financing, structuring, regulatory considerations and so on. After completion, we’re all onto thinking about portfolio monitoring and analysis, where we’re working with the investment leaders to put together the information for reporting and the board.

TDD: What are the most challenging aspects of your role at the moment?

KD: Data, and within that, the changing demands from investors in terms of granularity, which we may not have collected historically.

It’s a case of finding a balance between providing what’s needed, which is always our intention, and finding the time to generate it. We’re evolving what data points we collect from portfolio companies, and trying to predict what LPs might request in the future. For example, we now submit portfolio company analyses onto the eFront Insights platform, and some of the data points there, such as quarterly capex and turnover, isn’t something we’ve collected in that format previously.

Another challenge is finding automated solutions, such as portfolio management automation tools that fit our business; a lot of what’s out there is too expensive for us. With 12 portfolio companies it’s not cost effective; we need something tailored to our size.

Continued increasing regulation is an ongoing challenge. Over the last five years it feels as though we’ve been bombarded with new rules. And that’s not just at a fund level where we have to interpret these rules, it’s also at the portfolio company level. Talking to the executives of a crane company about why they need to think about FATCA is an interesting conversation! But we have to make sure they’re aware and have the appropriate controls in place.

TDD: Looking ahead, what are your key priorities, and how do you see your role progressing? KD: My key priorities are making sure I can respond to questions asked by our investors and providing them with the most accurate information.

In terms of progressing my role, I’m developing a portfolio monitoring process to make the reporting process slicker. At the moment we have a mixed bag, with some portfolio companies completing templates and others needing more help. I’m developing my relationships with FDs to help them understand why we need the information in such a way and supporting them to do it.

I would also like to deepen our use of Qlik Sense. At the moment we’re only using the dashboards for financial information. I’d like to include other types of information such as KPIs, things that would help the executives to think about their businesses in a different light by seeing high-level snapshots of the real drivers.

On the HR side of my role, I’ve been working on our internal processes and policies; we’re currently updating our employee handbook to ensure we’re market leading. We recently updated out maternity policy and now we’re thinking about our paternity policy. We want to ensure we’re an attractive employer and we maintain our current retention rate, which is very good.

TDD: What do you see as the biggest challenges facing the industry today? KD: Pricing is still high; there’s a lot of competition and a lot of dry powder out there, so finding deals at a good price that will generate the best return has been an ongoing challenge. We are investing a great deal of time and effort into our Origination function, developing deep sector knowledge and closely tracking a list of attractive businesses. This has served us well with a number of self-originated deals completed in recent years.

There’s always the challenge around improving diversity. Within Dunedin, I’m very proud that two of our deal team are women, and they are partners of the future. I’m also pleased that the broader diversity discussion has widened; it’s not just gender, it’s also about race and social diversity, which is really important.

Brexit is another obvious challenge but, following a deep analysis, most of our portfolio companies are neutral in terms of potential impacts. Although political uncertainty doesn’t help anyone.

TDD: Thinking about the future, what are you most optimistic or hopeful about? KD: Our current fund is exciting because it’s performed really well. We’ve had three excellent exits and there are more on the horizon, so I’m excited to see the returns on that.

I’m excited about the next stage at Dunedin as the business continues to evolve. We’ve moved away from focusing on industrial businesses, and instead we’ve found a niche within people / consulting businesses, which has been successful for us and continues to be very exciting.

I’m pleased with the evolution of our team, even more so from an HR perspective. The hires we made four or five years ago, it’s been great to watch them develop and now they’re on the boards of portfolio companies in their own right. And this progression will perpetuate as we continue to invest in the team at Dunedin.

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