Profile: Matt Harrison, Stanley Capital

The Drawdown (TDD): You were previously interim CFO at Appian Capital Advisory – what prompted the move to Stanley Capital in 2021?

Matt Harrison (MH): When I joined Appian Capital, a PE firm focused on the mining sector, they were almost finished raising their second fund. They were looking for somebody to step in as CFO. I started on a six-month contract but ended up staying 18 months. It was always intended to be an interim role, as my primary focus at the time was the development of my own family business.

It was interesting to work with Appian, a firm moving towards its third fund, as it was beginning to professionalise the business. I am proud that I helped to build the finance team and I taught them how to interact with their fund administrator, which was based in Jersey. Part of my role also involved searching for my successor.

After finding the next CFO and performing the handover, I began to think about my next project. It was at this point Stanley came along and while the timing worked well for me, the type of firm they were trying to build also appealed to me a great deal. I enjoyed the personal challenge of transitioning from working with established managers to going to Stanley, a brand-new manager.

By the time I joined, I had been working in PE for almost 25 years and I was intrigued by the firm’s investment strategy, which is a research-led approach to investing combined with a clear transformation strategy on assets, supercharged by SCP Digital, our AI technology platform.

The clarity of moving an asset from B to A with a clear plan stands apart from my earliest experiences in private equity, where that clear vision was often missing. While we invest in healthcare and resource efficiency, we always conduct in-depth sub-sector research before committing to any investment.

TDD: Can you tell us more about the kinds of sub-sectors in which you invest?

MH: Our first investment was in Qinecsa, a pharmacovigilance business, which conducts adverse event reporting on drugs. Stanley is attracted to this industry because it understands its potential for growth; as more drugs are being put out to market faster, there is a need for a quicker reporting method with regards to the impact of the drugs. Qinecsa started off as a service business, which was very labour intensive. Our mission at Stanley was to digitalise it, by adding on several platforms to help automate reporting functions and deploying SCP Digital.

This is a good example to help explain Stanley’s investment strategy, as it sees pharmacovigilance as a strong sub-sector with high potential for growth. We want to take the company to its next stage of evolution, transforming it from a centre of bodies, to upgrading the skillset that you have within that business using technology.

TDD: How do you use technology to help transform the portfolio companies you invest in?

MH: We have developed SCP Digital, which is a combination of our own AI-developed research tools and an independent AI and automation consulting and implementation business. Separate from our fund investments, such as Qinecsa, SCP Digital is an independent business and Stanley has a strategic stake in it as a GP. This means it works for its own clients but we can use it within our portfolio of companies. From my perspective, our strong footing in AI and automation is what completely differentiates us from our peer group.

I am CFO of SCP Digital as well as of Stanley Capital. The business has more than 100 employees and they are doing some work with Qinecsa to better integrate systems and streamline processes, assisting them with their digitalisation journey.

SCP Digital is a big part of the investment journey of our portfolio companies. As we look for B assets that we want to turn into A assets, we have a workforce of more than 100 people we can deploy. We don't put them all into the portfolio company because they are also working with other clients. If they were to go fully in-house, you would risk eroding their skillset.

Stanley has a very close relationship with SCP Digital. When we look at any potential investments, they will look at it with us. Together, the potential for the business and its digitalisation path is analysed. SCP Digital is software agnostic, which is quite key to us as well. They are not tied to any one vendor and they will find the best solution for the business.

TDD: What are some key things you have learned over the course of your career in PE?

MH: Having had various experiences within private equity interim roles, as well as setting up my own business, I have developed a mindset where I try to build resilience into a model. The aim is to make businesses as anti-fragile as possible. This can involve ensuring you don’t rely solely on one key person.

With this in mind, you try to look at weaknesses in the system. Although you can't always mitigate them, you can be aware of them and identify the point where something could happen. Periods of financial crisis offer valuable learning experiences and can teach you about not putting all your eggs in one basket when setting things up.

I also think one of the skills of being a CFO is being comfortable with partial information. This means not searching for every level of detail there is, as that could lead to paralysis and inability to make decisions. Knowing when to dive into detail and when to see the bigger picture is important.

TDD: What are some of the challenges you are looking to face during the next year?

MH: While I don't think we will have a problem with talent retention and growing the team, as we have an interesting enough proposition, I think the investor landscape can be a difficult arena right now.

That being said, I like to think we differentiate ourselves, and the founders have got a tremendous track record so investors should be willing to look at them. Having a new IR partner come onboard builds our capability there, and we're talking to other people that might help us further professionalise our IR activities.

There will also always be challenges around portfolio companies, but I think we understand the risks in them adequately. There are always going to be the ‘black swan’ events, so we are working to build resilience into the mix.

Other than that, we would like to build excess capacity around the team, so that we have more time to think. As a budding fund manager, we definitely have more room to grow. 

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Knowing the market
Harrison explains the use of Stanley’s own AI tool to conduct valuable market research: “SCP has developed a machine-learning origination engine built in Python, which allows SCP to landscape and profile potential targets with public and non-public information sources.

“We use the tool to help us make the correct investment decision relating to the sub-sectors we are interested in. We need to understand if there are enough targets, whether those targets have the criteria that we require, and we also look at the size of the business, Ebitda, growth potential, and so on. The knowledge we can gather from the tool gives us a headstart.”

He adds: “While there's a dedicated resource on the research side, we, the partners, are involved in it as well, and the investment team is involved, which means the research is not done in isolation and it's a regular feedback loop.”