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Making strides

Equistone’s partners have had the keys to the firm for 10 years. They asked business journalists Stuart Rock and Ross Butler to investigate what kind of a place it has become.

FOR ‘PEOPLE BUSINESSES’, culture is everything. And in a world where capital is a commodity, it is understandable that, to mark ten years as an independent firm, Equistone wants to talk about its people. But this time, it has a specific agenda. This firm, which is led almost exclusively by men with somewhat similar backgrounds, has committed to becoming more diverse and inclusive.

Treating people fairly and with respect has been a hallmark of the Equistone culture since before its spin-out from Barclays. Indeed, one could say that ethical conduct is an integral feature of the firm’s business model and exists independently of wider trends and changing expectations. But when it comes to social, institutional and generational attitudes as to what constitutes ‘good conduct’, things have changed rather a lot in the past decade.

The most obvious change in the investment world is the institutional demand for more formal and structured approaches to measuring, recording and reporting environmental, social and governance factors. Equistone, like most other private equity firms, has come a long way in this more scientific approach to non-financial considerations. Within this, the innovation that seems to have surprised many people at Equistone is the speed at which it has been able to embrace ‘diversity and inclusion’.

This year, Equistone instituted a Sustainability Committee, and at the same time, established a sister body with equal weight: the D&I Committee. The formalisation of a diversity and inclusion agenda within the firm’s lean central apparatus is a significant development. Private equity firms tend to be conservative about the way they structure their own organisations and even for one with as much “EQ” as Equistone, it is a significant milestone.

But why now? Is the firm merely jumping on to a fashionable bandwagon, or does it signal real change?

Quiet progress

For those on the inside, the move has felt organic and iterative. “Over the past decade, we have been persistently trying to ask ourselves the right questions. At the time, this felt entirely natural and normal,” says Christiian Marriott, Equistone’s IR chief. He says it’s only when looking back that it can be seen how the mindset has shifted. “It’s encouraging to see how far we have come.”

The firm’s D&I Committee is chaired by Equistone veteran Julie Lorin. She joined Equistone as an intern in 2001 and became a partner at the time of the spin-out. “I was an experiment – really,” she laughs. “[The firm] decided to take a female intern to see how it could live with a woman in the group. I guess some people were doubtful. But apparently the experiment was a success, because they hired me.”

“Things have changed really dramatically since I entered the company,” she says. “I’m working with people of another generation that have a different view on this.”

Inclusion in practice

Of the two concepts in D&I, Equistone is clearly most confident about its approach to inclusion. The culture of the firm, of mutual respect, has been reinforced by a much stronger and more structured commitment to inclusivity and participation.

“When we ask people, they really feel their voices are heard, they participate in the decision-making and they all feel part of the team,” says Julie. “We need to formalize what we’re doing, but we’re doing well on this.”

When we ask people, they really feel their voices are heard, they participate in the decision-making and they all feel part of the team.
Julie Lorin
Equistone Partner, Julie Lorin

The adoption of inclusive processes around the firm’s core mission (investment decision-making) is a clear indication that it is a value driver. The hypothesis is that sharing more ideas leads to better outcomes.

Every regional team has introduced its own variety of inclusive practices. According to Owen Clarke, in France, an inclusive approach to decision making has proved highly effective for a long time; in the UK, it is a more recent introduction, and it is proving popular.

Isabella Boman-Flavell

Isabella Boman-Flavell, who sits on the D&I Committee, explains: “Over the past two and a half years we’ve been testing an approach where every single member of the team sends their views and their questions on every opportunity,” she explains. “We assess it as a team and there’s a real emphasis on respecting everyone’s voice and everyone’s thoughts, rather than only the most senior partners making all the judgements.”

Similarly, in the DACH/NL team, a more systematic approach to inclusion has been adopted. Tanja Berg joined Equistone’s Munich office in 2016, and she also sits on the D&I Committee. “Very early in the process we have a ‘triage discussion’ where the deal team presents a short paper on a potential investment opportunity and have the opportunity to discuss this with five selected people from our team, but everyone from the team is encouraged to dial into those calls and follow the discussion,” explains Tanja.

She says that this results in a very open but also challenging discussion, without hierarchies. “This is very much a people business, so it is highly important that we ensure a fair, collaborative and open working environment where everyone’s voice is being heard.”

This is very much a people business, so it is highly important that we ensure a fair, collaborative and open working environment...
Tanja Berg

Owen Clarke sees no conflict between this wider inclusive approach and strong decisive leadership from the top. “It is absolutely consistent with our tried and tested processes. No investment will be made without having been thoroughly challenged and reviewed by our European Investment Committee. But I think we make better decisions by having a process before things even get to that committee. I strongly believe that this both improves the quality of our decisions, but also, that whole process is a key part of the learning process, particularly for the more junior people who are going to be very important leaders of transactions for us in the future.”

Diversity take time

Like her colleagues, Julie is “truly convinced” that Equistone is an inclusive company. “But we could be more diverse”. Unfortunately, this is not the kind of problem that can be simply or superficially ‘fixed.’

“I do think that it’s very important not to try to present as more diverse than you are,” says Julie. “I don’t think that reporting means just ticking boxes. You have to prove it.”

Julie sees the first task of the D&I Committee to honestly document what the firm is actually doing around diversity and inclusion. “I would say we are at the beginning of the journey.”

Once the committee has established robust reporting mechanisms, the next step will be to give advice to Equistone’s management board on how to be more diverse and inclusive.

The specific challenge with diversity is that the firm hires rarely, with high retention and low attrition. This isn’t stopping Equistone from adopting what it sees as ‘diversity practices.’ For instance, the D&I Committee is working to establish a recruitment methodology that would help it become more diverse over time.

Female representation is the criteria that the investment industry tends to focus on at present, and here Equistone is showing progress. It has significantly more women in the investment team than ten years ago, with more than 30% of its portfolio companies having a woman following the asset and with a voice at board level. “I lead recruitment in France, and we have had a strong focus on recruiting more women for five or seven years,” says Julie.

But if diversity means anything, eventually things like racial and socio-economic background, and neurodiversity for instance, will have to be addressed.

The D&I Committee spans the whole of Equistone’s European operations (which is unusual on operational matters for this federalised firm). This introduces legal complexities around what diverse characteristics can be measured in certain jurisdictions.

While the committee will seek to provide frameworks around, for instance, recruitment or LP responses, D&I training at the firm is then delegated to local offices. Once each office has devised its own approach, this knowledge can then be shared at a firm level, and best practices can be further distilled.

The committee is also having important discussions around socio-economic backgrounds.

Christiian Marriott

The UK D&I effort is examining the provision of internships and how they might be offered to candidates from a broad range of socio-economic, ethnic and gender backgrounds. If this doesn’t seem that ground-breaking, bear in mind that there are plenty of international private equity firms that will only recruit from very specific Ivy League colleges or Oxbridge.

Diversity is always going to be the tougher challenge, says Christiian. “Inclusivity is really easy when everyone around you looks the same. I mean, that’s why it’s linked to diversity, right? Because if the person you are deferring to is just a younger version of you, it’s not much of a challenge. When that person is materially different to you, it might actually be additive.”

Equistone's D&I Committee

Tanja Berg // Investment Director, joined the Munich team in 2016
Isabella Boman-Flavell // Investment Manager, joined the London team in 2019
Dominic Geer // Senior Partner, joined the London team in 1998
Julie Lorin // Partner, joined the Paris team in 2001
Stefan Maser // Partner, joined the Munich team in 2000
Caroline Pinton // Investment Manager, joined the Paris team in 2019
Sara Roberts // General Counsel, joined the Finance/Legal team in 2017

Pure motivations

The growth of ESG reporting across the investment industry is clearly driven by a mixture of institutional demand and regulatory pressure. D&I, specifically, is less far advanced, and Equistone believes that its progress here has been very much internally driven.

In 2019, the firm undertook an (inclusive!) exercise led by Owen Clarke, to define and articulate its values. “One of the values that we want to live and breathe is diversity and to have strong diversity and inclusion practices and ethos within our business,” says Owen.

One of the values that we want to live and breathe is diversity and to have strong diversity and inclusion practices and ethos within our business.
Owen Clarke

None of this is likely to surprise Equistone’s many partners across Europe’s mid-market. After all, its secret sauce (one could argue) is its almost magnetic appeal to management teams, who intuitively grasp the integrity and fair-mindedness of this ‘financial’ investor. Being ‘good people’ and constantly working to be better, was never really Equistone’s challenge. It is systematising and codifying that fact.

“I’m really sure we would be doing all this anyway,” says Julie. Perhaps what we might not be doing [without outside interest] is the formalization, the measurement, and structuring it in a way that can be proven. But in terms of investing in a sustainable way and hiring from more diverse pools of talents, this is part of our culture now. 

A full version of this article appeared in PLATFORM 06, Winter 2021/22