David

Welcome to the latest edition of the Clifford Chance, Australia Private Capital Podcast. Today we're thrilled to host Nick Oni, managing director and head of a NZ Private Equity at Aries Management. Nick is an experienced private equity investor having spent time with Bain Capital Private Equity after an initial stint with Goldman Sachs.

Nick has commerce and law degrees from the University of Sydney and an MBA from the Wharton School. Nick, thanks for joining us. That's, um, quite a cv, a little, a little intimidating actually. Um, but, um, we're thrilled to have you with us.

   Nick

A pleasure to be with you today, David. Thanks for the opportunity to, to have this conversation.

David

Thank you. Um, to start us off, could you tell us a little about, um, how you found your way into private equity?

Nick

Look, thank you for starting there. I, I love what I do, uh, and I consider myself actually very fortunate to have the opportunity to work in private equity. You know, I get to spend all day talking to.

You know, people who are leaders in their fields, uh, across a range of different industries, uh, and often align with us in terms of driving, you know, business change and impact, um, often with our portfolio partner companies. And so, uh, it's a, it's a great job. Um, I, I spend a lot of my day as well, uh, you know, both with other experienced investors, but also, uh, with, you know, some of the brightest, uh, young people around, uh, I would venture to say, uh, some of the most promising, you know, uh, folks in the world.

Uh, and so, uh, that is very, uh, energising, uh, role. And, uh, I had the good fortune, as you alluded to before, to have had some great mentors at both at Bain Capital and Goldman before starting my current role at Aries. And I'm very fortunate for that as well. Uh, and, you know, it's a great opportunity to then, um, uh, to develop the next generation as well.

David

Mm-hmm. Um, when you thought about the s opportunity and you met with more people in the organisation, was there a particular, uh, cultural attribute or philosophy of Aries that made you feel that that was the, the right fit for you?

Nick

Mm-hmm. Look, everyone I met, uh, through, uh, you know, the process of getting to know Aries, uh, really reflected in a very collaborative, uh, firm and organisation really. And so there's a lot of emphasis on working together, um, uh, being responsible stewards of capital for our, for our investors, uh, being, you know, working hand in hand to leverage, uh, you know, the global organisation that is Aries for the benefit, uh, of, you know, the partner companies that we work with.

And so, yeah, very much a global firm as was, uh, my previous employer. Uh. Uh, but certainly with a flavour of, you know, being very collaborative, uh, and with a real culture of working together, uh, that I found very energising actually.

David

Yeah, that sounds great. Um, um, there's a perception, at least looking slightly from the outside in that private equity is about financial engineering, but actually, um, it's, there are multiple phases of the value creation process.

There's buying, well, building well, selling well, and I was wondering if you could speak a little to that sort of different phases of the private equity investing and capital, uh, value creation process.

Nick

Sure. Look, our goal is to, um, you know, realise strong returns for our investors. And in order to be able to do that, we need to be, you know, selling bigger and better businesses than we're buying.

And so I would place the emphasis, uh, in that equation on the building well

David

mm-hmm.

Nick

Side. Uh, and so we, we spend a lot of time when we're assessing opportunities, really understanding, uh, what, what we can, you know, in partnership with management teams, uh, go and do for, from an operational perspective to make the business bigger and better.

Uh, and so we spent a lot of time doing that. We spent a lot of time as well thinking through, uh, you know, the macro, for lack of a better term, elements of, uh, the investment opportunity. And so that's not necessarily restricted only to, you know, economic variables, but also, you know, long-term trends that, uh, might be shaping in, in, in industry, whether that's, you know, technological, uh, commercial, regulatory or other sort of impacts that, uh, could, could shape an industry over time.

And so, yeah, I think if you can do those things in concert, you can really build an assessment of the opportunities and risks, uh, that you are, that you're buying and be able to make a considered investment decision off, off, off those inputs.

David

Um, just focusing on, on buying. Well, for one moment, um, I think Australia is quite a competitive market.

It's for quality assets. Um, when you think about buying, well, how do you think about that in this market? Um, and perhaps to make that question a little more specific, um, how do you think about participating in processes when you're on the buy side, um, relative to, um, seeking out more proprietary opportunities?

Nick

Yeah, well, you're certainly right David, that Australia's a competitive market, and so I think critical to operating in, in that environment successfully is, you know, having a clear strategy, a clear. Uh, right to win and having a very good understanding of that and actually being very clear about what it is and being very focused on it in, in spending time, assessing investments as well as with our, with our partner companies.

And so from an Aries perspective, uh, our, our strategy in Australia and, and, and New Zealand is to really bring the best out of the global organisation, uh, to the opportunities that we look at. Uh, we also focus, um, that's a key word for us. We, we focus our time on, you know, what, what we call the mid-market.

Uh, that's a common strategy for Aries private equity around the world. And so we would venture to say that in that, uh, in that opportunity set, uh, that we're looking at in Australia, we'd be, uh, the firm that has, you know, the most capabilities from a global perspective, whether that's helping businesses, you know, drive initiatives outside of Australia or whether it's, you know, spotting trends that may have occurred in other countries where we have a lot of experience, uh, and, and applying them to, to, to Australia.

And being able to see ahead of, you know, trends that will shape industries here.

David

Hmm, that's interesting. And so, um, on the, the buy side, um, the characterist, and I appreciate that every situation is, um, highly bespoke, but are there particular characteristics that make you really excited about an opportunity, for example, around the quality of the founder or the management team, or, um, whether it's more sort of sector specific, for example?

Nick

Hmm. I think all of those aspects that you mentioned are important, and I think what really gets me excited about a particular opportunity is a strong match between the, you know, the operational improvement and business building opportunities with a particular business and the capabilities that we Aries has as a global organisation.

So if I take, you know, our most recent Redback Boots investment, which you and your colleagues, uh, very ably helped us with, um, that was certainly a situation where we thought, uh, that what we could bring to the business, uh, was a very good match for the opportunity that was actually there. And so if you distil, you know, the investment thesis for, uh, Redback, you know, was really taking, uh, a.

Fantastic Australian made product, um, that had a great customer base, uh, that were largely advocates for the product, uh, and, uh, you know, making it easier to purchase, uh, both in Australia as well as internationally. Um, and also making more people aware of it. And, and so particularly as it relates to, you know, the ability for us to.

To increase market channels in places like the United States where we have, uh, connectivity into potential customers, partners, executives, uh, we, we felt like it was a real opportunity to, to turbocharge growth for that, for that particular, that particular asset.

David

And I guess on the, the other side, sort of, um, in, in that scenario, you also had the process of, of getting to know the founder or you know, the leader of that business, um, Matt, and it was clear to me from the discussions that I was part of that you quickly built a rapport with him.

Um, it's clearly an important thing for you when you're thinking of making an investment, but sort of how do you go about that, um, sort of building that relationship with someone who's built up a business over a long period of time and is getting to know you as the sort of, um, partner, um, for the next phase of growth.

Is that, um, something that takes, um, a long period of time to develop or, um, is that something you move through quite quickly?

Nick

Yeah, look, the other, the other aspect of, uh, of our strategy, uh, as, as Aries, you know, is matching, you know, the global capabilities that we have also with a substantial on the ground presence within Australia.

So, so we've been in this market since 2020. I'll, I'll talk a little bit

David

Yeah.

Nick

More about, you know, how that's enabled, uh, us to gain confidence in making, making the redback investment. Uh, to, to answer your question, uh, we, we actually just hit it off, uh, quickly. Um, and you know, Matt Al was always a, you know, such a genuine, um, you know, warm personality who clearly had a passion for his business and his product.

You know, he founded the business back in 1989. His family's actually been involved with boot making since 1927. And so, uh, you know, a, a real sort of depth of knowledge, legacy, um, you know, broader sense of, uh, you know, responsibility for the craftsmanship that's been developed over generations. Uh, and so, you know, that was, you know, that, that, um, connectivity, you know, that that personal, um, uh, relationship was, was actually a very important part of, uh, getting comfortable with the investment.

Uh, it, it also, I, I think helped Matt become more comfortable mm-hmm. Partnering with us. He still remains a substantial minority investor in the business. And so I think he was also very much attracted to, uh, areas of global capabilities and our ability to, you know, go and go on turbocharge, read back in, in the US and the UK and, uh, parts of Europe and, you know, Israel and the other markets that we operate in.

And so, yeah, no, that, that aspect of the deal is very positive. And, and I think, uh, there should be opportunities for, for, for us both to. Uh, to, to keep developing that relationship and winning over time.

David

Yeah.

Nick

Yeah, look, the other, the other aspect of, uh, of our strategy, uh, as, as Aries, you know, is matching, you know, the global capabilities that we have also with a substantial on the ground presence within Australia.

So, so we've been in this market since 2020. I'll, I'll talk a little bit

David

Yeah.

Nick

Yeah, look, the other, the other aspect of, uh, of our strategy, uh, as, as Aries, you know, is matching, you know, the global capabilities that we have also with a substantial on the ground presence within Australia.

So, so we've been in this market since 2020. I'll, I'll talk a little bit

David

Yeah. That's great. Um, you, you mentioned the, um, significant global dimension to Aries investing activities, and so in, in a sense, um, a dollar invested here is a dollar not invested somewhere else.

So what is it about a NZ that, um, is, um, a, an attractive home, uh, for capital for Aries?

Nick

Mm. Well, Aries has been investing in a NZ, uh, since 2020. Uh, and, and so, uh, on the private equity side, uh, you know, certainly the beneficiaries of, uh, of the track record that was established and the [00:14:00] reputation and the market position that we have in Australia, um, more, more broadly as Aries.

Uh, and, and so I think if you look at some of the fundamental drivers of that, so, you know, as we know, Australia is a, you know, as a resilient macroeconomic, um, you know, growth market. I think we haven't had a recession aside from COVID in 33 years. Uh, and so, um, the, the firm certainly sees it as a, as a, as a stable growing market, which, uh, I think has done a good job over the years in terms of, um, uh, changing economic mix and, and the drivers of the economy, um, to match global conditions.

So you think back to the days of, you know, deregulation, uh, in many key industries in the 1980s and nineties. Uh, you think to, you know, the resources boom and the materials expansion that [00:15:00] we saw in the nineties and two thousands, and you think, you think of a transition to the services economy after that and, and then today, uh, a lot of promising industries going forward, uh, which I'm sure we'll talk about.

Uh, yeah,

David

yeah. I mean, like Australians, generally, Australian businesses like to grow, go abroad. Um, is that a, a characteristic given Aries, um, global approach to investing that's particularly attractive for you as an investor in this market? Finding businesses that have that capability like Redback does?

Nick

Certainly is that goes back to, uh, our, our sweet spot in terms of a match between the capabilities that Aries has and, you know, the opportunities that businesses within Australia have to the, to go and grow on a, on a global basis. And so we certainly do see a trend of Australian businesses looking to access Asia Mm.

And looking to access, uh, the US in particular as well as Europe. And so we see ourselves as advantaged, you know, working collaboratively and closely with, with our colleagues in, in those geographies, to, to, to go and help those particular, you know, businesses that are, that are in those positions. Grow going forward.

David

With that said, um, limited partners like to see their capital deployed. Um, and um, as we touched on earlier, Australia in particular is a very competitive market on the, on the buy side. Um, so how do you, um, maintain the discipline to be patient and only pursue those opportunities that you feel are the, the best ones, rather than, you know, accepting maybe a, a sort of a second best, um, in order to get the capital deployed?

Nick

Mm-hmm. Look, I think I'd reiterate, um, the point that we discussed earlier around having a clear strategy, uh, clear focus, uh, and, and sticking to it.

David

Yeah.

Nick

And so, uh, again, for us, you know, these would be opportunities that, uh, have, have an international element, you know, whether that's, uh, business, uh, founder or management team that's looking to grow their business in, in other markets where we have, um, you know, uh, the ability to, to

actually operationally improve those businesses and drive initiatives, uh, or, um, industries in Australia where, uh, we, we, we see very similar attributes, uh, that have, you know, perhaps transpired historically in other markets such as the US where, where we've had success and have an ability to import that playbook.

So, so I'd say from a strategic focus perspective, maintaining that in a competitive market environment is, is absolutely critical. The other philosophy, philosophical point, uh, that, um, I've dwelled on a lot in my, in my career is making a distinction between, you know, good businesses and good investments.

Uh, often, uh, uh, you know, uh, often the, the best investment decision is to, you know, admire good businesses, uh, from afar and let someone else own them

David

really. Could you just dive into that a little more? I, I just instinctively feel like if it's a good business, it's a good one to own, but you are saying that's not necessarily the case for you.

Nick

Mm. I think I'd. Really look through the lens of, you know, what, what could we do to build a bigger and better business? Right? Uh, and so, uh, if it's already, uh, you know, a very good business, uh, and there's not a lot we can do with it, uh, then most likely, uh, someone else will be better off owning it.

David

Oh, that's interesting.

Hmm. Um, just pivoting to talk about, um, sectors for a moment. Um, yeah. I guess many people would think of financial services, real estate, uh, and then more recently sort of infrastructure with data centres and energy transition as being the key areas for investment in Australia. Um, would, would you agree with that?

And either way, um, are there other sectors that you are, that you are focused on and as, as an investor here?

Nick

Mm. Look, I think certainly if you look at, um, some of the data flows, um, into, um, some of the sectors you talked about. So there's, there's certainly a lot of capital going to areas like, you know, AI and AI value chain areas like, uh, electrification generally.

Um. Uh, you know, supply chain resilience, defence, uh, biotech, these are all areas in Australia, which, uh, which, which will hopefully go and drive economic and productivity growth over the coming decades. Now, I would also overlay from an area's perspective, uh, areas where we would spend the most time in that context.

Mm-hmm. And so, um, in many ways we, you know, we, we don't, we don't necessarily want to predict where capital will go. Yeah. Uh, we prefer to actually make a distinction and focus on where we see opportunity and where we have the capabilities to actually go and build better businesses. And so, uh, for us, uh, you know, we, we spend a lot of time in consumer, uh, in healthcare and in services.

Um, we are big believers that, uh, you know, Australian brands, uh, Australian, uh, you know, skills, uh, Australian ideas can compete at the world stage. That's been proven to be the case historically. And, and I think that'll continue to be, to be the case going forward. And so if you take a, if you take a business like Redback, again, one of the core bets we're making with that business is that, uh, an Australian made product will resonate in other markets, uh, in, in the world.

So we certainly believe that as a broader trend. We also think that, you know, within healthcare and industrial services, uh, we we're still in a relatively fragmented, uh, market in many, many of the areas within those industries. And so, as observed in, again, places like the, like the United States, uh, we expect there to be more consolidation, more sophistication going forward, and therefore more opportunities to, uh, to, you know, um, drive productivity, run businesses, uh, well and efficiently, and, uh, adopt, uh, a lot of the strategies, uh, and the playbook that have worked, uh, in other countries.

David

Mm-hmm. Uh, just on productivity. Wouldn't, probably, wouldn't be a private equity related podcast if we didn't talk about ai

Nick

Sure.

David

For a minute or two. Mm. Um, I'd be interested in any sort of insights into how that's changing, either the way that you work or the way that you think about investing. Um, and then secondly, whether there are any trends other than AI that, uh, occupy your mind, but are maybe getting, um, less attention in the press than AI is getting.

Nick

Mm. I think it's important to make a distinction between investing in AI directly and thinking about AI as a, as an overwhelming, uh, global, uh, pervasive force that's going to change the way that business, uh, and, you know, human life is going to be led going forward. I think, uh, I think every investor needs to acknowledge the latter.

Uh, and so from an Aries perspective, uh, you know, we, we certainly spend a lot of our underwriting, uh, process, uh, thinking about AI both on the risk as well as the opportunity side. And so, um, we, uh, we, you know, from, from an Aries internal perspective, we spend, um, we spend a lot of time actually, uh, ensuring that a lot of the data that we have internally is digitised.

We actually have our own internal ai, um, tool, uh, that we use that leverages, uh, you know, the various, uh, you know, investment committee memos, portfolio company performance metrics historically, uh, that we can now call upon to make future investment decisions. And so that's proven already to be a very helpful tool for us internally.

We look for opportunities within the companies that we invest in to, uh, leverage ai, uh, in, in the way that makes sense in for, for that industry and for that business. And so it, it, it'll be different, uh, depending on which sector the, the company operates in. Uh, but you know, AI's been pervasive in areas like finance, legal, uh, it, software development, uh, commercial go to market, being able to find the best places to, to, to spend time from a go-to market perspective.

And so, no, certainly, uh, certainly is a great, great use of the team's time to be thinking about such issues. Uh, and then, yeah, look on a, on a related topic, um. AI as well as other forces, I think are shaping what the landscape of Australia's labour market is gonna look like going forward. Mm-hmm. And so, uh, as a, as a nation, uh, in order to improve our productivity, not only do we need to embrace ai, I think we also need to, uh, really in a very conscious way, uh, upskill and ensure that, you know, the labour force is, you know, spending, uh, you know, a finite, um, finite time, time and bandwidth, uh, on the highest value activities and skills.

One other, uh, way that we've thought about this within our private equity strategy, uh, in, in this region is, uh, through, you know, uh, an investment that we have in, in what we call an, an employee of

record business, uh, that actually works with Australian companies, uh, and connects them to, uh, workers, uh, in places like the Philippines, for example.

And so in a very labour constrained market like Australia, uh, the ability to, to access, uh, workers in other parts of the world, uh, with their own skill sets, with their own advantages, and to be able to compliment that with, with an Australian local workforce, that that is hopefully doing, you know, more value added work locally, uh, we think is, is going to be an important trend going forward in concert with pervasive technologies like ai.

David

Mm-hmm. Yeah. Interesting. Um, we've spoken a bit about investing and I was hoping that we could just speak a little more about you for a minute or two. Oh, sure. Um, I was wondering if there have been any sort of key moments, um, during your career that have influenced the way that you, um, think about your job, um, and that have ultimately led to you being where you are today?

Nick

Hmm. Good question. I'd say that the most formative learning experiences that I've had in my career so far have been through difficult times. And so I think it's easy, uh, to, you know, be able to applaud yourself and, uh, cheer when things are going well. Uh, but my experience has been that, uh, you really, uh, forge strong partnerships and you earn trust, uh, of, of management teams and, and partner companies, uh, when you are, you know, rolling your sleeves up and looking to solve a problem, uh, during, during more difficult times.

And so, you know, whether that's, uh, you know, whether that's a cultural, uh, issue within an organisation or whether that's, you know, investments in initiatives that have been made that just aren't working yet. Uh, or whether that's something more exogenous like a cyber attack or, you know, or a pandemic mm-hmm.

Or some, something like that. You know, I've, I've, I have found that, you know, getting in the trenches and being side by side with. Uh, with management and partner companies is, uh, is the best way to learn and, and also to build trust and, and then to ultimately drive great outcomes for businesses.

David

Yeah. And your role will have changed, um, as you've become more and more senior in your career.

Could you just share a little insight into how you sort of allocate your, your time through your working day? You know, how much of it is on sourcing opportunities? How much of it is on, um, participation in portfolio companies, and then how much of it is on working and managing the team?

Nick

Mm-hmm. I certainly spend a lot of time doing all three.

Mm-hmm. Uh, and yeah, they're not, they're not mutually exclusive tasks. Uh, but look what, yeah, what, what I think, um, what I think, uh, I've acknowledged over time is that, um, by definition, as you progress through your career, you're actually further away from the data that ultimately forms the input to, to then make great investment decisions.

And so, uh, you know, acknowledging that, being comfortable with that, uh, and developing the skill, uh, of, you know, trusting, developing, delegating, uh, creating an environment, you know, of psychological safety, of intellectual honesty, curiosity becomes a really important task. And, and, uh, as I said before, I'm privileged, uh, to, to have a team who, who I consider, uh, to be some of the best young minds in the industry.

And so, uh, I'm, I'm, I'm privileged to, uh, to have that, uh, to have that as, uh, as a, as a key part of our team success

David

question completely without notice, but, um, you clearly have a very high performing team. Um, is there any, are there any. Um, things that you feel contribute the most to developing, um, a high performance culture in your organisation?

Nick

Mm-hmm. Mm-hmm. Yeah. So look, within, within our team, uh, we have very consciously adopted some values. And so for us at the moment, their transparency, ownership and empowerment, and having a proactive culture. Mm-hmm. And so, uh, these were the values that, that we chose, uh, as a team, uh, and, and have lived. Uh, and you know, by definition, uh, you know, were ones that were most valuable to us, uh, as a team.

And so that's been, you know, that's, that's worked well so far in, in terms of creating an environment of trust, uh, and, and empowerment. And what I'll also say is that, uh, you know, um, certainly through a hiring process, and certainly, uh, as you're thinking about development, um, you know, hard, hard skills are one thing, and the ability to technically, you know, perform the tasks required to make a good investment are obviously critically important.

But what I find more rare, uh, are some of the attributes, uh, that, that I think ultimately make great investors. I think many, uh, very intellectually curious, um, you know, have a real desire to learn, uh, almost have a chip on their shoulder a little bit in terms of, you know, they are really motivated to go and find the answer and, and to go and prove themselves and to go and, um, uh, you know, make an impact in the world.

And so I certainly look for that. Uh, and I certainly look for, uh, tenacity, uh, and, uh, you know, that bit between, uh, your teeth when, when you just will not rest until you solve a problem or achieve an outcome. Uh, I, I try and model that with, with my team. And, and, and that's certainly an attribute that I look for in the hiring process and in terms of developing and providing feedback as well.

David

It's amazing. Thank you for sharing that. Um, best piece of advice you've received in your career. Does anything stick out?

Nick

I'd say. A lot of people listen to reply, I encourage, uh, well, I have been encouraged, um, and I do encourage, uh, my team to listen to really understand. Uh, and so, uh, I, I think it's very important to, um, absorb and go back to first principles thinking.

And so when you hear something really try to get to the bottom of, you know, what is this person really saying? How does this impact, you know, my investment decision, uh, in a very intellectually honest way? Um, what do I then go and do about it? Uh, I think that is a really important, uh, skill and trait to have.

David

Mm-hmm.

Nick

I think also, um, you know, just, just in terms of listening to reply, a lot of people feel that they then, they then need to say something which, which, you know, which, which sort of validates why they're in the room. But I actually, um, was encouraged from a, from a young age by great mentors to, to be okay with, you know, not, not knowing the answer, saying, I don't know, saying, I'm not sure, saying, you know, here's the evidence one way and here's the evidence the other way, and no one could ever say for

certain, but on the balance of what I've seen and what I feel we should make, you know, decision X instead of decision y, I think that that's been a pretty formative part of, of my career.

David

Mm-hmm. Yeah, there's a real authenticity in that, not, not sort of forcing the solution.

Nick

Hmm.

David

Um, final question. Um, thank you. You've been very generous with your time. Um, um, as you, um, look ahead to the next 12 months, what are you most focused on from a professional perspective?

Nick

Hmm. Well, um, look, I'm, I'm very excited about the opportunity in Australian private capital and private equity, and I'm excited for the next, you know, 12 years there.

In terms of Aries and in terms of, you know, our private equity business in Australia, we're still in the early days of our build out of our build out. You know, we started in May of last year formally. And so, um, as I've alluded to, we've, we've got the beginnings of a great team, um, very much looking forward to continuing to, you know, build good experiences with them and, you know, uh, and, you know, pursuing, pursuing interesting opportunities and very much looking forward to developing and refining our strategy, which seems to have some level of acceptance in the market.

Um, but there's, there's always more to do, uh, and I'm looking forward to uncovering, you know, many great businesses that, that we can, uh, that we can use. Again, the Aries experience base and capability set both internationally and domestically to, to help them. Grow bigger and better.

David

Mm, that's wonderful.

Well, thanks again, Nick. It's been a, a fascinating discussion and, um, you've been very generous with sharing your insights, so thank you.

Nick

Well, thank you for having me, David. I appreciate it.