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Deal Talk

Nic Humphries, Executive Chairman at Hg, on firm’s unique approach to exits

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Nic Humphries is one of Europe’s most prolific technology investors and the Senior Partner and Executive Chairman of Hg — a specialist in enterprise software with over $75 billion in assets under management and a portfolio of more than 50 companies.

Nic became part of Hg in 2001, where he also served as CEO for ten years before assuming the role of Chairman in 2017.

In an interview with Steffen Pauls, Moonfare’s CEO and Founder, Nic talks about what makes a capital compounder, the investment strategy behind great portfolio companies like Visma and the thought process that drives the firm's approach to exits — along with many other topics. Here are some of the key takeaways:

What makes a great capital compounder?

“The very best businesses have a great home market, offer the best quality products and services and attract customers who flock to them. However, that’s not sufficient to make a compounder. These businesses also have the ability to invest excess capital consistently over decades. There’s not a lot of these companies.” 

Investment case for Visma

“Visma started as a leader in small business tax, accounting and payroll software in a small number of countries. We recognised we had the potential to transport that capability to many other markets. However, to do that you have to understand the culture, the tax and compliance rules in other countries — essentially you need to know how to operate in a local way and Visma had that from day one.”

Hg’s approach to exiting investments

“In an average portfolio, you have some good exits early on and poor investments that are left at the end. But that’s like cutting the flowers and watering the weeds. We wanted to reverse that by acknowledging that unfortunately, some investments won’t be so good, and selling them early to drive DPI and cash. You should then keep better investments for later.”

Advice to his younger self

“Pick a sector that will be growing for the next 10, 20 or 30 years, where the winds are at your back. I grew up in a mining town and lots of my friends went to work in the local pit. And I could have been the world's best miner and still wouldn't have a job today. But you could have been a very average software developer and you’d still do okay.”

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Important notice: This content is for informational purposes only. The opinions expressed by the interviewee are their own. They do not purport to reflect the opinions or views of Moonfare. Moonfare does not provide investment advice. You should not construe any information or other material provided as legal, tax, investment, financial, or other advice. If you are unsure about anything, you should seek financial advice from an authorised advisor. Past performance is not a reliable guide to future returns. Don’t invest unless you’re prepared to lose all the money you invest. Private equity is a high-risk investment and you are unlikely to be protected if something goes wrong. Subject to eligibility. Please see https://www.moonfare.com/disclaimers.

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