“I’ve realised that I have to take risks – personally, financially and in business”

2nd Aug 21

Stella Donoghue

Stel­la Donoghue has had her fair share of ups and downs. Her secret? She uses the ups to build con­fi­dence and the downs to tough­en her­self up. With the ben­e­fit of hind­sight it’s the per­fect prep for being oper­at­ing part­ner in the rough-and-tum­ble of pri­vate equity.

Stella is a rarity in the EquityFD executive profile series: she didn’t go straight to university after school. Instead, at 18, she was running a restaurant. “I ditched the idea of university and ran my own place instead,” she says. “I actually won an entrepreneur award, too, which really made me believe I could do anything. And at that point, my ambition was to run my own hotel or restaurant.”

But she knew she needed some formal instruction to do that. So a degree in hotel management beckoned. And her course placement at Copthorn Hotels revealed there was more to it than brilliance in the kitchen. “I ended up spending a lot of time in the finance function of a big London hotel, and realised that it was actually the business side that really interested me,” says Stella.

But when she asked the CFO for a job after the hotel degree (a first class honours, no less), he explained that “people with qualifications” would overtake her quite quickly. She needed to nail accountancy. “That led to me training as a Chartered Accountant with Stoy Hayward – and I didn’t hate it at all,” she says. After she qualified, she went straight back into the hotel sector, starting with a financial controller role at Radisson SAS, followed by a stint at One Aldwych as FC – and then in 1997, she got the FC job at Claridges.

MB eh?

But despite the succession of good jobs, something wasn’t right. “The hotels sector is pretty incestuous – there’s a lot of moving between the finance functions of the big hotels,” Stella explains. “I knew I didn’t want to move around too frequently, and in any case the sector was pretty limiting – wherever you are, the hours are always pretty demanding. My degree just didn’t tick some of the boxes for the top jobs. And I was a bit of a maverick. Plus the senior finance roles were all HQ-focused, and I enjoyed being in the hotels.”

So in 2000, she decided to take herself off to Cranfield for an MBA, “partly as a way of broadening my horizons, partly to prove I was more than just a hotel person,” she says. “It also told me that the problem was as much about my low boredom threshold as it was the hotels sector.”

But when you lose nearly everything, it makes you realise that you should compartmentalise your risk, too.

Cranfield wasn’t an entirely positive experience, however. Stella felt that the MBA system tends to encourage over-inflated egos, and students can graduate feeling that they are invincible in business, which is not necessarily the case. And it was through Cranfield that she hit a major down moment.

“I lost my whole investment in a business I’d been invited to join by Cranfield alumni, ” she explains. “It was probably the ‘MBA ego’ at work – you’re always being told how the models and theories you’re learning will make you so desirable to businesses, and so smart. But when you lose nearly everything, it makes you realise that you should compartmentalise your risk, too. It was a rough time. I was annoyed I hadn’t done enough due diligence on the business. But it toughened me up, too.”

Stella did mentor some Cranfield entrepreneurs later in her career. “But I was still concerned about the way that an MBA can inflate people’s egos and make them overconfident before they’ve even filed their first set of accounts,” she warns. “I just think people need a little experience in business first.”

(One upside of the Cranfield experience? Instead of living on campus – “at 33, I was a bit old for that kind of thing!” – she bought a small house in a nearby village. After her year-long course it had swelled in value, kicking off a love-affair with property investment that’s been extremely rewarding.)

Gun for hire

Those realisations – that more abstract management was a distraction, and that she had a low boredom threshold – led Stella to set up as a freelance FD for the next ten years. “It was the perfect antidote,” she says. “I could pick up meaty and satisfying jobs knowing that the next interesting challenge was always just around the corner. Some were small, portfolio-type assignments; but others were much bigger, including an interim stint as Group FD at Champneys.”

It wasn’t all hotels. She spent three years as part-time FD at the Centre for Medicines Research International; and 18 months at Neals Yard Remedies, which covered everything from manufacturing and exports to retail.

In 2008, one of the roles – which stepped up from a couple days a month to a couple of days a week – was pharma business Phlexglobal. “It started out as a turnaround, but within three years we’d got the business into decent shape – enough, anyway, to make it saleable and allow the founders to see an exit,” says Stella. “Then when we were negotiating inside the exclusivity period with the buyer, Inflexion, they said they needed me to stick around as CEO or the deal wouldn’t work.”

Leadership beckons

She’d never thought she would want to do a chief exec job. “But if they’d pulled out, we might have been in trouble,” she says. “The founders had checked out, really, after the hard work of a turnaround, then the prospect of a sale. I convinced myself I could hack doing an MBO for a bit, then leave as soon as I contractually allowed to.”

In finance, you’re always slightly cautious – and you need to be a bit more distant because you have to make hard choices, about costs particularly. Overnight I had to reinvent myself. People said I needed to stop walking around with a calculator in my hand! So I became much more of a people-person

But then she found that she enjoyed being CEO. “It opened up a whole new phase for my career,” Stella says. “In finance, you’re always slightly cautious – and you need to be a bit more distant because you have to make hard choices, about costs particularly. Overnight I had to reinvent myself. People said I needed to stop walking around with a calculator in my hand! So I became much more of a people-person.”

Of course that role also meant giving up her client base of portfolio and interim assignments. But the business flourished, opened up in the US, and built out some new tech. That was ‘job done’ for Inflexion, who sold out to Bridgepoint in 2014.

“I stuck around with the clear proviso that I would exit in the foreseeable future,” Stella says. “So when Vitruvian Partners bought the stake in 2016, I knew it was time to move on. I was a bit burned out – selling a high growth business three times in less than six years was pretty draining – and it was the longest I’d ever been in one role. But the CEO job had changed me. And when I left, it was the people I really missed the most.

From a hole to new horizons

“And then I fell into a pothole – literally,” she continues. “I broke my shoulder and ankle quite badly. It meant I went quickly from this high-energy CEO working in a pressurised PE-backed environment… to sitting on the sofa, pretty much helpless. I couldn’t even walk, much less plan the next stage of my career.”

But as she recovered, a new opportunity manifested. She got a phone call from Bridgepoint. “They’d enjoyed working with me during their ownership between 2014 and 2016 – so did I fancy being an operating partner for the growth fund they were setting up for smaller businesses?” she recounts. “Well, I jumped at the chance.”

The offer had a certain irony, too. “I’d been interviewed by a large private equity house while I was at Cranfield who told me I was too old – at 34! – and the wrong gender to work in private equity,” Stella says. “There are still issues in the industry. There are more non-white and female faces now, but they mostly have a pretty blue-chip background. I’m definitely not from that kind of background, and I was never going to be a McKinsey type, by-the-numbers, exec. But coming in as an experienced finance exec and leader? That’s different.”

As an operating partner, she gets to look over due diligence ahead of deals and bring a ‘front-line’ eye to the analysis. After a deal, she helps get things in line operationally and financially. “I’ve got the experience to help fix what needs to be fixed, sometimes advise on the right hires, or sit on the board to support the management team,” she says. And having had her share of downs as well as ups makes her even more valuable as portfolio businesses deal with the volatility of business in an era of rapid technological change and Covid-era unpredictability.

Add in a couple of other non-exec posts, and, she concludes, “I’m back to having that low-boredom portfolio career. What I’ve realised in my later years is that I have to take risks – personally, financially and in business. It doesn’t always pay off financially. But it’s what keeps me engaged.”