Me And My Partner: Eric Walters And Jon Moulton

Jon Moulton hired Eric Walters at Schroder Ventures in 1987. Ten years later, he founded private equity firm Alchemy Partners and invited Walters to join him. Last year, Alchemy came second only to 3i in the buyout league tables

JON MOULTON: The first contact I had with Eric was through Allen Sheppard, chief executive of Grand Metropolitan. GM wanted Eric to be part of the management in the States, and Eric didn't want to go. I heard he would make a good hire, and he joined me at Schroder Ventures, which I was running.

I had set it up in spring 1985 after working for Citycorp in New York: I was advising in leveraged buyouts in 1980, and came back a year later.

Eric joined Schroder with the intention of being on the industrial and commercial side of the business. He was one of two people looking after things and sorting problems, rather than deal execution. To some extent, he has remained in that mode. He is loved by managers, sometimes to excess. It's very difficult to imagine Eric as a duplicitous conspirator. He expects me to look after the investors.

With Eric what you see is what you get: you know exactly where you are with him. He's bright and extremely decisive and he gets 90 per cent of decisions right. He's very organised, very tidy: his office desk is clean and he doesn't leave a meeting with open issues. His personal life is the same way. He's married to a Swiss lady, and that seems appropriate.

Schroder wanted their ball back in 1993. They'd given too much independence to the troops. I had built it up from myself and a secretary to a huge business. In that year, we had realised over 100 per cent of the cost basis of the portfolio. I went to Apax for two years. That was good, but not perfect: it is a group with lots of meetings and discussions. Eventually that irritated me - so I set Alchemy up on 20 January 1997.

We decided we were going to have a non-standard funding structure. It's a 12-month rolling arrangement and much more flexible. Investors were able to come in one at a time. It was novel and brilliant, because it got us going quickly. We were operational in weeks.

We have a non-auction policy, a really serious decision, because 80 per cent is auction. But it makes us extremely efficient, because the deals we work on tend to happen. We are the smallest professional team in the league table, one-twentieth the size of 3i, so to have the managing partner to do a deal is reasonably unusual. Our marketing efforts and expenditure have been trivial: we have nice brochures and chocolate bars in reception, and try to treat people well, and that's about it.

We have meetings every Monday morning, and even the secretaries join in. Everybody co-invests in every deal because they believe they will make money. Part of our strategy is to stay the same size and we feel we're near the perfect size. We haven't got much more in the way of objectives: we have no firm strategic steps in mind. I'm 48 and he is 54: we have got to a stage where we don't have a great deal to prove. We work because we enjoy it.

If Eric and I have a disagreement, it can last as long as 15 seconds. The great thing is that he doesn't dig his heels in. He says, yes, I'm wrong - and that's it. It's gone.

We do have one terrible defect - we like to go to bed early. So when we go to the theatre, we go to matinees, because we both need to sleep.

ERIC WALTERS: I was working for Grand Metropolitan and Allen Sheppard started talking about how he enjoyed working with Jon Moulton. I had never met him. I didn't want to go to America for family reasons. I got a pay-off, and a smart headhunter rang me and put me in the direction of Schroder Ventures. I found Jon incisive and decisive, a kindred spirit.

He would never settle in a place such as Schroder. There was a spat, and that particular spat had its human dramas, but there was never any drama between me and Jon. I was absolutely of his camp. If he had founded Alchemy at that point, I would have joined him, and I told him that. He chose to join Apax. He underplayed himself. He thought if he set up on his own, it would take a long time to see money from institutions. He was wrong: he didn't understand his own worth. He just couldn't believe it could be done so quickly.

I stayed with Schroder Ventures but I was bored out of my brain because of the absence of Jon and the scale of it. It's a big operation. There were lots of meetings and committees. Jon said to me: "Stop fooling round. Come and join me." He had just started Alchemy. My daughter said: "You love working with Jon and you always talk about him. Why don't you go and join him?" I thought: "You're right."

Venture capital, to me, is like some sort of heaven. I go home most days and say: "Guess what happened to me?" It's a complete buzz non-stop. Being at Alchemy is like the early days at Schroder Ventures, and people say to me: "You're reinvigorated." It's a combination of working with Jon and the small scale in terms of bodies. It's to do with the hunter- gatherer syndrome, being in groups of 5 to 15. We genuinely don't have clogged arteries.

We focus on difficult deals. That's easy to say and a lot of people talk about it, but you can't just wake up one morning and say: "We'll do loss-making transactions." For us, it's pretty cool. It's not by chance. We have a tremendous mix of different backgrounds, and that's vital. I've learnt a tremendous amount and I'm still learning. I'm Steady Eddy: I react evenly. I'm not casual, but I take everything calmly. Jon is more mercurial. It's a good combination, but our views tend to come into line.

Jon was really focused in creating something, but he has loosened up and he'll take a long weekend in France, and go skiing. I am not a financial guy - I learnt on the job - but working with Jon has opened a window on a world I had never dreamt of.