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Most firms investing in both private equity and private credit prefer to keep the two separate. Apax, however, has gone the complete opposite way, operating as one fully integrated firm without any information walls.

This allows Apax’s private credit team to benefit from the data and information its private equity colleagues have, but what challenges does such a strategy bring? And how has it affected the firm’s credit investment strategy?

9fin sat down with Derek Jackson, partner and head of credit at Apax, who joined the firm last year from CPPIB where he was head of European credit. In the interview, Jackson tells 9fin all about the perks of not having information walls, Apax’s strategy, and his thoughts on software and AI.

1. How has your first year at Apax been?

It’s been a great and busy first year. We’ve added several colleagues in New York and London as the team grows. What often surprises people is that Apax has been investing in credit for more than 10 years. We started with the firm’s own money and have grown organically to manage external capital too. The existing credit business and the full integration with the wider resources of Apax’s private equity platform was a big draw for me — this isn’t a start-up.

2. In three words, how would you describe Apax’s credit strategy?

I'd say integrated, thoughtful, and flexible.

Integrated because we don’t run any walls between our private equity and private credit teams. There are few credit platforms that operate within a large private equity firm without information walls and benefitting from the full resources of the firm and people.

That integration allows us to be thoughtful about investments. We generally look to finance businesses that are within our sectors of expertise and businesses where the Apax funds have either looked to buy on the private equity side or owned previously. We have a detailed view on the business, the management team, and the sub-sector, informed by our large private equity teams, who also get involved in the credit business. We feel it is a great approach compared to a credit firm originating a transaction and starting from scratch with limited deal time and people resources.

We invest in both the US and Europe out of a single fund and with a single team, so we can follow the best value and be very thoughtful about the types of deals that we want to do.

And then our flexibility. We’re very user friendly and given our deep sub-sector knowledge, we are not asking the really basic questions. We tend to zero in on where we can be the most helpful to a transaction and our counterparties.

3. What sectors does Apax focus on?

Apax is not a generalist investor. Everybody here is expected to have deep industry, sub-sector, and end-market knowledge. Often our investment professionals spend their entire careers focused on just a few sub-sectors, getting to know the potential investable companies and the sub-sector dynamics incredibly well.

We're quite granular and we address over 50 end-markets, but everybody focuses on their areas of expertise. That's why we have 180 investment professionals, because you can't do that without a large number of people.

The sub-sectors in tech that we look at are technology services, software, and telecoms. We also look at healthcare technology and healthcare software. The next sector is services and within that is business-to-business and business-to-consumer, and many end-markets. For example, professional services is very thematic, but you’ve also got route density and distribution businesses. We also have some specialist sub-sectors such as marketplace businesses — these are businesses that would be similar to Rightmove or Autotrader — and data analytics, along with branded consumer.

4. Tell us more about the relationship between Apax’s private equity and private credit arms

We really operate as one firm, with full integration. We’re embedded in the private equity pipeline and the M&A flow. If the private equity team really likes the quality of the business but can’t get there on price, we are then in a position to leverage the work already done and offer credit. Our job then is to turn the continuous source of private equity insight into a credit transaction, moving from a mindset of upside focus to credit-minded downside protection.

We typically run four-person deal teams: two private equity colleagues and two credit colleagues. The PE side brings granular knowledge of the business and its sub-sectors, while the credit team structures the deal for what is usually a fast-moving phase. Private equity processes take months and multiple rounds, with often three to seven investment committees as issues surface, whereas credit may culminate in a one-shot, final investment committee. We’re present throughout, so we have the opportunity to learn more.

As a result, our credit decisions rest on highly granular information which is often shareholder or management level rather than the quarterly, high-level (and sometimes very limited) information typical in credit.

5. How does the lack of information walls affect your dealmaking?

Firstly, we strictly manage conflicts and don't do captive deals, so we won’t lend to a business owned by the Apax funds, and we don't finance competing bids against our private equity team.

Credit deals move fast. We typically come in once our private equity teams have exited the process, and we’re generally welcomed. The message is: we learned a lot diligencing the business to potentially buy it, now we are a smart partner to finance the deal for you. We’ll engage with sponsor partners and share views and sometimes parts of our diligence to be genuinely helpful. More often than not, it leads to a productive dialogue.

6. What is the key to a successful fundraise?

The non-negotiables are a consistent track record, demonstrating a real edge, and proof of disciplined underwriting. Cycles and volatility happen, the question is who’s best positioned when they do. Demonstrating robust performance over a sensible period is crucial.

I’ve been on both sides of the conversation. First, a long time on the buy-side in both credit and hedge funds, then an institutional direct investing and LP role at CPPIB, then back to the buy-side at Apax. I think that breadth of experience and perspective make for richer discussions with investors. They want managers with the best perspectives and the strongest underwriting. That’s a big part of why I came to Apax: we believe we can underwrite with very high-quality information in our sub-sectors because we’ve owned many of these companies.

7. What are your thoughts on the software sector, in particular AI?

This area is moving quickly, so a lot of commentary is to a certain extent looking through the rear-view mirror of a bullet train. Views can be right in the moment and then wrong very quickly. In the last 18 months, investor chatter on AI has shifted from curiosity to worries about existential risk to businesses. We’re having true “look around the corner” debates about value destruction risk from AI in potential investments we consider on the credit side that we wouldn’t have had a year ago.

We try to focus as a firm on what AI does now and where it’s going. As a private equity firm, in our portfolio companies, we spend time focused on three current archetypes: process automation, product and service innovation, and software development. We see our portfolio companies using AI to add value and improve efficiency. For example, we have seen dramatic efficiency gains using AI in greenfield software development this year. Given we operate in clear sub-sectors with common business drivers, we use all of these learnings and apply them to diligence and monitor the credit portfolio. There’s lots of talk in the investment world about replacing people, but in practice AI is an incredible efficiency tool that dramatically enhances the capacity to make investment decisions.

8. What do the opportunities in Europe look like compared to the US?

We think it is important to focus on both and run a wide sourcing funnel. The US is bigger, deeper, and more liquid and the companies are usually larger. We stick to our upper-middle market thesis, focusing on what tend to be more regional champions rather than large tariff-exposed multinationals. We generally focus on IP-heavy and services businesses, not the production of goods, so tariff risk is mainly a general inflationary cost risk shared by most businesses.

Between Europe and the US, we stay flexible. Europe often offers slightly better spreads, though they are compressing along with the US market. Term-sheet innovation usually starts in the US and lands in Europe months later. At the top end of the upper-middle market, the gap is modest between the two geographies. We are always conscious of the fact that there are themes and areas that are worth leaning into and you need to have that perspective across both geographic markets.

9. We hear you’re quite the sports fan! If you had to swap your career in finance for one in sport, what would it be?

Professional golfer, for sure. I love the game, the discipline of putting in the hours, and the mental side as much as the physical routine of a sport that can never truly be mastered. I grew up with it, and getting my kids into golf has allowed me some time to get back onto the course.

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