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Will the SPACs Boom Continue?

Will the SPACs Boom Continue?

 

In the past few years, special-purpose acquisition companies (SPACs) have been all the rage. Despite a recent slowdown in their growth, Goldman Sachs predicts that SPACs will drive $900 billion worth of deals over the next two years. This prediction is based on a forecast from April, showing that although there has been a slowing boom, deal-making by these firms could still reach historic highs this year and next.

The question remains: will this type of company continue to be popular among investors?

The answer is no if you ask Clay Risher, director of business development at TrueNorth Capital Partners LLC Stamford, CT.

“I think that trend is going to sort of start to diminish,” he said, adding that things will eventually revert to the traditional merger model.

A SPAC exists only to buy a company or companies of its own choosing and is structured as a publicly held entity. In exchange for the cash SPACs receive from investors to finance their acquisitions, they offer shares at a discount on an open market that can be traded on public exchanges like Nasdaq or NYSE. Many companies choose to go public via a SPAC rather than a traditional IPO because of the reduced risk and costs associated with going public.

Despite the slowdown, major SPAC deals continue to be announced. On Wednesday, Pagaya, a US-Israeli fintech startup, reached a $9 billion deal to be acquired by a SPAC called EJF Acquisition.

Jonathan Bluth, Co-Head of Healthcare at Intrepid Investment Bankers LLC in Los Angeles, Ca, believes that SPACs are driving up merger and acquisition (M&A) valuations.

“For more than a year now, SPACs have been setting the pace with strong valuations.  SPACs can gain shareholder approval to pay big numbers today based on the promise of future growth potential, and can offer a substantial amount of equity currency to go out and make aggressive acquisitions.  This has caused private equity investors and other traditional strategic acquirers to re-evaluate how they pursue attractive companies, so they can be competitive,” he said.

“Intrepid recently advised one of our clients in its sale to an acquirer that had recently gone public via a SPAC, and the outcome was very attractive for everyone involved.  It is unclear how long this SPAC window will be open, but sellers should consider SPACs in their processes for as long as they can continue to offer strong valuations,” he added.

Others are not as confident. For example, Robert Whitney, managing director of Seale & Associates in Arlington, VA, doubts that this boom is anything more than a short-term trend.

“SPAC activity has ebbed and flowed several times over the 20 years or so I’ve been in M&A” he said.

“Their popularity seems to cycle through every ten years or so as a potential solution. Ultimately, I think there are many other factors that are going to continue to drive the overall market – such as liquidity, cost of credit, age if business owners, ongoing changes to tax code, and on and on. So, you know, with SPAC or without SPAC, I think it’s going to continue to be a very frothy environment for the next 12-18 months, if not beyond that,” he added.

Tell us what you think on LinkedIn, Instagram, Facebook, or Twitter! @opusconnect.

By Lou Sokolovskiy, Founder & CEO at Opus Connect
October 2021

The Problem with Lack of Regulation in the Blockchain Space

An interview with JR Lanis, chairing the West Coast Corporate & Securities Practice Area at Polsinelli

 

Blockchain technology has the potential to revolutionize the way people do business around the world. But without regulation here in the United States and abroad, entrepreneurs, investors, and the general public are left in a grey area without clear rules or standards to follow.

Some people believe that there is no need for regulation of blockchain technology because it will be able to self-regulate by bringing more transparency into business transactions while also protecting consumers and investors from bad actors.

But JR Lanis, a securities and M&A attorney chairing the West Coast Corporate & Securities Practice Area at the national law firm, Polsinelli, doesn’t completely buy that argument, saying that the lack of regulation can be dangerous.

“At least intuitively, you might believe [since] there’s limited law, you can’t get in trouble,” Lanis recently told me in a Zoom interview.

“‘But I think the opposite is true. It’s the fact that there isn’t much law that makes it more precarious,” he added, explaining that the lack of laws makes it easier for a regulator to accuse one of doing something wrong. In the best case, this would lead to an expensive legal battle and, at worst, jail time.

“And it becomes a sort of guilty-until-proven-innocent in a lot of ways,” he said.

Blockchain is a decentralized, digitized public ledger used to record all transactions made on a network without the need for third parties such as banks. The most prominent outgrowth from the blockchain have been cryptocurrencies such as Bitcoin and Ethereum. Blockchain has been used to create new digital tokens that can be transacted on a blockchain network without the need for government-backed fiat money like the U.S. dollar, euro, or yen.

The U.S. has so far failed to pass any sort of legislation to address the use cases for blockchain technology. This has created a significant challenge, not only for entrepreneurs in the space, but also for attorneys like Lanis trying to navigate a constantly changing regulatory environment. In the absence of laws, the U.S. Securities and Exchange Commission (SEC) considers almost every ICO (initial coin offering) or other token sales a security.

“It’s much more art than science at this point,” he said, explaining that attorneys must be constantly learning about new technology and how the old law applies to it. He said he regularly follows the news, listening to what senior SEC officials say about blockchain technology and cryptocurrencies to be able to advise his clients on how they might be regulated.

“Until there’s a clear and direct body of law, this is kind of the best we can do. It’s gotten easier, as the space has developed and matured, and as there’s more information and data out there, we can probably give even better advice today than we could a few years ago,” he added.

Tell us what you think on LinkedIn, Instagram, Facebook, or Twitter! @opusconnect.

 

By Lou Sokolovskiy, Founder & CEO at Opus Connect
September 2021

Five Keys to Succeed as a Service Provider

An interview with Mark Podgainy, Managing Director at Getzler Henrich & Associates

 

Mark Podgainy knows it’s not easy to succeed as a service provider. Unlike a product, he says, a service has no tangible value. You can’t touch it, feel it, or directly experience its benefits. That means you must do a lot more than simply provide great services to succeed in today’s hyper-competitive environment.

Few are better qualified to advise on how service providers can do that than Mark Podgainy. He has more than 20 years of experience working with struggling and underperforming middle-market firms as an advisor and a management team member. He has spent most of that time at Getzler Henrich & Associates, a New York-based management consulting and financing advisory firm.

I recently had the chance to talk to him via Zoom about what he has learned about how service providers can succeed in today’s economy. He provided five key lessons.

1)   Be Prepared to Ask the Right Questions

It might seem obvious, but it’s also a lesson that all too often gets forgotten in the excitement of a new engagement. “I remember early on in my consulting career that I was really eager to show potential clients that I knew my thing even though I hadn’t been at it for very long,” he said.

“One of my mentors said you don’t have to try so hard. When you’re asking the right questions, people will understand how insightful and thoughtful you are, and it will come out in the conversation.”

2)   Listen

Listening is critical for service providers because it helps them get inside their clients’ heads. It also allows them to build trust, which is essential to cultivate in any relationship, he said.

“If you’re listening 90% of the time, then that is a successful interaction,” he said.

“When you really listen, it actually stands apart from other people, and you gain a lot of insight, and it helps you be better able to solve problems, resolve an issue or take something to the next level,” he added.

3)   Seek Relationships, Not Transactions

Podgainy stressed the importance of service providers building long-term relationships with their clients rather than making it all about transactions.

“It’s a marathon,” he said, “your mind is set on finishing the race. You are going to have some milestones along the way. I think of those milestones as transactions.” He added that if you focus on developing strong relationships with the right people, “there will be transactions along the way. But the relationship doesn’t necessarily end there.”

4)   Enjoy the People You Work With

Podgainy stressed that when you enjoy the people you work with, it makes everything more fun.

“I think ultimately it’s about enjoying the process,” he said. “If you like the process that you’re going through, then you are going to be more thoughtful about all the things that you do around it.”

“When you meet someone for lunch, not every lunch is great, but the point is you’re enjoying the process, and people see that. You enjoy being with them, and I think that is critical to all of the things that we do,” he added.

5)   Narrow Your Focus

Podgainy said that in today’s economy, it is essential for service providers to focus on what they do best and stay away from the rest. He stated that asking the right questions has helped him focus his efforts and figure out what he needs to accomplish.

“The answer to those questions enables you to ask other questions and be able to target your sale. If you have a cannon approach to the sale where you try to hit everything, you are going to hit nothing,” he said.

Tell us what you think on LinkedIn, Instagram, Facebook, or Twitter! @opusconnect.

By Lou Sokolovskiy, Founder & CEO at Opus Connect
September 2021

7 Simple Steps to Getting the Most Out of Online Networking

7 Simple Steps to Getting the Most Out of Online Networking

 

With COVID-19 entering a new phase in the form of the Delta variant, the challenge of balancing in-person and virtual events continues. For some, transitioning to virtual events has been an easy switch, for others, a bit more of a challenge. Here are 7 simple steps on how you can get the most out of your future online networking event. 

1. Embrace the Change
The world has turned digital and we are lucky to live during a time in which technology allows us to stay connected from the comfort of our homes. The virtual space is designed to accomplish all that you would in the physical space, so if possible, learn how to navigate it in advance so that you can get the most out of the platform at the moment. Virtual events are a great addition to your business development that are not going anywhere so take advantage of them!

2. Look the Part
Even though it is just a virtual meeting, it is important to dress like you are attending in person. Being in formal business attire gets you in the right mindset and makes you look professional. Make sure to sit in a well-lit area so that everyone can easily see your face and expressions. Having proper “zoom etiquette” when attending a virtual event will ensure that the meeting runs more smoothly, professionally, and efficiently.

3. Do Your Homework
Before attending any virtual event, take advantage of all the networking methods available. Make sure to complete your profile on the relevant website by updating your contact information, linking your updated LinkedIn profile, and taking all the necessary steps to make yourself as easily accessible as possible. Find out who else is coming to the event, connect with them, and see who’s available to share deals on the platform. 

4. Keep it Concise
Be sure to have a brief and informative elevator pitch that clearly explains what you do and how you can help others achieve their goals. Opus Connect recommends 20 seconds for an effective elevator pitch. It’s important to note that side conversations can be especially distracting, for that reason we recommend keeping your microphone on mute when not speaking. Virtual meetings require more thoughtful communication to keep everyone on task and respect people’s time. 

5. If You’re There, Be There Fully
Don’t just be a wallflower, make sure to participate to a tasteful degree. If you have something interesting to say, make sure you do before the moment passes. Even if you are simply introducing yourself and asking a question pertinent to the topic, you would be surprised how many connections you can create by putting yourself out there and establishing an initial rapport with the audience. 

6. Enjoy the Breakout Sessions
Ask questions during sessions to better understand the other company’s business and offerings. You can also then discuss these topics in more detail with others when chatting with participants. To get the most out of virtual events, it is really important to arrive early and try to stay until the end. We all have busy schedules, but keep in mind if you show up late or leave early, you may miss out on valuable opportunities to network with others who weren’t able to stay either. 

7. Follow Up
Once you do start networking and interacting with participants and sponsors, be sure to follow up in a meaningful way to solidify the relationship. Talking about these new business ideas, people, and concepts helps you remember key points and process the new information. Whether through email, social media, or a one on one follow-up meeting, simply providing a comment on a topic can set you apart and lead to amazing networking opportunities. 


Today there are so many more opportunities to attend online events that never existed before to network and learn from a wider range of people. Now that you have read our 7 simple steps for attending, we hope they will give you the boost or confirmation you need to have a great experience at your next virtual event. These historic times are certainly forcing us to reinvent ourselves, and online networking is no exception.

Tell us what you think on LinkedIn, Instagram, Facebook, or Twitter! @opusconnect.

By Lou Sokolovskiy, Founder & CEO at Opus Connect and Anna Adamian, Content Marketing Associate at Opus Connect
September 2021

Inside Business Development Strategy with LFM Capital

An interview with Jessica Ginsberg, Director of Business Development at LFM Capital

 

When you hear Nashville, you probably think of country music stars, the Grand Ole Opry, or beautiful countryside. In recent years, however, Nashville has become one of the fastest-growing US cities in areas like technology, banking, healthcare, and logistics. It recently topped the list of the US cities with the most economic growth in 2021.

Private equity firm LFM Capital has been at the center of this growth, investing in manufacturing companies for more than six years. Since shortly after the firm’s inception in 2014, Jessica Ginsberg has led its business development efforts, which have resulted in nearly a dozen platform company investments, including most recently Diamabrush, a leading manufacturer of concrete floor polishing and resurfacing products.  Ginsberg’s team has also helped source several add-on acquisition opportunities, including most recently Beranek, maker of precision components used in aerospace and defense, which was acquired by LFM portfolio company, J&E Precision.

What is Ginsberg’s sourcing strategy that has enabled her to find so many great deals in such a short time?  She says the firm subscribes to a dual-channel approach focused on both direct and indirect sourcing.

LFM’s direct sourcing methods include cold calling and emailing, industry trade show attendance, and occasionally LinkedIn messaging.

“Direct sourcing can be a very long process, ” she recently told me in a Zoom interview.

“To give you a sense of scale, we send over 15,000 emails per year and it often takes 6 or 7 tries to get a response from a business owner,” she added.

That might seem like a lot of work for little return, but Jessica says it is “absolutely worth it” because of the quality of leads that come through this channel.

“Most times, it is not a competitive situation so there are not auction dynamics. The diligence process, however, can take a very long time because the business owner is running the process by themselves while trying to run a business,” she said.

As for the indirect sourcing side of the equation, which refers to deals LFM sees from investment bankers, brokers, and other intermediaries, Jessica says she actively maintains and grows her network to seek out opportunities that fit LFM’s investment strategy.

“We typically see between 600 and700 manufacturing deals in a year, and then we will  narrow that down and review around 150 to 200 of those deals with our investment committee, with the goal of closing 2 to 3 new platforms per year.”

LFM has always been committed to Business Development in order to maintain a full pipeline of actionable investment opportunities.  As such, Ginsberg has built a strong team around her to assist in the sourcing process.  Other members of the BD team are focused on industry research, scouting trade shows, and managing data around the sourcing process. Given LFM’s manufacturing background and investment focus, the team is very focused on lean initiatives and continuous improvement, which is always motivates the BD team to identify new sourcing strategies.

“We tend to divide up the universe, and I think it’s really important to let my team members own different parts of the process – be it managing metrics, outreach to highly targeted business owners, or leading an add-on search for a portfolio company,” she said.

“I am really excited about the business development function within private equity. It has grown a lot and has become a very viable career path. I think COVID really accelerated that because of the inability to get out there and do the things we usually do – and it made us realize that there are many, many ways to stay relevant and get in front of people.  I am thrilled to have found such a great firm and team to continue to grow with” she added.

Tell us what you think on LinkedIn, Instagram, Facebook, or Twitter! @opusconnect.

By Lou Sokolovskiy, Founder & CEO at Opus Connect
September 2021

Challenges and Opportunities: Covid-19 Effects on Private Equity

An interview with Robert Crapsey, director of Business Development for Trivest Partners

 

In-person meetings have long been a staple of the private equity business. Deals that start in person are more likely to close successfully. It’s simply about building relationships and letting your clients know you care about them.

But the Covid-19 pandemic turned this reality upside down, forcing private equity firms and many other businesses to find a way forward with remote working. For Trivest Partners, a 40-year-old private equity firm in Miami, Florida, 2020 didn’t turn out as bad as anticipated.

Despite the challenges of working remotely, Trivest Partners managed to close 38 deals during the pandemic lockdown.

“Last year ended up being one of Trivest’s best years ever,” said Robert Crapsey, director of Business Development for Trivest Partners. “We closed 11 new platform transactions and had a couple of really fantastic exits out of the portfolios.”

The situation was doubly challenging for Crapsey because he joined the company in early April 2020, when the pandemic hit, forcing companies such as Trivest Partners to embrace remote work. Before that, he worked as a relationship manager for nearly seven years on Wells Fargo’s middle market banking team. Crapsey holds a master’s degree in finance from Florida State University.

“The big challenge [was that] I just didn’t know anybody on the team,” said Crapsey about joining Trivest Partner during the pandemic.  “It added a level of uncertainty where you didn’t have that face-to-face interpersonal relationship how to interact with somebody or how to get feedback from someone.”

But Covid-19 also presented an opportunity for Crapsey to build a new network, whose role had transformed from dealing directly with companies to “focusing on intermediary relationships and investment banking and brokers.”

Crapsey explained that holding virtual meetings instead of in-person ones allowed him to speak to more people and develop relationships with more intermediaries.

“I think it actually worked out for the better,” said Crapsey, “because I was able to build some strong relationships and get a lot of information or a lot of new contacts that might have taken a little longer if it had been in person.”

Crapsey credited Opus Connect’s virtual events for the network of connections he built in his new job. Opus Connect brings together company executives, investors, and industry experts for webinars on topics related to merger and acquisition (M&A) transactions and private equity deals.

“The events that Opus Connect hosted were definitely a big part of getting that network,” he said.

Despite being successful working remotely, Trivest Partners is not planning to maintain the status quo. The company plans to resume working in the office as Covid lockdown measures are lifted, thanks mainly to a fast rollout of Covid-19 vaccines.

“We are starting to get back out into in-person networking events. The desire has been there for us to meet in person for networking events for a while now, but the opportunities have not necessarily been there yet,” he said.

“The plan really is now to pound the pavement and get out there in person and make up for a lot of lost time,” he added.

Tell us what you think on LinkedIn, Instagram, Facebook, or Twitter! @opusconnect.

By Lou Sokolovskiy, Founder & CEO at Opus Connect
August 2021

Tom Courtney’s Metrics-Driven Approach to Business Development: How to Close a Deal Every Year

An interview with Tom Courtney, president & managing director of The Courtney Group

 

Tom Courtney’s systematic approach to business development has been a critical component of his success. As president and managing director of The Courtney Group, Tom has made 25 investments in the last 22 years.  Courtney obtained an undergraduate degree in Economics from Princeton University and an MBA in finance from The Wharton School of the University of Pennsylvania . I recently talked to him about his approach to business development and what it takes to succeed in the increasingly competitive world of private equity. 

Set Goals

Like any other business, Courtney argues that setting goals is the first step to success in business development. Having a goal means having targets and metrics to guide you. Courtney’s goal is looking at 1000 deal leads a year or 20 leads per week. He takes a two-week vacation every year.

“I think what happens is that people just follow the drift like you are in a rowboat and following along with the current,” he said. “But I believe that you can set targets and hit goals for business development just like you can for sales or profits or other metrics that you track.”

Courtney believes that having a large funnel of opportunities helps him find the businesses where he and his team can contribute the most to the company’s growth and success.

Have a Phone Day

When he is not looking at deals, Courtney sends emails or talks to his contacts over the phone, staying in touch.

“If I am down to one or two things left in the cupboard, I might decide to spend an entire day, eight hours, on outbound marketing,” he said. On one of his “phone days” he can send 100 personalized emails or have 25 phone calls and generate 21 deal leads.

Keep a Positive Mindset

Having a positive mindset is imperative for success in business development, Courtney said. A positive mindset entails not only staying away from negativity but also being proactive and looking for opportunities.

“Don’t get discouraged. Not getting something is a win,” he said, “because it is all a game of statistics, and if you are following your statistics and the goals you set, then you are one step closer to getting the deal you want to do.”

“So, a ’no‘ still propels you forward, and you need to get enough no’s so you can get some yes’s. And if you never ask, you never get,” he added.

Look For Relationships, Not Deals

Finally, Courtney said that one of his most important tips was to look for relationships, not just deals. Staying in touch with as many business owners and individuals as possible is the Courtney way to find the right partners.

“You don’t get a deal. What you get is a relationship with somebody,” he stressed. “Think of it as a person you want to be friends with; you want to have as a colleague; someone you can learn from; someone you can share ideas with; someone you can have fun talking to.”

“You won’t find things if you are looking for a deal. You will find things if you are wanting to have a relationship with somebody,” he added.

Tell us what you think on LinkedIn, Instagram, Facebook, or Twitter! @opusconnect.

By Lou Sokolovskiy, Founder & CEO at Opus Connect
August 2021

The Rising Costs of Finding Workers in the Post-Covid 19 Era

An interview with Fran Jurkovic, senior vice president of Alliant Insurance Services in Chicago.

 

Will the Covid-19 pandemic finally make corporations do what they’ve long refused to do: pay a higher minimum wage? The answer might be yes, according to Fran Jurkovic, Senior Vice President of Alliant Insurance Services in Chicago.

Companies around the country might not be ready yet to increase the minimum wage to $15/hour, long demanded by labor groups and progressive politicians, but some of them may have no choice as the blue-collar workforce continues to dwindle in the wake of the pandemic.

“I see a lot of clients, particularly in lower-wage jobs in various industries, struggling to find talent, to bring workers back or hire additional workers to meet demand,” Jurkovic told me in a recent Zoom interview.

“It’s given blue-collar or lower-wage earners an opportunity that they haven’t seen and didn’t even see during the recent recession because jobs just weren’t available [then]. But now, with increased demand, it appears that employers are having to hire more quickly even prior to completing any background checks” she said, adding that companies are offering “bonuses and higher wages” to incentivize workers.

 

The Covid-19 virus is still ongoing and many experts say that it could take years for Americans to completely recover from its effects on workplace productivity and life in general. But Jurkovic predicted the wage hike to be permanent.

“Once you increase wages, I think we can all agree that it’s difficult to take something back or reverse it,” she said, adding that the federal unemployment payment program has encouraged low wage workers to be more selective about their job choices, contributing to the shrinking of the workforce. Federal unemployment benefits are set to expire on Sept. 6 and it’s not clear how that will affect the labor market.

“I think you’re seeing that people aren’t returning to work in restaurants or bars, in particular, as well as fast-food restaurants. It’s better to stay at home and collect unemployment benefits than to come back,” she said.

Proponents of a minimum wage increase to $15 an hour argue that it would be good for the economy because workers will have more money to spend. Opponents, on the other hand, say that it will lead to higher prices and fewer jobs.

As a result of the Covid-19 pandemic, businesses have been forced to employ remote work arrangements for many employees. Studies show that remote work is here to stay as an overwhelming majority of workers want to continue working remotely beyond the pandemic.

Jurkovic says Alliant has fully embraced the notion of flexible work options for its employees.

“Alliant is not mandating that employees return to the office, although the option is available, and introduced a Flexible Workplace program, based on employee feedback around flexibility in where and how one works.” she said.

“I think we’ll all agree that flexible work from home options were available prior to COVID albeit to varying degrees across industries.  It’s no longer a trend but a reality that’s been accelerated,” she added.

Tell us what you think on LinkedIn, Instagram, Facebook, or Twitter! @opusconnect.

By Lou Sokolovskiy, Founder & CEO at Opus Connect
August 2021

Blessing In Disguise: Did Covid-19 Pandemic Make International M&A Easier?

An Interview with Eric Korsten, Senior Managing Director of Branford Castle Partners

 

For Eric Korsten, a senior managing director for Branford Castle Partners in New York, international deals used to entail extensive traveling. That changed with the Covid-19 pandemic. Korsten realized it a few months ago when his company helped a U.S.-based company acquire a Switzerland-based firm.

“In normal times, we would have had to travel back and forth in between the United States and Switzerland,” he told me in a recent Zoom chat, explaining that while the novel Coronavirus produced unprecedented challenges, it also created “opportunities” for dealmakers.

“Obviously, during COVID, travel was essentially blocked for those travel routes. What this meant is that everybody involved in the transaction was basically sitting by their computer 24/7. It made it a lot easier to convene groups of people at any hour because everyone was just available,” he added.

Korsten explained that travel restrictions meant the deal could be completed almost entirely online, something people in the industry did not think was possible before.  There was a lot to consider: time zone differences, the need to meet in person physically, or other logistical challenges.

“I think one thing that benefited us is we actually had an in-person meeting prior to everything happening, so we did have that personal connection beforehand going into all of this,” he said, adding that the rest of the deal-making occurred virtually.

“When you take out having to do international travel and can be sitting at your desk in real-time having conversations with the other side, the seller of the transaction, their professionals, your professionals, any combination of that. It really took what normally is challenging and made it a little easier,” he said.

The pandemic brought everyday life to a standstill, with bars, restaurants, and movie theaters closed in the U.S. and worldwide as millions of people died. Covid was largely bad for the economy even though some sectors such as M&A have witnessed a boost. Deals have reached an unprecedented amount, with $2.5 trillion announced so far in 2021, which is expected to be the most active year of all time. Large private equity firms, including Branford Castle Partners, have begun spending their dry powder, securing over half a trillion in deals in the past six months.

International M&A, however, can be more complex than domestic deals. For example, currency fluctuations can significantly impact returns for international acquirers due to the increased risk of volatility in foreign markets. Korsten advises companies to build in a hedge against currency risk.

“In this environment, the volatility of the markets, currency can move significantly. Even relatively stable currencies like the Swiss Franc,” he said.

“They can ultimately change the purchase price for you so as a deal gets more likely to close, you know, considering hedging can really protect yourself against what can be pretty violent moves in the market. A 2% move in a currency can be a big deal. Small funds should think about what hedging options and strategies might be used when a deal becomes solid, he added.

Tell us what you think on LinkedIn, Instagram, Facebook, or Twitter! @opusconnect.

 

By Lou Sokolovskiy, Founder & CEO at Opus Connect
July 2021

Food for Thought: Mark Tedford on the Challenges of Being an Independent Sponsor

An Interview with Mark Tedford, Founder and Managing Director of Valley Ridge Investment Partners

 

Mark Tedford, founder and managing director of Connecticut-based Valley Ridge Investment Partners, has a unique perspective on the challenges of being an independent sponsor. A lower middle market investor with decades of experience in private equity investing, Tedford shared his thoughts in a recent interview with me on what it takes for fundless sponsors to succeed in the current market.

One of the most challenging hurdles for his company has been in the final stages of signing a letter of intent (LOI).

“I would say that the lesson we’ve learned and the struggle we face is when we get a deal under LOI we’re busy in the throes of closing a deal we tend to ignore our business development pipeline at our own peril,” he said, explaining how Valley Ridge has seen deals fall through because they didn’t have an investment in the pipeline.

He added that negotiations with all the parties involved – the company’s management, accounting teams, lawyers, bankers, and advisors – is often so time-consuming that “we let our business development pipeline go dry and at the end of that two- or three-month period we have to restart it again.”

But Tedford says his company has found ways to keep things moving forward despite the obstacles.

“We’re trying to get better at maintaining an ongoing dialogue with investment bankers and deal providers over the course of the year regardless of what our vehicle looks like at the current time,” he said, crediting Opus Connect for providing firms like his with an online platform to create a marketplace for prospects.

“I think it’s a matter of finding being visible to enough firms often enough to stay kind of on their radar screen,” he added.

“We have tended to do better with smaller boutique investment banks in sort of second and third-tier cities, particularly Midwest and the South rather than the little, larger banks that are doing a lot of deals.”

To Say or Not to Say

Tedford says sharing too many ideas with sellers can be a hindrance in terms of deal flow.

“It’s a fine line to walk,” he said, “In cases in the past where we’ve come up with creative ideas and we’ve said to the prospective sellers how about this how about that. They said yea, that’s a good idea, and the business suddenly came off the market, and then they decide to try to do those ideas themselves.”

But how should private equity firms handle the delicate balancing act of sharing ideas while still being respectful?

“We try to be open and honest with folks and say here are the opportunities that we see and the opportunities you’ve laid out, these look stronger than those… We sort of try to, in a delicate and polite way, stress [that we] test some of our ideas and some of their ideas to see which ones are the best opportunities and, in many cases, we found that these companies have so much opportunity before them, it’s not a matter of finding the growth it’s a matter of prioritizing what opportunities to tackle first,” he said.

Tedford remains optimistic about the opportunities available to independent sponsors in today’s market.

“I think growth is going to be pretty substantial for the next two to four quarters at least into 2022, and if we can get a handle on inflation and inflation doesn’t cause interest rates to rise,” he said. “We are trying to manage our business development efforts in the same way. Trying to get ahead of the curve.”

Tell us what you think on LinkedIn, Instagram, Facebook, or Twitter! @opusconnect.

 

By Lou Sokolovskiy, Founder & CEO at Opus Connect
July 2021