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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

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

Has Covid-19 Pandemic Made ESG a Priority?

An Interview with Carrie DiLauro, Director of Operations at Hamilton Robinson Capital Partners, on the recent rise in ESG investment demand.

 

In recent years, ESG, which stands for Environmental, Social, and Governance, has become increasingly popular among investors. Though many businesses suffered financially due to the Covid-19 pandemic last year, the ESG sector witnessed a significant increase in investment.

In 2020, more than $51 billion was invested in ESG funds, a record which was double the amount of 2019. The pandemic appears to have made people more aware of the potential risks and vulnerabilities that we face, leading to a shift in investment in these funds.

As a result, firms of all sectors from banking to manufacturing are increasingly trying to balance profit-making with social and environmental responsibility. One such firm is Hamilton Robinson Capital Partners (HRCP), a Connecticut-based private equity firm focusing on lower to middle-market companies.

“Coming out of Covid, ESG is something we all need to focus on,” said HRCP’s director of operations, Carrie DiLauro, we are working with our management teams to take steps to improve their ESG practices to grow and protect their financial performance.  She said her portfolio companies have recently hired several diverse candidates for the Chief Financial Officer (CFO) position and another company has achieved zero waste to landfill. A diversified workforce that includes minority and female employees is considered a key ESG issue.

To DiLauro, ESG compliance is not an overnight process but rather one that requires a long-term commitment. She called it an “evolutionary concept” rather than a revolutionary one.

“What we’ve seen during fundraising is you have to just make an effort. There is no investor out there that expects you to go zero waste to landfill by next quarter,” she told me in a recent Zoom call.

Last year’s surge in ESG investing coincided with the election of President Joe Biden, who rejoined the Paris Climate Accord after his Republican predecessor, Donald Trump, had left the agreement. Shortly after assuming office, the Biden Administration rescinded Trump-era rules that discouraged fiduciaries from including ESG factors in “the financial evaluation of plan investments.”

Currently, Washington is hearing louder voices in Congress to take action on climate change and support ESG legislation. Whereas the U.S. differs from Europe in that it does not explicitly regulate ESG, its Environmental Protection Agency (EPA) has rules that may apply to ESG-related risks. From 2018 to 2020, US-based registered investment companies, such as mutual funds, variable annuities, exchange traded funds (ETFs), that incorporated ESG investing criteria grew by 15% to more than 800 companies, according to the Forum for Sustainable and Responsible Investment (US-SIF).

“Understand that you need to show some year-over-year improvement, make sure you have measurable KPIs in place,” she added. KPI stands for Key Performance Indicator, which private equity firms use to measure the effectiveness of their investments.

“No matter where you start, even if you’re starting at zero, if you add one [minority] person to a five-person management team … you’ve increased your KPIs by 20%, which is fantastic. Don’t make it something that seems so overwhelming that you don’t get started.  Start immediately and start easy,” she said.

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

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

Building a Virtual Company Culture

An Interview with Steven E. Brady, Partner & Practice Leader, Transaction Advisory at Withum

 

Last year, Withum, a major advisory & accounting firm, needed to expand its mergers and acquisitions (M&A) transaction advisory division. It was a difficult time for businesses as the U.S., like the rest of the world, was under lockdown because of the Covid-19 pandemic, causing severe respiratory illness across the globe.

To help the company achieve its goal, Withum hired Steven E. Brady, a man who had been a leading transaction advisor for nearly two decades for global and national firms. “Steve is the perfect person to lead Transaction Advisory for Withum,” wrote Jim Bourke, Managing Director of Withum’s Advisory Services, in a statement introducing Brady as the market leader for his firm’s transaction advisory in September 2020. “With all of his experience across global and national firms, he is the perfect fit for our practice,” he added.

But despite his vast experience, Brady found himself in a new work environment, where he faced unprecedented challenges. He had to quickly adjust to working remotely and build his team nearly from the ground up while still managing clients. How did Brady manage to expand the practice from four people to twenty-one employees in a year? How did he cope with the challenges of remote work? How can company culture be built remotely?

I recently spoke to Brady to get his insights on these questions.

Master Virtual Communications

Brady started by explaining how remote work or some form of “hybrid work” is here to stay, and leaders must learn to adapt. His views align with a recent Microsoft study titled “The Next Great Disruption Is Hybrid Work—Are We Ready?” The survey found that more than 70% of global workers want to maintain their flexible remote work options even after the pandemic. To successfully navigate the new work paradigm, Brady says mastering virtual communications is essential.

“Communication is always key, in my opinion,” he told me recently via a Zoom call. “You really need to over-communicate because you don’t have that personal touch of being able to sit down across the table from someone, shake their hand, have a meal or a cup of coffee, and build relationships that way.”

Building A Virtual Culture

Brady said he largely depended on Microsoft Teams for day-to-day communication with colleagues at home or on the road. He has highlighted two things that have helped him cultivate a virtual culture at Withum.

The first was to ensure he constantly communicated with the team members regardless of where they were located. Brady found that this would help maintain a sense of camaraderie and keep the team on the same page.

“Reaching out to everybody on the team certainly several times a week so that they know they’re important,” he said, adding that the team members need to feel “that they are being listened to and part of that certainly builds that culture of teamwork.”

Finally, Brady said that building an inclusive culture, which motivates all employees in a virtual work environment, requires more than just holding work-related meetings. He said that his team held regular virtual happy hours such as bingo games and wine tastings, allowing employees to have the kind of water-cooler moment that used to happen in a physical office.

“We sprinkled in. It wasn’t just talking about business every day. Sprinkling in some gatherings, again it was all virtual because of the pandemic, but we were able to create it create that bond that is a lot easier to do in person,” he said.

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

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

What It Takes to Build a Brand in the Private Equity Industry

An Interview with Patrick Floeck, Principal at Valesco Industries, LLC.

 

Patrick Floeck has been in the private equity industry for years. He is principal with Valesco Industries, a lower and middle-market private equity firm based in Dallas, Texas.

“Floeck’s primary responsibilities include business development strategy and investment origination,” reads Floeck’s biography page published on his company’s website. “His athletic background and drive for success help promote Valesco’s brand and mission of Commitment Beyond Capital.”

I recently had the chance to speak with Floeck on Zoom, asking him questions about his views on branding in the age of technology, artificial intelligence (AI), and Big Data. While technology has changed how people are exposed to brands, Floeck believes that it doesn’t change human nature, which he sees as the foundation for building a successful brand.

“What we have really focused on from a branding perspective is tapping into human nature,” he told me in our Zoom interview.

 “People do business with people they like.”

Floeck explained how Valesco uses his approach in practice. While on special occasions marketers often send gifts such as mugs and tote bags bearing their logo to customers, Valesco’s customer service team used the most recent Memorial Day holiday to send customers a sleeve of spices and a large wooden cutting board bearing the company’s logo.

“The whole idea was hey here is something you can actually use, and I hope you’re getting out and having a BBQ with friend and family as we come out of this pandemic environment, and maybe next time you use this cutting board or spices, you will think of us,” he said.

Floeck says his philosophy on branding is shaped by a quote that has been attributed to some of America’s most successful entrepreneurs such as Warren Buffet, Keith Ferrazzi, and Barbara Corcoran: “People do business with people they like.”

“You really have to like somebody to want to say yes; I want to do business with this person and partner with them because I know we are going to have more than just a transactional relationship,” he said.

You Can’t Quantify Everything

Valesco invests in small to mid-sized companies specialized in manufacturing, value-added distribution, and service businesses. In this industry, Floeck says branding depends on building close ties, developing trust, and engaging in intangible activities that cannot be quantified in terms of dollars and cents.

“There’s no way to quantify that each individual thing that I do. Whether it’s a phone call, an email, a gift, a dinner, or where along that relationship-building process, what was the defining moment that led to an opportunity coming in the door. I don’t think you can ever quantify that because it’s an amalgamation of all of it,” he said.

“We truly look at it as a friendship. I mean by my close relationships, I know about their families. I know about their Alma Maters, the things that they’re interested in and do on the weekends, and it’s not because I take notes and put those into a CRM system. It’s because I’m truly genuinely interested in it because I’ve developed a friendship with them.”

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