The private equity sponsor community is a major player in the middle market. With over 1,600 such firms investing in the US, the sponsor community controls a large pool of investible capital that they are economically compelled to deploy.
Any credible investment banking firm needs to be intimately familiar with this community and their transaction desires. These firms have concentrated holdings in certain sectors. They operate with 5-7 year horizons, as opposed to public companies in these industries that are bound by accretion/dilution issues and quarterly earnings pressures. We are in constant point-to-point dialog with these buyers and their portfolio company executives. They are a critical source of market information – the kind of intelligence that you cannot get from a database subscription.
At Headwaters, we gather, organize and share this information with our banking teams for the benefit of our clients. Rather than try to cover the world, we select certain firms that specialize in sectors that match up with our vertical coverage and work on deals in the middle market. We go deep with these relationships, seeking meaningful dialog with their portfolio company C-suite executives as well as the sector investor leaders at the PE firms. It’s the old “80/20 rule”: we go deep with the select few to get the nuanced view leverage our culture of information sharing and technology tools to gather info from a good portion of the others. We nurture the relationships with the small group by conducting searches for their target investments and use our scale to become a leading source of deal flow for them. Collecting, organizing, and sharing this information is a full time endeavor – we are committed to it because our clients benefit.
Lastly, if you are a sponsor looking to get into our game, please contact Brendan Burke (firstname.lastname@example.org) and he will get you going (if you don’t hear from him first!)
Playing nice with private equity sponsors.
If you are a sponsor with portfolio management issues like a need to extend hold period or cross-fund investment issues, please check out our merchant banking capabilities.