How did you get your start in private equity?
I knew in college that I wanted to be involved with private equity. I read a few books that detailed the industry, and was I hooked immediately. I became obsessed with making my way into the field. While in school, I formulated a plan for doing so and essentially walked that path until I reached my goals. Like many people, I put my time in by first taking a position at a large corporate investment banking firm and working hundred-hour weeks. After my analyst program, I made my way to the largest non-bank Charlotte-based private equity fund, where I became an integral member of the execution team. It was there that I cut my teeth in the lower-middle market.
What is the most exciting thing about working in the private equity space?
There are two big things. First, the complexity of the transactions is exciting. Each deal is unique, as each business is different and each owner has different goals. In private equity, you are thus constantly creating bespoke solutions for the unique situation of each company and owner. I thrive under challenges like this. Second, it is amazing to work on projects and transactions that almost always have a transformational impact on the business owner’s life. Having grown up in a small business, I’ve seen the blood, sweat, and tears that are involved. Taking part in something that allows owners to reap the benefits from those sacrifices is an irreplaceable feeling – the sheer joy is incredible.
Is there a particular deal that you managed that stands out as embodying why private equity is so important for companies, and its impact on their longevity?
I have worked on many deals. I’ve reviewed thousands and completed hundreds. The types that most stoke my excitement are what are often called “management buyouts.” Many business owners think highly of their own management teams and would love nothing more than to reward them by selling the company to a select few managers who have provided loyalty and hard work in building the company into what it has become.
Yet, there is usually a disconnect between what management teams can afford through personal means, what the debt markets can bear, and what the owner wants for their personal estate. In these scenarios, I have seen private equity act as a bridge between the management team’s personal means and the owner’s benevolent expectations (not selling for the highest amount they can, but still higher than can be afforded). It’s awesome to see private equity become this connective bridge.
You chose to start RCP in the midst of an economic downturn and a global pandemic, which to many people might seem very risky. What makes you confident that now is the right time to start a PE firm?
Private equity is a very attractive investment vehicle in general, but it is even more attractive, from an investor-return perspective, for funds that are raised on the heels of an economic recession. There are several reasons for this, but generally the financial performance of companies tends to contract or to grow more slowly during recessions. Because businesses tend to be bought and sold on the basis of multiples of their earnings (earnings × n = purchase price), valuations can theoretically be lower than they were at the peak of the economic cycle. And because investor capital and buyers become more scarce during recessions, the multiplier can contract as well.
I also feel that launching right now sends the right message to the community about our confidence in ourselves and the opportunity we see. There is no reason to delay, given what we know: that the Midwest and Southeast were underserved last year and are still underserved this year, despite the strange times we find ourselves in.
You have partnered with a group of impressive businessmen at RCP. How did you come together?
RCP was not the core focus for starting the group; other business matters and relationships preceded the idea. But the beauty of many good business ideas is that they occur organically and aren’t forced. This was the case for all the RCP partners. What started as a conversation among a few businesspeople about an entirely different matter ended with everyone bemoaning the fact that there weren’t enough high-quality local private equity options for companies and investors, and that the group of individuals currently assembled ought to do something about it. It really was a perfect blend of many disciplines, experiences and strengths occurring in the right place at the right time.
You are currently Managing Director of M&A Services and a shareholder at VonLehman CPA and Advisory. How does this affect your role as Managing Partner at RCP?
In short, it makes me better. I believe that to be a truly great buyer of businesses, you have to be good at selling businesses, or at least have spent some time on the sell side. Sell-side advising tends to bring different levels of complexity that buyers don’t often get to see before closing a transaction. The amount of time and energy that must be invested with a business owner to reach the decision to sell, and to decide how they want to do so is tremendous, and the task is tedious, time consuming, and highly consequential for many people (employees, family members, friends, etc.).
Because of that, I am continually sharpening my skills, and my appreciation of stated objectives is probably much greater than the average buyer’s. As a sell-side advisor, I’ve also seen many ways to accomplish various types of transactions due to soliciting offers from various buyers and investors. As such, I have plenty of original and unoriginal strategies I can deploy when determining what type of deal might work for RCP and the owners of a company.