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Private Equity Investing:
Today’s Challenges
Private equity groups, including holding companies
and early stage venture capital firms, face growing challenges
today more than they have since the mid-to-late 1990s. With
the public markets currently closed, a very slow economic
recovery and the lowest corporate valuations in a decade,
private equity investors are spending almost 100% of their
time concentrating on existing portfolio companies rather
than sourcing and making new investments.
Focus Enterprises’ principals have been very successful
in assisting portfolio managers with certain parts of their
existing portfolios. Over the last 24 months our firm has
been engaged by or otherwise worked very closely with The
Psilos Group, Sterling Venture Partners, G.L.Ohrstrom Company,
Weston Investments, Argentum Capital Partners, First Analysis
Corporation Funds, WhiteRock Partners, Chisholm Private Capital
Partners, Mid Atlantic Venture Funds, Comerica Bank and the
Jordex Fund among others. For these and other firms we have
provided the following services:
- Merger, Acquisition and Divestiture--In
an environment of constrained investment, portfolio managers
are continually prioritizing their portfolios to determine
which of their holdings will be granted continued investment.
Focus principals have assisted these private equity groups
including venture capital firms in selling or merging those
average performing companies that will not make the return
on investment criteria established by these firms.
- Capital Raising for Remote Holdings--During
the middle and late 1990s, during a high level of investing
activity, many east coast private equity groups opened offices
on the west coast and vice versa. Today, while many of these
remote offices have been closed, continued investment and
management of these remote portfolio companies is still
a requirement. Over the years, Focus principals have assisted
private equity firms with sourcing and organizing follow-on
equity rounds for these companies that are remote from their
owners or investors.
- Debt Placements--Where
financial performance allows for other than equity funding,
companies are increasingly turning to the debt markets.
The current economic climate is putting intense pressure
not only on portfolio managers but also operating management
of portfolio companies to focus their time and attention
on the tactical operations needs of the business. Focus
principals have assisted operating management with identifying
the most appropriate debt sources and negotiating the best
terms, as our firm has a broad network of funding sources
including commercial banks, asset-based and mezzanine lenders
and specialty finance companies.
- Strategic Partnering and Alliances--A
particularly attractive growth strategy in today’s
environment is strategic partnering and alliances. These
arrangements can take the form of distribution channel agreements,
OEM agreements, joint ventures or manufacturing agreements
with domestic or off shore partners. These partnerships
and/or alliances can add enormous value to the portfolio
company and, quite often, can reduce or eliminate planned
continued investment in the company by the venture capitalist,
holding company or later stage private equity group.
- The Operations Audit--Focus
principals routinely complete full operations audits for
investment managers assessing the health of the entire portfolio
company. These audits include a detailed analysis of the
sales and marketing function, product development, research
and development, operations and customer service, technology
infrastructure, intellectual property and accounting function,
and a review of legal and corporate governance issues. This
Focus service is particularly attractive to investors who
are remote from the portfolio company and to those investment
managers who would like to have an independent third party
evaluation of a particular portfolio company.
About Focus Enterprises,
Inc.
Our firm has been assisting clients with corporate
development consulting assignments, merger, acquisition and
divestiture engagements and capital raising and capital formation
assignments for almost 21 years. Our clients are buy-side
corporate clients, sell-side corporate clients, private equity
groups, holding companies and early stage venture capital
firms. Currently Focus has six full time partners, all of
whom have had deep operating experience having held C-level
operating positions prior to joining our firm. The firm has
an extensive research capability managed by our Director of
Research. Focus operates nationally and internationally and
concentrates on the following market segments: Technology
including hardware, software and services; Media and Communications;
Telecommunications; Government Contracting; Aerospace; Manufacturing
and Distribution; Retail; and, Healthcare. For the advantage
of our clients, the firm integrates its consulting expertise,
transactional expertise, research capability and precise methodologies
and processes. Unlike larger investment banks, our processes
have been optimized and proven effective in our target marketplace
-- private companies or operating units with revenues in the
$5 million to $100 million range. |
