With the 2008 financial crisis just a distant memory, the private equity industry is once more thriving and trolling the growth capital landscape for bigger and better deals, says Finance Professor David J. Brophy, director of the Center for Venture Capital and Private Equity Finance at the University of Michigan Ross School of Business. Changing market conditions, however, have put a slightly different slant on today’s private equity activities.
These new market trends and deal-making opportunities will take center stage at this year’s Michigan Private Equity Conference on Oct. 3 and 4. The event, now in its eighth year, warms up with a mid-morning golf outing at the U-M Golf Course and an evening dinner reception at Campus Inn on Thursday. The conference opens Friday at 7:30 a.m. in the Michigan Union ballroom. To whet the appetites of top investors, industry practitioners, business owners and entrepreneurs who are expected to attend, Brophy has agreed to provide a quick preview of the event highlights.
“Today, the PE sector is certainly healthy and well-funded,” Brophy says. “But gradually, it has shifted its sights away from strictly doing buyouts, especially of large companies, to providing growth capital to younger, high-potential companies in the post-venture-capital stage of financing. PE shops are finding value in this middle market area, and that’s where they’re doing a lot of their investments.”
Deal-making is robust and highly competitive, according to Brophy. So, now is a good time for companies to look for PE investors who are interested in leveraged recapitalization, which is used as a means of growth financing with private capital. “In a leveraged recap, investors take an equity position, usually a controlling position, in a company but leave the management in place,” Brophy explains. “This investment infuses additional capital and talent into the company. The management is able to take money off the table by selling some of its stock to the PE fund. The company benefits because it has a continuing source of capital from a new financing partner but has not lost its identity.”
This middle market activity by PE investors helps to fill an unmet need in Michigan and the Midwest. “We have a number of venture capital investment programs aimed at helping early-stage companies, but there’s an equally compelling reason to make capital available for growing companies that are past that stage,” Brophy notes. “Company owners who want to meet these types of investors should attend this conference, which is the best of its kind in the Midwest.”
Opening keynote speaker Kevin Albert, global head of business development at Pantheon Ventures, an international PE fund-of-funds manager, will shine the spotlight on new trends in fundraising by private equity shops. Increasingly, large investment-services and financial-management firms, such as Charles Schwab and Merrill Lynch, are exploring ways to offer private equity investment opportunities to their clients, particularly individual and family wealth holders seeking better returns on their money. “PE is the beneficiary of this trend, because it broadens the scope of the sources of funds for the industry,” Brophy remarks.
Afternoon keynote speaker John Diggins, a partner at Platinum Equity Partners, will share insights into what attracted the California-based PE firm to the state of Michigan and where it is placing its investment dollars. “The firm is a nice addition to the set of PE investment groups currently operating in our state,” Brophy observes. “It raises the quality bar and provides additional capital to help Michigan companies grow and reinvigorate the state’s economy.” Two years ago, Platinum Equity and founder Tom Gores bought the Detroit Pistons, becoming one of the first private equity firms to own a stake in a professional sports team. The afternoon’s lively discussion will touch on the firm’s experience with the NBA franchise and the team’s turnaround prospects for the 2013-2014 season.
Three different panel discussions centered on various aspects of fundraising and the current climate for exits will round out the 2013 Michigan Private Equity Conference.
Plan to attend the post-conference Fireside Chat Career Panel
Following the conference, Brophy will host the second in a series of CVP Fireside Chat Career Panels at the Ross School. The chat, which is open to the entire University community, begins at 3 p.m. in room 1210 and features an in-depth discussion of career opportunities by leading Ross alumni. Colleen Hoy, director of recruiting at Moelis & Company, will serve as moderator. Panelists will include: Evan Wildstein, Kohlberg & Co.; David Payne, Blackstone Group; Scott Schaen and Benjamin Johnston, Pine Brook Partners; and Robert Kalsow-Ramos, Apollo Global Management.
“The purpose of the fireside chats is to bring Wall Street to the Ross School,” Brophy explains. “We invite alumni from venture capital firms, private equity firms and hedge funds to talk about their respective businesses and tell students what it takes to break in. We also include executive recruiters who provide practical advice about career entry requirements and strategies.”
The first fireside chat, on Sept. 6, featured an exclusive video interview with Twitter CEO Dick Costolo, conducted by NBC/MSNBC News anchor Richard Lui. The timing couldn’t have been better. Six days later, on Sept. 12, Twitter announced it had filed confidential paperwork with the Securities and Exchange Commission to begin the process for its highly anticipated initial public offering.
“The Twitter interview called attention to these chats and demonstrated we’re serious about bringing prominent individuals who are standouts in their field to the U-M campus,” Brophy says.
For more information on the 8th Annual Private Equity Conference, read the press release online here.