At The Deal's Private Capital Symposium John Morris, Assistant Managing Editor, of The Deal moderated a panel about less leverage and more management. Adam Max, managing principal, at The Jordan Company and Jeffery Stevenson, managing partner & Co-CEO, of Veronis Suhler Stevenson spoke about generating growth and significant returns from applying financial and operational strategies to their portfolio companies.
Stevenson led the panel by speaking about how his firm is positioning companies to sell to the strategic marketplace by sharing risk with other financial backers. "As with most companies they build a business to a certain point, and they become more risk adverse the larger that company gets. As time goes on they become more adverse to taking a risk with the comapny. So they build a good base in business by sharing the risk. So to build up a company, part of the trick is to bring in outside capital early so the business can grow through acquisitions and the risk is also shared," Stevenson said.
Max suggested that firms create an integration and strategy group for portfolio companies. He said his firm had key people that managed these processes for all of its portfolios, which became a larger group within the company later on. "These people help us evaluate the talent in the business, and which team should be the lead in the transaction, integration systems, and if you are lucky they helped buy and also fill in the strategy for a build out," he explained.
With these management teams Max said his firm can manage investments easier in China. However, some investments have been met with resistance from management teams. "Some management teams can see this as a threat, but it is really an opportunity because we can help with distribution opportunities," he added.
Stevenson agreed that it is sometimes challenging to work with existing management teams. "No matter how hard you work the plan there is always the question of the department head and the information structure. There is still integration risk so you have to be on top of that. The less obvious conflict is with people and that doesn't neccesarily show up from day one. Sometimes these companies hadn't integrated acquired properties themselves so you had an organic culture, and an acquired one so in order to integrate the comapnies the management team had to be replaced," he said.
- Maria Woehr
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