Dealmakers seeking value in their portfolios look to their own sector expertise to diversify across a spectrum of middle-market firms. New York-based Corsair Capital is one of them. We examine the PE firm’s investment strategy below.
Corsair is a firm that invests in business services, software, and payments firms and diversifies across firms in all three sectors. “We consider RIAs and wealth management firms part of our financial services portfolio, but we don’t think of ourselves exclusively as an RIA and wealth management investment shop,” Corsair partner Jeremy Schein tells Mergers & Acquisitions.
Rather than focus on one sector, Schein says Corsair targets a broad array of middle-market companies in the financial services ecosystem where Corsair has deep sector experience. “Having high touch and being focused on value-added engagement models within your portfolio companies to ensure you can drive value creation is critically important today,” adds Schein.
That’s especially true during economically uncertain times. “Knowing there will be cloudy skies, we’ve tried to position our portfolio companies to withstand different economic environments,” says Schein. Even experiencing economic uncertainties like in today’s investing market, Corsair positions its businesses to survive economic downturns, then thrive afterward.
One strategy they use is complementing portfolio company management teams with new talent. People are attracted to their companies because they haven’t over-leveraged the businesses, positioning them for success, so they come out of economically volatile times strong. That ensures people keep their jobs.
Schein explains, “What really excites me is creating jobs with exceptional benefits.” For their portfolio companies, Corsair rolled out equity plans or stock option equivalent plans to multiple team members who have never gotten equity before. That’s the sort of alignment with portfolio companies that private equity can achieve with their employees, Schein says.
“We love that the people we hire want to go to the office in the morning, feeling like they can derive value from their work and that hopefully leads to wealth creation over time for them,” says Schein. “But it’s not just about the money, it’s about feeling of mattering,” he adds. He’s convinced that when middle-market private equity is done well, it’s possible to achieve this.
Corsair also works closely with all their portfolio companies because they all have patterns that are similar that position them to create great outcomes, but not only for investors. They say their private equity strategy creates them for their management teams, employees, and customers. “We’re really focused on that today,” says Schein. “That makes me proud of what we do.”