Control buyouts, minority interest investments or debt placements, Chicago-based Granite Creek is ready to invest. Flexibility is just one lesson co-founder Mark Radzik says he learned during his time in legendary billionaire investor Sam Zell’s office. He tells us more.

Granite Creek typically insists on being the first institutional investor in a business. Beyond that, though, flexibility has been Granite Creek’s guiding strategy since its launch in 2005. That means being open to a variety of investment options in a wide array of businesses. Its willingness to take minority stakes and provide loans is resonating at a time when many private equity deals are foundering in the abyss of valuation gaps.

It also has two specialized real estate arms, Renovo and Moraine Farmland Partners. Renovo provides residential real estate loans and Moraine buys and manages Midwest farms.

The firm’s chief business is to capitalize on business owners who are reluctant to sell outright by making minority investments or private debt placements. It will serve as a mezzanine lender or senior debt provider.

That doesn’t mean it won’t buy out an owner. Granite Creek in November acquired NYP Corp., a New Jersey nursery packager and distributor.

Nonetheless, it has found most of its success in making a combination of minority investments and loans to target companies.

“Entrepreneurs like the debt because they don’t have to take dilution,” Radzik says. “I really think ’24 is going to be an active year for non-control investments and private credit.”

Granite Creek usually invests between $10 million and $30 million in each transaction. It targets companies with $25 million to $100 million in revenue and Ebitda between $3 million and $15 million.

Granite Creek closed its third fund in November — oversubscribed $300 million FlexCap III — which the firm already put to work investing in two lower-middle-market companies: commercial printer Salem One and bowling alley entertainment centers operator Pinstripes.

Salem One used its capital infusion to expand operations with the February acquisition of printing company iTek Graphics.

The two new investments out of the new fund join 14 other current investments that range from pre-mixed, frozen alcohol drink maker Big Easy Blends to Life Spine, a medical device maker.

It took a little more than a year of lobbying existing LPs to return and wooing new investors from university endowments, pension plans and insurance companies among other sources to raise its third fund after raising $200 million for FlexCap II, which closed in 2019.

Radzik says the firm was fortunate to start and finish fundraising right before the market turned.

“We did a lot of work in 2022,” he says.

“We also had good results,” Radzik says with a chuckle of Midwest understatement, where he has spent his entire adult life. “I think that helps.”

Radzik, an Indiana University undergrad and business school graduate who has spent his professional career in Chicago, co-founded Granite Creek in 2005 after working his way up to managing director of Zell’s Equity Group Investment.

“He was more than a mentor to me,” he says of Zell. “I learned so much from him. “The way he thought, how he made decisions.”

Radzik says Zell inspired and motivated him to set up his own shop.

Zell died last May at age 81.

“Many great lessons and sayings I learned from Sam pop up all the time in my life, ” Radzik says. 

Here are five Zellism that have stuck with Radzik:

  • “Go for greatness.” It has become a mantra that I have passed on to my children and I try to embrace every day.
  • Challenge conventional wisdom/the emperor has no clothes. Use common sense and facts to understand a situation. Don’t be afraid to be right.
  • Get paid for the risk you take. It’s ok to take risks, but make sure you understand the risks and get paid appropriately for taking that risk.
  • Everything comes down to supply and demand.
  • Liquidity has value. Often times the option value of liquidity is forgotten.

Contact Granite Creek at 312-895-4500