Two PE vets have joined HKW to help drive its industrials manufacturing, distribution and business services investments, sectors the firm says it is prioritizing. The Indianapolis-based firm announced in April that Devraj Roy and Laurence Lederer would operate out of its New York office. They sat down with us to discuss their strategy.
Roy and Lederer met 20 years ago when both were breaking into finance, but soon went their separate ways in private equity.
Roy joined Bear Stearns Merchant Bank, which spun out as Irving Place Capital and ended up at IPC spin-out Radial Equity Partners, an industrials-focused shop. Lederer ultimately found a home at New York-based Branford Castle Partners, where he focused on industrials and business services.
But they stayed in close contact through the years after they both started covering the same sector and pursued the same industrials targets, especially in high end, niche manufacturing.
Last year, they decided they wanted to work together. A recruiter put them in contact with HKW, which they formally joined earlier this year.
Lederer says Indianapolis-based CEO Ted Kramer hired the New York pair after complimenting them for their “Midwestern sensibility.”
“Both sides have a high degree of confidence that there is a cultural fit,” Lederer says.
Roy says they will focus on sophisticated manufacturers using the latest technology to capture data, including testing and measurement plays. They’re looking for high-margin businesses providing singular services, indicating they’re producing something more than commodities.
They’re targeting businesses with Ebitda of between $5 million and $30 million.
“We are targeting highly technical products where the cost of failure is high,” Roy says.
Roy says the pair’s deep expertise in the sector helps close deals with founder-owners looking for responsible investors to take over their companies.
“You need more than capital,” Roy says. “You need to come to the table with capability.”
Those types of manufacturers have not moved overseas because they need to remain close to their U.S. customers. Their U.S. locations have become even more of an asset after Covid uncovered the fragile nature of global supply chains, Roy says.
The partners say they have developed an extensive contact list of investment bankers, executives and other origination sources. Plus, HKW has provided additional contacts in their sector.
Lederer says dealflow has been busy and taking on average a meeting a week with executives at potential targets.
Lederer and Roy will raise cash for each new investment, calling on the firm’s existing LPs and other investors, rather than work from the firm’s previously raised funds. HKW closed the HKW Capital Partners V Fund at $365 million in 2019.
“It’s just cleaner that way,” Lederer says of the arrangement.
Contact Lederer at [email protected] and Roy at [email protected].
