Private Equity Special Report: 10 young and thriving firms worth watching
While competition for private equity deals is arguably more intense than ever before, the opportunities for new firms are also greater. The fundraising environment is robust, and PE funds are getting raised more quickly than in the past. The maturity of the industry means the PE model is understood and liked by limited partners, and it means there’s a whole generation of seasoned investment professionals in their 40s and 50s ready to branch out and open up their own PE shops. And new technologies and new service providers, most notably fund administrators, have made it easier than ever to launch a firm. We also explore 7 ways the industry is changing.
Thriving new firms are embracing the ways the private equity industry has evolved over the years by specializing in sectors and bringing operational expertise to improve and expand portfolio companies. AUA Private Equity Partners LLC provides a great example of a rising firm. Founded in 2012 by Andy Unanue, the New York firm focuses on “demographic-driven investing,” including companies benefiting from the growth of the Hispanic population in the U.S. Unanue served previously as the COO of Goya Foods Inc., the largest, Hispanic-owned food company in the U.S. Goya was founded in 1936 by Unanue’s grandparents, who were Spanish immigrants. “The Goya story is as much about the importance of family as it is about achieving the American dream,” says the Goya website.
Unanue knows first-hand the challenges of family-held businesses. “Succession is never smooth and never done. It’s an ongoing process,” says Unanue. “In my family, I’m G3, but there’s also G4, which ranges from 2 to 40. Having a clear path is important.” Between working at Goya and founding AUA, Unanue ran a family wealth office. These days, he is enjoying collaborating with partners and doing bigger deals with the $275 million AUA has in assets under management.
Among AUA’s portfolio companies is Raymundos Food Group LLC, a Bedford Park, Illinois-based maker of refrigerated snacks and desserts, such as gelatins, flans, puddings and other ready-to-eat offerings. The products are distributed through mass retailers and conventional grocery stores, as well as local Hispanic retailers. AUA has made many changes since buying the company in 2016. Among them is new leadership, such as CEO Ricardo Alvarez, who held previous CEO positions at Overhill Farms, Spartan Foods, Busch’s Fresh Food Market, and Ruiz Foods; and CFO Jim Taylor, who served previously as CFO of Rupari Food Services Inc. Under AUA’s ownership, Raymundos made an add-on acquisition in Noga Dairies Inc., a maker of drinkable yogurts and ethnic dairy products, expanding Raymundos’ better-for-you offerings. AUA has also improved worker safety, boosting Raymundos’ food safety and quality ratings.
Attention to issues involving environmental, social and governance issues (ESG), including diversity, is another hallmark of the next generation of private equity. Here are 10 rising firms worth watching:
1. AE Industrial Partners
Founded in 2015, debut $680 million fund closed in 2016. Makes control-oriented investments in middle-market companies in aerospace, power generation and specialty industrial sectors. Investment team includes: managing partners David Rowe, Thomas Churbuck and Michael Greene. Portfolio includes: AC&A LLC; Belcan Corp., which acquired East Kilbride Engineering Services, Intercom Consulting & Federal Systems Corp., Schafer Corp. and Tandel Systems; Global Jet Capital, which acquired the GE Capital Corporate Aircraft lease and loan portfolio; Kellstrom Aerospace Group Inc., which acquired Vortex Aviation Inc.; and Moeller Aerospace.
2. Angeles Equity Partners
Founded in 2015, debut $360 million fund closed in 2017. Invests in industrial sectors and targets businesses that can benefit from the firm’s expertise in operational transformation and strategic repositioning; focuses on platform investments in U.S. and Canada with enterprise values up to $200 million. Investment team includes: co-founders Timothy Meyer and Jordan Katz. Portfolio includes: Applied Acoustics International and ERP Power.
3. Australis Partners
Founded in 2014, debut $379 million fund closed in 2017. Invests in middle-market companies in Mexico, Colombia, Peru and Chile with at least $100 million in enterprise value, focusing on businesses driven by market trends of the emerging middle class, expansion of infrastructure and a competitive advantage in non-commodity exports. Investment team includes: Enrique Bascur, managing partner and founding member, and founding members Cristián Celis, Alex Manzo, Juan Pablo Pallordet and Armando Borda. Portfolio includes: Inversiones Ambientales S.A. and Inversiones Emergencias S.A.
4. AUA Private Equity Partners
Founded in 2012, debut fund closed in 2015, $275 million AUM. Seeks control investments in U.S.-based lower middle-market companies that are Hispanic-oriented or family-owned within the consumer, media or business services sectors. Investment team includes: Andy Unanue, managing partner; Steven Flyer, partner; David Benyaminy, partner; Astrid Soto (one of Mergers & Acquisition’s Most Influential Women in Mid-Market M&A) , vice president, business development and investor relations. Portfolio includes: Indulge Desserts Holdings LLC, with add-ons Love and Quiches, Ltd. and Elegant Desserts LLC; Tijuana Flats Restaurant Group, LLC; Raymundos Food Group LLC, with add-on Noga Dairies, Inc.; VStar Entertainment Group LLC, with add-on Cirque Dreams, LLC; Associated Foods Holdings, LLC.
5. College Hill Capital Partners
Founded in 2016, no fund yet. Makes non-control investments in family- and founder-owned middle market companies with proven profitability and growth. Investment team includes: managing partner Lorn Davis and partner Seth Berry.
6. Cordillera Investment Partners
Founded in 2014, debut $197 million fund closed in 2017. Invests in non-traditional assets including international arbitration claims, permanent crops and water rights, boat marinas, litigation finance, broadband spectrum licenses and music royalties. Investment team includes: co-founders and partners Agustin “Gus” Araya, Chris Heller and Ashley Marks.
7. Luminate Capital Partners
Founded in 2014, debut $265 million fund closed in 2017. Invests in software companies with $10 million to $50 million in annual revenues, focusing on U.S. providers of business-to-business enterprise software with a market leadership position. Investment team includes founder and managing partner Hollie Moore Haynes
(one of Mergers & Acquisition’s Most Influential Women in Mid-Market M&A). Portfolio includes: Comply365, Financial-Information Technologies and Oversight Systems.
8. One Equity Partners
Founded in 2001 as part of Bank One (later JP Morgan (NYSE: JPM), spun off in 2015, closed first $1.65 billion fund independent of JP Morgan in 2017. Invests in companies in North America and Europe to merge like-sized businesses that fit together strategically to quickly scale up and build market leaders. Investment team includes: Dick Cashin, president, and senior managing directors Greg Belinfanti, JB Cherry, Christoph Giulini, David Han, Jamie Koven, Chip Schorr and Johann-Melchior von Peter. Portfolio includes: Anvil International, Bibliotheca, Celltrion Healthcare, Cless Cosmeticos, Grupo Phoenix, Netas, Smartrac Technology, Strike, Voltyre-Prom, Wow! Nutrition and Zodiac.
9. ParkerGale Capital
Founded in 2014, debut $240 million fund closed in 2016. Buys profitable technology companies headquartered in North America with predictable revenue models and at least $2 million in profits. Investment team includes: co-founders and partners Kristina Heinze (one of Mergers & Acquisition’s Most Influential Women in Mid-Market M&A), Devin Mathews, Jim Milbery and Ryan Milligan. Portfolio includes: Aircraft Technical Publishers, OnePlus Systems, Ipro Tech LLC, Profisee, WorkWave, The Tie Bar and 2Checkout.
10. Solace Capital Partners
Founded in 2014, debut $576 million fund closed in 2016. Makes control investments in special situations--lower-middle market companies that are complex, distressed or capital-constrained in a variety of industries where managing partners have expertise. Investment team includes: managing partners Chris Brothers, Vince Cebula and Brett Wyard.