As the name suggests, Resilience Capital Partners goes beyond supplying businesses with funds to equip them to withstand adverse events and market shifts. Founded in 2001 in Cleveland, the firm selects companies that fill a unique niche, enjoy positive potential cash flows, and produce good returns on reinvested funds. Such companies are also well managed and are unlikely to experience disruptions in their field.
Resilience’s clients generally earn revenues between $25 million and $250 million in a wide range of industries such as consumer goods, manufacturing, logistics, and aviation. Advisors focus on businesses with insufficient expansion capital, those that are not central to a parent company’s main mission, or have liabilities brought on by low capitalization. To address these problems, Resilience draws on the expertise of over 40 proven leaders in many sectors. This global Executive Advisor Network participates in due diligence and contributes members to clients’ boards of directors. Resilience’s current client list includes companies such as Innovatus Imaging, a provider of medical diagnostic equipment, Maysteel, a manufacturer of metal enclosures for energy companies, and SIMCOM Aviation Training, which operates simulators for pilots.
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Private equity funds represent collective investments typically inaccessible to individual investors of modest means. They deploy capital to acquire dominant ownership positions in businesses. Private equity firms commonly allocate funds to small and medium-sized enterprises through financial instruments such as capital injections, debt financing, or equity. These investments aim to produce profits for shareholders over a prolonged duration. Every private equity firm possesses backers who favor direct investment in firms over purchasing stocks. Private equity firm investors might seek to finance businesses due to personal motivations or to enhance an organization's operational efficiency. The firms usually collect management fees and are entitled to a portion of the total profits upon the firm's sale of the company. Alternatively, they might achieve their return on investment through acquisition or merger, initial public offering, and recapitalization. A private equity firm invests in privately held businesses, anticipating growth that will yield returns within a set period. Sometimes, private equity firms purchase complete businesses and revamp their structures to enhance their effectiveness and boost their financial gains. The reorganization typically includes financial tactics aimed at deriving worth from the corporation. The firm can later trade these companies for a profit, resulting in actual earnings for investors. Similar to all forms of businesses, private equity companies aim to generate profits, thereby producing financial gains for their stakeholders. Investment managers commonly dedicate significant effort to thoroughly researching companies and industries or doing due diligence before committing funds. They consider various elements when making investment decisions, including whether a firm operates within a sector that presents significant barriers to entry for potential competitors and consistently produces profits. Private equity firms operate with a unique structure. Firstly, they typically take the form of limited partnerships—the general partners secure funding from institutional investors, the limited partners, to invest in the partnership. The general partner handles investments, whereas the limited partners supply the capital for investment purposes. Limited partners are only liable for the amount of money they've invested, whereas general partners have unlimited liability. Every participating party establishes the conditions of their collaboration through a limited partnership agreement or a formal contract. Private equity firms obtain their funding from institutional investors and affluent individuals recognized as accredited investors. These organizations have received approval from the Securities and Exchange Commission to allocate funds to securities that are not publicly traded. Private equity firms have various investment preferences. For instance, some firms adopt a passive approach as investors, depending on management to run and enhance the company's operations. While other firms engage as active investors, offering hands-on assistance to the business to foster its growth and ensure its success. Active private equity companies frequently possess extensive networks and robust bonds with executives at the C-suite level across various sectors. Despite contributing minimal personal funds to acquisitions, private equity firms usually obtain a management fee, typically around 2 percent of the company's total assets, and a 20 percent share of the profits upon selling the company. These earnings are subject to favorable taxation by the US government through a tax benefit known as "carried interest." In finance and investment, private equity (PE) firms have emerged as powerful entities, driving growth, fostering innovation, and reshaping industries. These firms play a critical role in the global economy, offering a unique blend of capital infusion, strategic guidance, and operational expertise to businesses across various sectors. For seasoned investors and ambitious entrepreneurs, starting a private equity firm presents a compelling opportunity with advantages, such as the potential for attractive investment returns.
According to some studies, private equity firms employed 11.7 million people in 2023, nearly 3 million more than two years ago. There are over 18,000 PE funds, almost a 60 percent increase in the last five years. Moreover, PE manages $4.4 trillion in assets, including $1 trillion of uninvested capital. A private equity success story is Bain Capital's acquisition of Domino's Pizza in 1998 amid declining sales and a tarnished brand image. Implementing strategic interventions, Bain Capital revitalized Domino's by changing marketing, technology, and operational efficiency. It invested in online ordering systems and enhanced the customer journey. The investment turned around the pizza chain, propelling Domino's into a global leader in the pizza delivery market. Private equity investments typically give higher returns than traditional investment assets such as bonds and stocks. According to industry data, private equity funds have consistently outperformed public markets over the long term, delivering robust returns to investors. Unlike public equity markets, where shareholders have limited control over management decisions, private equity firms exert significant influence over their investments. This hands-on approach allows them to drive strategic initiatives, streamline operations, and steer businesses toward sustainable growth trajectories. While public markets may be subject to short-term fluctuations and volatility, private equity firms can focus on creating long-term value without the pressure of quarterly earnings reports or market sentiment. This long-term perspective enables private equity firms to pursue strategic initiatives that may take time to materialize but ultimately result in substantial value creation. Successful private equity firms offer operational expertise honed through years of experience and industry specialization. They can help optimize supply chains, expand market reach, or restructure organizational frameworks. These firms possess the know-how to unlock hidden value within portfolio companies. Moreover, by leveraging their operational expertise, private equity firms can drive efficiency improvements, enhance profitability, and position portfolio companies for long-term success. Unlike publicly traded companies, where management may prioritize short-term shareholder value over long-term sustainability, private equity firms have an incentive to maximize returns for all stakeholders. By co-investing alongside limited partners, fund managers demonstrate their commitment to maximizing returns and mitigating risks, fostering a collaborative environment conducive to long-term success. Private equity presents an attractive option for investors seeking diversification beyond traditional asset classes. By assembling a diversified portfolio of companies across different industries and geographies, private equity firms can hedge against market volatility and capitalize on emerging opportunities in dynamic sectors. In addition, investors have the opportunity to empower entrepreneurs and fuel their growth ambitions. By providing capital injections, strategic guidance, and access to extensive networks, private equity firms become catalysts for innovation, driving economic development and job creation. Private equity firms also demonstrate remarkable adaptability and resilience. Through rigorous due diligence, proactive risk management, and agile decision-making, these firms navigate challenges adeptly while capitalizing on emerging trends and market inefficiencies. By staying ahead of the curve and embracing change, private equity firms can position themselves for long-term success in dynamic and competitive markets. Private equity investments have served as a driving force in the financial sector, shaping the performance of businesses and industries. Private equity has demonstrated resilience during economic uncertainties, including the global challenges posed by the COVID-19 pandemic. They also experience trends, such as disruption by technology.
The ability to weather economic downturns and adapt to changing market conditions underscores the robustness of private equity investments as a long-term asset class. As private equity firms and portfolio companies plan, they must anticipate a changing investment landscape marked by new opportunities and challenges. By carefully following and analyzing emerging trends, investors in the private equity domain can plan and strategize accordingly. Technology continues reshaping private equity, with a pronounced focus on technology-driven sectors. Investors actively seek opportunities in artificial intelligence, cybersecurity, and digital health. From conducting due diligence virtually to leveraging AI-driven tools and analytics to identify potential opportunities, technology has assumed an important role in the private equity investing process. Then, technology investment firms and managers can leverage artificial intelligence (AI) for predictive analysis when dealing with workforce planning challenges. With AI, companies can analyze market performance and trends to predict staffing needs for strategic hiring decisions that optimize resource allocations and avoid unnecessary labor costs. Beyond financial engineering, private equity firms are increasingly emphasizing operational improvements within portfolio companies. This involves optimizing business processes, implementing cost-saving measures, and leveraging technology to enhance efficiency. Niche or sector-specific funds are gaining traction as investors seek specialized expertise. These funds focus on specific industries, such as healthcare, renewable energy, or fintech, allowing investors to capitalize on in-depth knowledge and trends within these sectors. Because niche sectors are generally less crowded, private equity firms stand a better chance of finding unique investment opportunities that promise strong returns. Focusing on niche sectors also increases their portfolio allocation and reduces their susceptibility to broader market risks. Over the coming years, some expect private equity firms to increasingly factor in and integrate environmental, social, and governance (ESG) considerations into their processes. Key considerations include cybersecurity, diversity, equity, and inclusion. Investors increasingly prioritize companies with robust sustainability practices, ethical business conduct, and responsible governance. Integrating environmental, social, and governance (ESG) criteria aligns with ethical standards, mitigates risks, and enhances long-term value. New opportunities for private equity investing are also emerging. With increased healthcare costs, an aging population, and medical technology advancements, sectors like healthcare technology, home care services, specialty physician practices, and e-commerce logistics management may witness increased investment interest from private equity firms over the coming years. To find unique value-added opportunities, private equity investors may also need to explore niche manufacturing businesses with a clear growth path and a strong market position. This can help drive innovation and expansion into new markets. Lastly, in response to the prevailing high-interest rate environment, the financial world continues to experience increased activity at bridge and mezzanine loan levels, a trend that some expect to continue in the foreseeable future. Bridge loans are short-term with higher interest rates, while mezzanine loans are longer with comparatively lower interest. Increasingly, private equity firms are turning to alternative lending sources such as debt capital and retained earnings to diversify their portfolios and generate returns on investment. Today, there is a growing demand for private equity funds, especially for accredited investors and institutional investors. An accredited investor is an individual or business entity allowed to trade securities not registered with the Securities and Exchange Commission (SEC). An institutional investor, on the other hand, is an entity that invests on individuals’ behalf and includes insurance companies, pension funds, mutual funds, sovereign wealth funds, and university endowments.
That said, not just anyone can start a private equity fund. It typically takes about 10 years for a person to acquire the necessary experience required to begin such an undertaking. Notably, most founders are 40 and older. The most common experience and backgrounds of those starting private equity funds today include principals and vice principals at mega-funds (MFs) and upper-middle-market (UMM) firms, and partners and managing directors with experience in economics. Others include managing director-level bankers with investing experience and chief-level (C-level) executives with extensive investor relationship experience. For such individuals, there are certain steps to take when they decide to start a private equity firm. While there are no specific guidelines on the steps one should take, there are some basic steps most executives take. These include writing a business plan, working out legal details, raising capital, hiring a team, and determining a fee structure. A business plan is a blueprint detailing important information such as the private equity fund’s expected cash flow and the fund’s timeline, including the capital-raising period, and other instructions such as how to exit from investments. In most cases, a private equity fund has a 10-year lifespan, however, the exact timeline is usually only known to the managers. The business plan also contains an outline of how the fund will attract investors, how it will grow over time, and an executive summary to pull every detail together. Most private equity firms in the United States are limited liability firms or limited partnerships. After completing a business plan, it will be necessary to hire attorneys who will assist with the legal work. Attorneys are especially helpful to new managers, since they help them with their know-your-customer (KYC) procedures and due diligence. Among the important documents include a subscription agreement, articles of association, marketing fund operating memorandum, due diligence questionnaire, custody agreements, compliance and risk guidelines, investment management agreement, and violation policy. After completing the business plan, it is also crucial to decide how funds will be raised. This is always the biggest challenge, since it involves convincing investors to fund a startup. To gain credibility, it is vital to have a fund established at the outset. A common approach is to first invest in one’s own fund. Previous successful fund managers are expected to fund at least 2 to 3 percent of their own money. For new managers, they can contribute 1 to 2 percent to the initial fund. Hiring a team is another important step. The ideal minimum number is three partners. Starting a private equity fund individually or with just two people is risky due to the “key person risk.” This refers to where a business loses value or reputation due to a key person’s demise, incapacitation, or other event causing them to leave the firm. Apart from the key partners, other hires are necessary. Importantly, it is advisable to hire non-traditional candidates: people with relevant experience who can get the job done at an affordable salary. As the fund grows, such hires get promoted, since the firm can then comfortably pay them. The important consideration in picking a team is getting people with the required skill sets. Calculating the fee structure is also paramount. Fund managers usually determine the management fees, carried interest (the fund managers profit participation), and hurdle rates (the minimum return on investment that must be realized before managers share in the profits). Such managers typically get management fees of 2 percent of investor-committed capital. Nonetheless, new managers may receive just 1 percent. Usually, the set carried interest is about 20 percent above an expected return. With the hurdle rate, the managers and investors split about 20 percent and 80 percent, respectively. It is also vital to establish compliance, risk, and valuation guidelines during this step. Distressed investing happens when an investor funds an organization’s, government’s, or other entity’s debt. Mostly, distressed investors buy debts and other securities from lenders in situations where the latter’s clients are facing financial difficulties or on the verge of bankruptcy.
A majority of lenders are banks, and they sell loans to investors at discounted rates while trying to avoid scenarios where businesses may fail to pay their debts. Distressed investors purchase these securities to recover value after restructuring the entity’s liabilities and avoiding bankruptcy. Due to the risk involved, it is unlikely for individual investors to go into distressed debt investment unless they do so by investing in mutual funds or hedge funds that buy debts and securities. As such, most distressed investors are institutional investors. They make investments on behalf of individuals and include mutual funds, pension funds, university endowments, and insurance companies. Most distressed investors look for entities with successful business models or sell in-demand products and services. Once they purchase debts or securities, distressed investors own the controlling shares and can influence restructuring processes and become equity owners. In case a distressed entity files for bankruptcy, distressed investors can still recover their money since they are given priority over a distressed entity’s equity holders. There are key factors that institutional investors consider before deciding whether to invest in a distressed entity. One factor is the available turnaround expertise, which summarizes the investors’ knowledge and resources that can help a company avert bankruptcy. Investors assess their capacity to provide expertise in operational restructuring, strategic planning, and financial engineering. Another factor involves analyzing the legal and regulatory complexities of buying debts and securities. In most cases, the distressed company is on the verge of filing for bankruptcy, and investors assess how they can influence court proceedings to save the company, resolve complex issues, and minimize legal fees. Institutional investors must also focus on diversification since distressed investing is a high-risk venture. Funding other investments minimizes portfolio losses since not all distressed investments yield positive returns. The distressed investor must also consider timing. They must analyze a business and where it is in the distress cycle to decide whether it is worth taking a risk. Most distressed investors prefer companies and other entities in their early distress cycles since they are more easily saved from bankruptcy than those in advanced stages. It is also crucial to do due diligence that involves financial analysis, operational analysis, an entity’s management evaluation, and market trends knowledge. Financial analysis focuses on evaluating financial statements, including the balance sheet, income statement, cash flow statements, debt levels in relation to assets, and the firm’s liquidity position. An operational analysis reveals an entity’s operational efficiency by reviewing asset utilization, wastages, and supply chain challenges. These metrics help understand a business’s competitive positioning and highlight areas where investors can optimize production while minimizing operational costs to realize returns on investment. Reviewing the distressed company’s management highlights a business’ current leadership team’s strengths and weaknesses, allowing investors to tailor turnaround solutions. Distressed investors can alter the management team’s knowledge and expertise to ensure they support the proposed changes and deal with any workforce resistance. Last, evaluating market trends, specifically consumer preferences, shows the potential for a turnaround. Distressed investors consider the ease of updating a company's inventory to match the market demands and how these efforts can influence positive changes. Private equity (PE) refers to the capital investments made by private equity firms on target companies not listed on public stock exchanges in exchange for a share of the company (equity). PE firms identify businesses with growth potential, offer financial resources to support their development and growth, and hope to make a profit after selling the shares to large corporations or in an initial public offering (IPO). PE firms assist target companies in creating value in various ways, such as by expanding markets, launching new products, hiring additional workers, or acquiring new technologies to enjoy a competitive edge.
Even though they primarily focus on private entities, PE firms can also acquire entire public companies and later convert them into private businesses. PE investments are mostly offered through a fund that pools investments from multiple accredited investors, those who have a net worth of at least $1 million and meet other criteria. PE funds consist of a general partner and limited partners. The general partner works at a PE firm and is responsible for initiating the fund, managing investments, collecting money from investors, and repaying investors’ money in accordance with the agreements. Limited partners, on the other hand, are the individuals that contribute capital to a PE fund. The end goal of PE funds is to see appreciation of the assets they purchase from target companies within 10 to 12 years, and selling these shares for a profit. This is often made possible by making large capital investments in the target business and retaining at least 50 percent of the company’s ownership during the agreed-upon time period. Private equity is beneficial to companies for several reasons. Acquiring PE helps startups and struggling yet promising businesses access alternative funding. Banks and other financial institutions are reluctant to provide leverage to these companies, since they may have inadequate assets or insufficient revenue to back the loans. By considering PE, these companies can get flexible solutions and create relationships with professionals with rich industry knowledge and experience that can also be to their benefit. Through accessing PE, private companies can also evade the scrutiny that public organizations must endure when making investment decisions. In a public company, the shareholders may criticize, delay, or reject bold business plans, especially the risk averse investors. Moreover, shareholders in public companies require quarterly reports without fail to assess the progress of investments. PE investments avoid these complications, meaning businesses can exploit innovative growth strategies without unnecessary pressures. PE focuses on long-term value creation, given that agreements between businesses and PE firms typically last 10 to 12 years. The first three years involve the acquisition process, where the general partner conducts thorough valuations, the next three to five years are the period PE firms channel capital and offer advice, while the last period involves efforts by the PE firm to dispose of the acquired assets. After the limited partners contribute resources, they may not withdraw their money until the end of the agreed upon time frame. Through this lengthy and guaranteed collaboration with established professionals and significant capital investments, businesses can experience significant long-term improvements in their operations and management. PE funds create value in the target companies through leveraged buyouts or venture capital (VC). Leveraged buyouts involve buying a business using debt collateralized by the entity’s assets and operations. The PE firm assumes control over the business and utilizes the company’s cash flow to settle the debt. This strategy can help PE funds buy entire public companies, restructure and improve them, and sell them to a corporation or shareholders in the financial markets for a profit. Venture capital, on the other hand, involves issuing capital to startups in less-saturated or less mature sectors with the aim of future returns. PE funds issue capital to these businesses after identifying their potential and the logical impediments to growth, such as inadequate funds and cash flow to justify bank financing. A private equity company team comprises limited partners and general partners (referred to here as GPs). Other team members include principals, vice presidents, supporting investment professionals, associates, and analysts. Limited partners, mainly high-net-worth individuals, insurance companies, mutual funds companies, or pension funds, commit the money required to run the fund, but rarely involve themselves in the day to day activities of the firm or maintenance of the firm. The GPs perform most of the critical administrative and operating functions, including sourcing, structuring the investments, and managing the funds.
The GPs encourage these investors to commit funds for investments in different opportunities until a timely exit that (ideally) maximizes their profits. The investment period is typically about ten years. Within that time, the private equity fund may invest the client's money in as many as 25 opportunities or firms. GPs should possess skills that help them find investors and attractive investment opportunities with promising returns. GPs often have a long history in business and a vast network of contacts. These help GPs gather information about upcoming or tentative deals before the information gets to the public or other parties, thus offering an advantage. Most investment opportunities, such as initial public offerings (IPOs), feature intermediaries or go-betweens like investment banks and brokers. The GP typically convinces the investors that they have proprietary access to the investment deals that bypass these intermediaries before the information is available to the public. The arrangements are either on potential, upcoming, or overlooked investment opportunities. Research and due diligence skills help GPs form an opinion on the future status of an industry or market based on its history and current performance. They gauge a company's potential by studying its administration, especially its executives, financial health, and performance compared to similar companies, the state of the industry, and future objectives, such as expansion. This research helps GPs build quantitative models they can present to investors. GPs often have an in-house team of researchers or hire consultants to perform the due diligence. The best GPs possess financial engineering skills. This interdisciplinary branch combines statistics, applied mathematics, economics, computer science, and computer theory to analyze the present and future status of the economy and the financial markets. This enables GPs to optimize factors in the market that affect the potential return on investment, such as inflation. They then use this information to structure the investment package and present the opportunity to clients. An example is analyzing if a pending merger between two companies presents a viable investment opportunity for the client. GPs monitor the investment's performance to ensure the continual appreciation of the company’s value. Depending on the company, the primary GP may operate the investment. Some companies have an operating partner team, typically comprising former executives with experience in different industries. Operating partner roles differ, ranging from support to complete takeover. Salesmanship proves beneficial for a GP. Sourcing funds, some from “sensitive” sources such as pension funds, requires gaining the confidence of many parties and committing large sums of money for a lengthy period. Charisma, self-confidence, and above-average communication skills are desirable traits in a GP. GPs are paid via a management fee, a percentage of the managed funds, or other agreed upon remuneration. The fee covers administration fees, salaries, and fees paid to third parties like investment banks. Based in Hunting Valley, Ohio, Bassem Mansour is an accomplished leader who has served as the co-CEO of Resilience Capital Partners since founding the Cleveland private equity firm in 2001. His responsibilities encompass investment decisions, portfolio company oversight, and nurturing relationships with investors. When he is not working, Bassem Mansour indulges in his favorite hobbies of golfing and fishing.
Both natural and artificial bodies of water in Ohio offer memorable fishing opportunities. Black crappie and white crappie are native fish species in the state. Black crappie have dark, mottled patterns along their sides, while white crappie feature more uniform dark stripes. Popular destinations for crappie fishing in Ohio are Indian Lake in Logan County, Alum Creek Lake in Delaware County, and Mosquito Creek Lake in Trumbull County. Crappie typically cluster in water with features like drop-offs, fallen trees, brush piles, and stumps. Ideal lures are small jigs, minnows, and rubber worms. A private equity executive in Hunting Valley, Ohio, Bassem Mansour has been a co-CEO of Resilience Capital Partners in nearby Beachwood since 2001. To augment his professional activities in Hunting Valley and beyond, Bassem Mansour holds active membership with the Association for Capital Growth (ACG).
A leading industry organization for M&A professionals, the Association for Capital Growth has been endeavoring to drive middle-market growth for roughly 70 years. One way that this organization reaches out to the corporate community is through its online, on-demand webinar series. Dating back to September 2014, the ACG webinar catalog covers a broad spectrum of topics. Recent webinars in the series include “The Outlook for Middle-Market M&A in 2023” and “How to Navigate 2023’s M&A Headwinds: The Big Picture, Macro to Micro.” The latter of these webinars featured a diverse panel of S&P Global Market Intelligence professionals under the moderation of S&P Global associate director of Desktop Product and Market Development Joe Toomey. |
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June 2023
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