How GP, LP and Family Office work together most effectively
Relationship building is the lifeblood of business, but connecting with general partners, sponsors, and family offices isn’t always easy. With the pandemic preventing face-to-face meetings, these connections are becoming more difficult to establish in some cases.
Speaking at ACG’s InterGrowth feature session, “Becoming a Value Added LP/Family Office,” the experts shared how they’ve leveraged relationships over the past two years and how they’ve managed to build stronger relationships.
Leveraging relationships between portfolio companies is key to success, said R. Whit Matthews, chief investment officer at abrdn, a global investment firm headquartered in Edinburgh, Scotland. For example, abrdn invested in a Texas-based waste collection company, and in another part of the portfolio it had invested in a technology company that had invested in software in the waste space, so abrdn connected those general partners, he noted.
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“It’s a small example of how we can put the pieces of our larger network together and add value to GPs at the end of the day,” Matthews said.
He added that abrdn’s has a 12-person team that focuses on investing in the lower middle market. They can be used to help sponsors who have their own direct programs who tend to have smaller teams because they don’t have dedicated resources at that end of the market.
“When we think about how we can add value, it’s really about being experts in that market,” Matthews said.
Importance of innovation
Nottingham Spirk, an Ohio-based industrial design innovation company, is making fewer investments and projects because it wants to be heavily involved in its portfolio companies, said Katherine Hill Ritchie, board member and director of the Nottingham Spirk Family Office, based in Ohio.
Nottingham Spirk wants to encourage innovations that have disruptive results when working with companies or portfolio funds, she said.
“We are on our path to innovation,” said Hill Ritchie. “We are always in partnership with other funds and companies, so we do it together.”
She added that Nottingham Spirk often added value in the due diligence process during the purchase phase by reviewing patents and portfolio packaging.
For example, Nottingham Spirk recognized that many women focused on DIY projects around the home, which helped create packaging aimed at women, such as lighter bags of fertilizer or redesigned paint cans to look like more to screw-top laundry detergent bottles.
“The goal is for the output to be that much bigger,” Hill Ritchie said. “You’ve added something disruptive, so you’re crushing your competition, and when you go and sell this business, you have a real, solid reason for a bigger multiple.”
You’ve added something disruptive, so you’re crushing your competition, and when you go to sell that business, you have a real solid reason for a bigger multiple.
One of the most shocking changes in the past two years has been to hold Zoom meetings rather than doing business in person. But the pandemic has shown that business doesn’t always have to be face-to-face.
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Mortimer Singer, managing partner of New York-based private equity firm Traub Capital, said people thought it was not possible to raise funds without face-to-face meetings. But that has changed over time due to COVID restrictions.
“The LP community had the ability to embrace that, and that’s been wonderful for us,” Singer said. “We feel like we’ve met as many as we otherwise would have and that’s obviously practical.”