Getting into the Mind of Private Equity with Roberto Canto MD, Pine Tree Equity

we're going to just do a sound test for those of you on the call please raise your hand find the box with your name raise your hand that you can hear me and you can see the web page called black more partners please raise your hand so I know that you're there and that you can see the web page good it we're coming in strong people are continuing to get on we're just doing a test that you can hear me and you can see the web page if you can't at any time do write a note in the dialogue the questions box to inform us okay we're going to go ahead and get started once again my name is Gerald wire managing director blackmore partners we've been around since 2005 we have one mission to find executives to work with them to help them monetize their background into a deal that's fundable by private equity now along the way we've grown into many areas my partner on the deal side so Yelena and I we will find great exacts they have a good thesis and we'll go find targets the exact clients targets we co invest in the deal we bring in other co-investors like pine tree equity and we put the deal together and the exact typically runs it with salary bonus equity etc and certainly a Roberto will talk to this as we go along so that's how we got started we've done numerous deals we just exited the deal just two weeks ago it was called at the time Northwest mailers worked with Tom Regan to put together a thesis to take sleepy mailing houses right the mail documents to your home's advertising material and combine it with data analytics this was back in 2009 and was really ahead of its time before big data data analytics was the rage and we we had a very successful exit just over 2x time and tom is staying on the company just got bought by RR donnelley so a beautiful thing a strategic exit versus another financial buyer although that would have been okay also we've gone on to do deals that were wildly successful when we bought company kinetics with winter capital with it was a management buyout and a total purchase of two companies that were put together for 30 million and in just over a year and a half ago we sold it to golden gate capital for 280 million eight times our money so private equity is a beautiful thing that's why black more partners exists is we're an independent sponsor who partners with executives to put deals together along the way we developed we added a few other partners mike johnson mike does our board partner board positions for private equity only last year his group did about 40 of them however according to michael relly if you've been on our webinars in the past there are 36 thousand board positions of potentially available private equity firms for the most part are putting one to two board members outside folks on their portfolio company boards that is a trend that I've seen Roberto has that been a trend you seen over the last five years have been less sell more so what if what are your thoughts what are you here in the market or see for your own firm there's ya know look it continues to be more and more focus it always has been a focus for us our strategy since we started almost ten years ago has been to partner with with great operators at both the executive level and bringing in as advisors or on the board level so it's always been part of our strategy and we see more and more groups doing it that way every day no so 36,000 potential board positions out there just in private equity in the total public and private market over 58,000 according to my corolla LE you can see that webinar up on our blackboard connects website by the way I'm landing board seats input wonderful presentation by Mike on that our other partner is she on ciao she has six full-time recruiters last year they did over 160 searches c-suite searches uh you know once again private equity is always looking for a talent whether it's talent that they find as the app because they're being brought a deal or talent they are upgrading talent in their portfolio companies however we did 160 searches there's over a hundred and thousand according to statistics of potential sea level positions every year the question becomes if if you're not getting in the offers why is that and that's where we Blackmore started Blackmore connects so that your source for everything private equity so that executives can take advantage of getting themselves known in the private equity rather than taking a passive approach so on black more partners inc side you know that's a you're going to be hearing from our recruiters but only when you when you are a fit for the deal the black more connects allows you to be have a more proactive approach through networking events webinars there's articles everything that you need to get better educated to make yourself seen and be heard in the private equity market so just as a reminder this is a webinar with pine tree equity and Roberto canto is part of a an insight we call into the mind to private equity and how they think and work in the lower middle market October twelfth is our conference here in Chicago and that will go from 12pm to 4pm for the conference part and then 4pm to 7pm for one-to-one meetings for those attending the conference to meet with the 24 private equity firms that are attending right now we have over 15 private equity firms they signed up and we will close out for private equity we're now fifty percent filled of our target of of 50 executives who typically have a penile north of 50 million we're looking for executives to attend the conference who have an idea at the minimum to acquire companies in their industry their industry experts private equity that's the calling card so these are just some of the private equity firms that will be in attendance and you can see Roberto is right down there here okay so we're going to go off to Pinetree equity Roberto your when did you start with pine tree I partnered up with with my partner Jeff satin Barrino back in late two thousand six so Jeff was at try this before another private equity firm down here in Miami had spun out to start pine tree and I joined up with him as he was getting it off the ground and we officially launched our first fund in January of 2007 so we've been added as pine tree now for a little over nine and a half years excellent well Roberto what are some of the what are you going to cover here today about pine tree well I'll give just a brief overview of a pine tree what we do how how we operate in terms of the types of businesses that we like to invest in and and very specifically how we like to partner with operators right we don't look to come in and run the businesses we invest in in the day-to-day we want to partner with successful operators with successful successful executives that have industry experience that we can partner with to help them run the businesses in the day-to-day and an aggressively grow those businesses over time got it why are you attending the conference you you wanted to talk up a little bit about that I know before we got into the meat of pine tree what what makes it important versus just getting an email and a resume by phone and yeah I you know well it's it's a gray eight it's a great setup to be able to meet face-to-face with a large group of executives in one-to-one meetings in in one place at one time right it makes for a very very efficient process we get as I'm sure most private equity of not all private equity groups we have many many emails resumes sent to us by different executives every day every week every month that we just don't have the time to go through all of them we don't have the time really to contact all of them or to filter and qualify them or a small group or a small team we're focused on making great investments and we just we just can't spend the time so it's great to have a group like yours Gerald that does that for us right that filters and qualifies these executives and then we can meet with them again in one place at one time it makes it makes for very efficient as I mentioned before our whole strategy is to partner partner with executives partner with operators and we do like spending a lot of time with them in person one-on-one before making an investment or before partnering we one of the things that that we like about the small end of the market which is the space that we've been investing in now for almost ten years other things we like about it is that many times we can invest in companies outside of a full auction process right we're in an auction process you may get a chance to you know have one conversation with the management team spend you know two or three hours maybe in a management meeting and you're already at the LOI stage we don't usually like to operate that way we want to get to know our our potential partners much better than that and spend a lot more time with them up front in person getting to those of getting to know them as operators but also getting to know them as people making sure there's there's a good fit there so you know want face-to-face time with our potential partners is very important for us and and having the ability to very efficiently meet with qualified executives have already been qualified by you guys is is very important that makes it makes it a lot more efficient for us talk about the range of what qualified executives mean for you let me share my thoughts and then I'd like you to expound that and so we look at you know the number one thing that private equity exists for is to put money to work so if there's an executive who has an a great investment thesis whatever that might mean and I'd like to have you expand on it boy you want to meet them right now they may not be of always afin we find executives bring us deals they're not a fit necessarily be the CEO but they could be a good fit for the board uh for being a board member they could be a great fit as a co-investor in the deal they could be a great fit for being part of the due diligence or consulting there can be a full range why don't you give us your range of what you notice with executives and what you look for from Jerry yeah I think I think you mentioned most of them the one thing I would I guess maybe not agree a hundred percent with you is we don't think private equity exists to put money to work we think it exists to make great returns for our partners or our limited partners make green vestments returns for them so so we're very very picky in terms of the investments we make we look at seven eight hundred opportunities in any given year to make two maybe three platform investments because we want to find those really perfect situations so not always will it make sense even though we may have a great executive or operator bringing us a good opportunity it may just not be a pine tree investment like I said we're very very picky we're looking for the absolute perfect situations but at the same time knowing that executive even though that opportunity may not be the ones that we want to go forward with we may find another opportunity a year later a couple years later that we do want to invest in and now that we know that executive another than operator we can bring him into that opportunity and partner with them in that case and throughout as you mentioned there's there's opportunity to work together on consultant basis as advisors during diligence or after we've invested where again it may not be the type of company that that executive is looking to join but after knowing him and knowing his uh uh or what he is qualified at etc we can use him on an advisory rule to not only evaluate other opportunities but as you mentioned at a board level on ongoing consulting or advisory role okay would you like me to move down in the slides here sure if you want to get started and and please as Gerald said to be great to make this as interactive as possible versus me just going through a few slides so send send in your questions at any time okay um if you want Gerald we can just we just skip to the next slide that should have just a executive summary if you will on pine tree Cheryl said before we're based in Miami started back in January 2007 when we launched our first fund we're currently investing out of our third fund now and across those three funds we've got about two hundred million dollars of equity that we've invested and remaining to be invested we are a committed fund right so we do have committed capital as i mentioned across those three funds two hundred million which is important in the in the small end of the market where many times you'll you'll come across fund less bouncers or independent sponsors that you know me find a good opportunity may be interested in investing you have a an executive but then still need to go out and find the equity we have the equity we just call it down um focus on a small into the market as I mentioned it's all we've done since we started looking to invest in small cap companies sub 10 million dollars of Eva da typically between two and eight million across business consumer financial services healthcare services as well so we're services oriented we are generalist within services though and we have invested in financial services it's been a little bit of a focus of ours we've made five platform investments in financial services and then a whole host of other business and direct to consumer services whether it is health care services or oil and gas services industrial services etc so we're general list but only services we typically won't invest in more industrial heavy manufacturing businesses we will look at some neat small niche manufacturers but again primarily focus on the services side we want to be always the first institutional investor in any in any business so we are looking to invest in or acquire family or founder owned companies as I mentioned we will look to do two to three investments in any in any given year we look at you know at least seven or eight hundred opportunities so as I mentioned before filtering and qualifying these opportunities is really important for us that's where we spend most of our time and and that's why we don't have as much time to spend filtering qualifying the the executive emails or resumes that we have come in we've invested now in the nine and a half years that we've been added we've invested now in 18 platform investments we've also completed I think around 25 add-ons now so you know over 40 total investments and we're also the last the last point I'll make we do have to we call my operating partners they are you know full-time pine tree employees or pine tree partners but focus exclusively on working with our portfolio companies in a support role right so like I mentioned before we're not looking to run these businesses in the day-to-day we want to support our partners help our operators are executives that are running the business help them grow the business more aggressively and we spend our time in a whole host of different areas that I'll touch on a little later but we we do have again the two internal resources all they do is work with our portfolio companies versus looking for new new investment opportunities so I have a question about operating partners define what an operating partner is what does their day look like what do you look for in operating partners is it is it based around run portfolio company or are they generalist popping in doing strategy strategy execution lean expand please sure so our that the two partners that we have now operating partners both come from a financial background both for cfos of middle market businesses one with CFO / coo as well a little more operating experience as well but we decided to to bring them in with that type of background because over the first few years in looking at valuating small business opportunities and investing in small businesses we found that pretty much all these small businesses needed or the areas where they needed the most help was on the financial side whether it's putting in the appropriate accounting system bringing a controller bringing a CFO they acted as interim CFO is on many occasions while we recruited and brought in a permanent resource you know spent a lot of time on the expense side looking for cost downs looking for saving opportunities that are so doing a lot of work on the financial side versus the heavy operating side where again we were partnering with either the founder of the business who was continuing to run or we were partnering with an executive that was coming in day one alongside us investing in the business and running it in the day-to-day so that that that's been or that's the profile of the two guys that we have now but we'll continue to look for other operating partners down the road as our portfolio continues to expand and probably not necessarily a a financial background but maybe a little more of an operating background of different businesses so like I mentioned before we're generalists we're not focused on a particular industry so less important what specific industry they have experience in and more important just what kind of experience they have ad executives and how they'll be able to help our our you know partners in the business if you will you know you bring up an interesting point more generalists we find in the lower and the lower middle market is it's more about executives ability to block and tackle that is critical than industry knowledge what's your experience in hiring it or working with execs to buy a company do they have to know that industry perfectly or can they just be just great executives I think it depends a little bit on exactly what what we need them for if you will and and what industry the business is in so for example I've got a case study here in the back of this brief presentation talking about one of our investments where we did partner with an industry executive who invested it went through one you know with us through diligence and vested alongside us and ran the business through our ownership period in that case for that specific business we thought it was very important to have an executive with industry with industry specific experience and haven't been in that industry for many years and having the contacts with the customers in that specific industry which is a a very limited customer so I think it depends right and other occasions we have looked for executives that you know you mentioned blocking and tackling i want to say necessarily just blocking tackling experience but my experience running businesses on the operating side or on the financial side but not necessarily important that they have experienced in that specific industry you know were usually you're constantly hiring CFOs into our businesses we don't necessarily look for industry experience in that case we we just want good CFOs with good CFO experience right same thing many times we are looking to bring in chief operating officers in in a lot of our investments we will partner with the founder of the business who will continue running the business a CEO many times those founders are very sales-oriented CEOs right and we want them to focus more and more on the sales side and customer relations side which is really what's going to drive growth and drive value in the business down the road so we're looking to bring in more operating guys guys with coo experience if you will to help manage the business with the CEO focused on sales again in most of those cases were not necessarily looking for guys with specific operating experience in that industry we're just looking for good operators a good executives good cos okay great some other questions here let's see i'm going to tell me i'm going to read them and you can read them respond in the order you want how would you suggest a pre-revenue medical device company with a 1.5 million in a ram a post 1 million angel fund start I don't I need some clarification on that Bruce but fine oh you're looking to find one to two million well private equity there's a difference between private equity I'll answer it now private equity and a venture capital & private equity is typically looking for cash flow history of ebit da a north of two or three million if it's a growth company a history of at least 1 million ebit da so private equity really doesn't do it now blackboard connects Bruce has a whole list of venture capital funds and you could probably work through them send me a note I can introduce you and you can get their list to market okay one of the questions is from a few from Willard please expand on your investments in health care services what is your preferred check size regarding financial services are you seeking firms that deliver software services to the finest financial institutions or other types of b2c financial firms so there's a three different questions sure I think the first one was health care related in terms of health care we've made now several investments in health care i'll go through case study a little bit later of one of those which was a primary care business down here in South Florida provide providing primarily we had a few specialists on staff but providing primarily primary care physician services to the Medicaid population down here where we were contracted with the Medicaid managed care plans to provide all the health care for those patients we were at risk so you know we get a per member per month fee and we were responsible for all the health care and for coordinating all the care of those patients we've recently made another investment in very similar business in Central Florida doing the same thing but exclusively Medicare so working with Medicare Advantage plans we've got i believe over 25 close to 30 positions there now and we've also invested in a dental business on the west coast of florida or up to i think twenty three offices probably you know general dentists talking to a few home health businesses now we're actively looking for me for companies in the home health space that's another area of focus as well as the urgent care space we're talking to a few there in terms of financial services we would look at add you know called fintech or companies providing technology whether it's its software or others to financial services but we haven't invested in those in the past when I say financial services it's been primarily specialty finance companies so asset-based wonder we own we are factoring business factoring primarily government receivables we own a subprime auto lender we recently sold a couple months ago a third-party administrator of retirement plans doing administration record-keeping for defined contribution retirement plans primarily 401 k plans for small and medium-sized businesses so that's on the financial services I think you had another question in there about Chuck sighs as i mentioned before we're focused on the small end of the market so usually companies with sub 10 of aveda we're usually investing 5 to 15 million of equity capital and anyone investment which which translates to enterprise value companies in the typically 10 to 50 million 10 275 we probably stop out or top out at around 75 million of enterprise value and then equity capital again you know five ten 15 million of equity capital out of the fund many times I mentioned the founder is staying aboard or is rolling over some equity as well so you know that that typically completes the the equity part of the capital structure okay can you give some examples of the debt partners you bring in Luke sure we've got a really a couple that we work very very closely with that we've worked with now for many years and these are usually small that funds whether they are SBI CS or on their their debt funds providing dead capital for small businesses in the you know usually minimum three million dollars of Eva da we haven't traditionally worked a lot with commercial banks we've had really just a couple of our investments where we finance the acquisition or part of the acquisition with with senior debt from a commercial back we found that commercial banks are just typically very very slow tough to deal with we are usually investing in service businesses so we usually don't have a lot by way of hard assets we may have some ill receivables that we can finance or leverage with a commercial bank but they're usually not willing to lend a lot on a cash flow basis to small businesses especially remember we started back in in 07 so you know Oh 809 banks weren't lending at all 2010-11 they still weren't lending that much unless it was you know pure acid collateralized loans they've started to learn a little more on a cash flow basis but it would be if we were to use some senior debt from a commercial bank and then finance the rest with some subordinate debt or resin een if you look at the blended rate between the two tranches we usually are coming out more or less in the same place working with one of these debt funds that will do a unit ranch as usually easier just to work with with one lender that we know well versus having a senior lender commercial bank and then a subordinated lender we and look we usually move very very quickly we like to close our transactions quickly it's it's one of the things that that we think differentiates us as well and commercial banks are just really slow yeah well said well what's your philosophy and how long you hold companies we really go we usually go into an investment thinking or expecting a typical private equity hole which is around five years right but we've we've sold eight of our portfolio companies now over the years and we've had hold period just the littlest two years and then there's businesses that that we've held now for almost six years right that are still in our portfolio and we're probably going to hold it for a little longer you know a couple things that I would say to that is many times it's our partners that are running the business in the day-to-day that are coming to us and telling us when they think it's time to exit the business whether it is because the industry is getting more competitive or it's going to be tougher to grow over the next year so it may make sense to seek liquidity at that point it could be that our partner is just ready to retire now you know whether it's after three or four years and just looking up i'd i'd like to hang it up now i'm getting tired you know we we've had a great run Asik liquidity dial you know I've been running 100 miles an hour for the last four years I I need to take a break so most of them again most of the time it's our partners coming to us and starting that discussion for different reasons that they're seeing in the business and the other thing that I'd say and it's it's a presentation one of the later slides we can be very flexible we can be very patient in terms of our hold period because of our investor base where we don't have any institutional investors all we have is very high net worth individuals family office type investors that have been investing private entity for many years we're a very small piece of their portfolio at our small size so we don't feel that pressure we don't have to provide distributions we don't have to show realization for us to continue to raise additional small funds so we can be patient and one of our recent investment our partner told us what we we we love to partner with you guys but we want to hold this business for 10 years at that point we'll be on our in our early 60s and we'd love to sell the business at that point and retire are you willing to do that was an absolutely we don't have any problem holding the businesses longer if if it makes sense great here's a question and I'll start off with my answer I'm a transformational season software executive with proven track record of turnaround engineering and operations how do I get on the radar with PE well yogi it's like your if you just present your resume and your record to private equity they're overwhelmed with people unless they you happen to hit the need at the right time what I recommend to you and everyone else on this webinar and those listening in the future is come up with an angle for an industry in the industry to acquire companies that will differentiate you from ninety-nine point nine percent of the executives out there so that when you're using and reaching out to you know we recommend you have a list of about 200 private equity firms in the industry you know so when you're reaching out to those PE firms with hey here I have a thesis here's what I think we could be acquiring they go wow that's interesting let's talk more your thoughts on that Roberto you you hit it right on where you hit the nail right on the head as I mentioned before we get we get those emails every day and we just we just can't respond to all and we can't even look through all of them many times but if we get something that says this is a business that I think we can acquire I've already talked to them or I'm experience in this industry I know these 10 companies I've talked to some of them already what I need is an equity partner to go out and acquire one and this is my experience then that makes a huge difference or if it comes from a black more right if Gerald calls me up and says hey I've got this great executive in this industry I know you guys like this industry he's already identified several opportunities we can help him identify a few others I think it makes sense for you guys to talk to him he's a great operator great executive then that backhaul take any time right because I know if it's coming from Gerald he he already knows the executives he's prepared him in terms of you know what he should be looking at businesses and I know that blackboard can also help find additional businesses is with our potential acquisitions with that executive so you know that that works perfect yeah so so there you go yogi another you know comic get yourself into the conference uh you know just register or send me a meeting notice yogi and if you can get to the conference we can see if you're a fit for it we're over half full but not everyone can come and we turn down a lot of people because there's a certain requirement which we can go over on the phone for your portfolio companies do help them with Lean Six Sigma best practices to grow their sales new product development that's a question from dick yeah we not necessarily lean or six sigma we don't we don't spend too much time on that from from a pine tree perspective in terms of growing sales in which you mentioned on the sales front we do spend a lot of time in helping our partners build out a sales organization most of these small businesses don't have anything by way of a sales organization most of or many times our partners in these businesses have no experience in you know recruiting properly for the sales function managing a sales are going to say organization properly incenting them tracking their production or productivity properly etcetera etcetera so we do spend a lot of time on on that side in in helping our are operating partners rate okay let's go on to the next slide slide number four it's about you yeah this is just just a brief blurb on me as I mentioned about 10 years now almost 10 years at pine tree before that I was with UBS investing in small businesses on the on the public side so it's almost 20 years now of investing exclusively in the in a small end of the market but you know the next slide a little bit more on our criteria in terms of the types of businesses that we look at you know in terms of size again usually sub 10 Aviva dot 10 to 50 of revenue I think everything everything else is pretty typical of what private equity likes to see in a business you know good growing businesses defendable market positions with high entry barriers switching costs you know predictable cash flows we look for businesses they're typically non-cyclical or recession resistant not a lot of capex some degree of visibility everyone particularly in private equity everyone wants businesses that have good recurring revenues but I think there's there's very very few businesses that have real recurring revenues but we really want to see at least some degree of visibility and and nice and nice margins or high margins I think that the lowest Eva da margin business we've invested in was right around fifteen percent which again goes to show that you know they do have high barriers to entry high switching costs they they do have a good good fundamentals right and obviously these are small businesses they're not they're never the leader or the call 800-pound gorilla and then the industry but what we are look for our are leaders in either a particular niche or particular geography and and you can usually see that in in the nice margins question for you ah it's built dead that private equity already owns anything of value you know and given government regulation on smaller companies and green shoots out there there just isn't much to buy how do you ascertain in any one of the market areas that you're going after for business services are there enough potential targets even yeah I mean I didn't put potential targets we've we've never really had an issue with in the small end I mean I could see that as you get bigger and bigger but at the small end of the market they're just so many businesses right thousands and tens of thousands hundred thousand businesses in the you know two three four five million of EBITDA that there always are many targets the the issue for us historically has been more filtering right taking that seven eight hundred potential opportunities that we see and and filtering it down to the ones that we really should be spending our time on and looking at more closely but you know we're looking to make a couple of platform investments a year there there there plenty of targets out there that that hasn't really been been an issue at least all right for us as tourists plenty of targets in that two plus may need da that haven't been previously owned by private equity that's good news correct crotty well it's in and it's you're saying that potentially they meet the criteria right so there's enough of them out there that have them it's just a matter of finding and buying them yep exactly it's a matter of of filtering and and finding the really really good ones that that we want to invest in next to probably skip skip to the next it really skip to the next slide gerald a skip to the value of pine tree and and again this is this some of where we spend our time including obviously are operating partners that we have internally and you know we always look at it as just as our partner or executive that's running the business in a day day obviously has a job to do we also have a job to do for our executive for our partners again in a support role and these are just some of the things or some of the places where we spend our time whether it's and lender negotiations are really just taking care of the balance sheet we tell our executives you never have to worry about where your next dollar of capital is coming from if you find good opportunities whether its internal investment opportunities or add-on acquisition opportunities you know just let's go out find him and execute on those will take care of where the Capitals coming from you never have to talk to the bank you never have to worry about anything like that yo management recruiting again we spent a lot of time bringing in additional depth into the management team whether it is on the financial side CFO's and/or controllers see photos pruiting a question had come up earlier and what you tend to do use mostly outside recruiters or is your first place to go is people that you already have that you've gotten to know over the years both but usually we are using outside recruiters so in some cases there will be people that we've gotten to know over the years either add up conference like the one you're putting on in a couple months or or just oh in different ways and you know when we have an opportunity or we have they need will say well yeah this guy would be perfect we we've known and we've been talking to them for a while makes perfect sense that happens rarely but it happens occasionally most of the time we are going out and and bringing an outside recruiter but we will we will pretty much handle that process ourselves so that our partner or CEO doesn't have to spend too much time on that yeah you know in terms of doing again sifting through the 100 or 200 resumes funneling that down to a few interviewing those qualifying them to the point where you know we're putting two or three guys or girls in front of our partner and at that point it's more than anything just making sure there's a good fit personality wise or which one is the best fit because we've already done all the work previously to qualify them etcetera got it same slider next slide I mean there again we've talked a bit about it on the financial side etc looking for cost improvements or cost downs or operating improvements and then obviously on the add on front it's always part of our strategy in order to help the businesses grow faster than they could just organically again we spent a lot of time going out finding add-ons we've made I think it's a 24 25 now add on investments for our 18 platform companies taking you can go to the go to the next slide and just just a few additional things of that make us maybe a little bit unique in terms of private equity perspective and and the small and the market we are as a group internal here were the largest investors in our funds with around twenty percent of the committed capital is actually coming from the team so yes our our success is your success in terms of our partners you know we every time we make an investment we look at it as principles we don't look at it as we're putting money to work on behalf of other people we're putting our own money to work and that's that's very important right because there's there's a good alignment of interest from from everyone yeah just I've gotten slide here in the back but we we like the fact that a few several of our executives three of them now where we sold businesses with them in the past have come back around not only invested in our funds but we've actually or they've actually come back around and wanted to partner with us again in acquiring another business so we were actually pretty proud of that I mention speed to close which is which is something that that that we always or that we think differentiates us a little bit there's no there's no investment committees here my partner Jeff and I like the investment we go forward quickly right we don't or we won't sit in front of an entrepreneurs in front of an executive say we're going to do something this is what we're going to do and then come back a week later it's that well actually once we sat down with all my best committee they had different ideas they don't want to do it's right here we are the decision makers so it makes for a very very streamlined process imagine the the exit requirement we talked about before in terms of the whole period and having the ability to hold for longer any of you want to go to the go to the next slide which I think most of this we've talked about before we only make a couple of essence a year we have a very concentrated portfolio we want to make sure that we're spending a lot of time with our portfolio companies again in a support role but you know we don't want to have a you know 30 company portfolio we're spread and we want to make sure that we know exactly what we own and we're spending the time and the resources to help them grow as quickly as possible talk about server side and the operating partners and just the last bullet point he or something obviously were very proud of through 18 investments we've never had a we've never had an impairment we've sold eight of our portfolio companies now generating a little over six times return on the cat on our capital for our investors but more importantly that's generated as seven times return on the equity capital that our operating partners that our executive partners have invested in the business and part of the reason they are or the reason it their returns are higher than ours is because we always put in option pools in place to incent or additionally intent and align the interest of our executives right so if we're all very successful we'll push more and more equity back to the executives that have been primarily responsible for that success and lastly I've got the case study I mentioned a little bit earlier Community Medical Group which is the business down here in Miami we invested in in august 2013 partnered with an industry executive with extensive experience in the in the industry and great relationships with the managed care plans in Florida working on the Medicaid side so we were able to acquire this business from the two owners that had started the business back in two thousand and and partner with a very successful executive from the industry went through diligence with us invested alongside us in the business and ran the business from day one of our investment if you look at if you go to the next slide just just some of the things that that we helped with or where we spent our time in a support role again bringing in the CEO bringing in a COO under him and putting in all the financial monitor and facile reporting we typically do now he secured or he really helped secure contracts with pretty much every single managed care plan operating in in South Florida except Humana which was a competitor on the provider side so we didn't want to partner with them but it was a great success story and and it was a great success again in large part because of of the executive that we partnered with and he did a great job bringing in additional business and growing that company with our support you know from essentially 13 million Aviva done doubling the size in in two years and so it was a it was a great exit it was a it was a quicker exit than normal for us but you know we had we had some strategic interest that approached us so based on that we decided to actually start a full process and ended up selling to another private equity firm where the the executive CEO stayed aboard you know he took some money off the table that actually kept more money in continues to run the business today with the new partner and they've actually continued to extremely well talk to them last week and they've continued to grow very very nicely so just an all-around great story there and then finally he'll mention mention some of the executives that that we've worked with in the past that have come around and partnered up with us again Jamie Davis ran business for us as CEO in the testing space a great result they're made 12 times our money he stayed aboard with the new owner for a couple years and then decided you know he he didn't want to continue their wanted to partner up with us again found this safety services business and we partnered up with him to acquire that business yeah but that's that's just one of the examples I've we don't we don't need to go through all them but again we're very proud to have had several of our executives not only invest with us in enough funds after after their experience with us but but actually want to come back and partner with us again in a new investment great well this has been very informed of here and i want to invite everyone to consider the Blackmore conference on october 12 it is by application only so you do need to schedule a meeting with me once again we really need to make sure it's a fit for you one of the last questions came from one of the participants is well how do I find out about more private equity opportunities well what you need to do is build your funnel and there's some articles that i sent out and i'll send out again to everyone on building your funnel private equity firms as you as Roberto said they only do a few deals two to three deals a year they look at 700 so if you think about that you need to have a funnel of 200 to 500 private equity firms and get on their radar and the best way to get on their radar is to give them something from the point of view of hears about reason to invest here's an idea for investment here's a here's some companies that I have in mind that I'd like to buy and I'd like to get your backing you want to do that with as many private equity firms as possible build your funnel get noticed become aware go to conferences like Blackmore connects conferences and you can do that by the way for those of you coming up besides the October 12 conference we have in a one on November 29th which is focused entirely on health care I believe and then on December first everything food so if you're an executive a generalist or in any industry the 12th is open to you but if you have specific industry knowledge on the November 29th its healthcare and on the December first is all things foods a Roberto thank you for your generous time and attention and anything what in closing no look thing thank you for setting this up Gerald thanks everyone for for you know taking the time this morning to to dial in and and participate yes we are going to look forward to meeting some of you I really look forward to meeting some of you and in a couple months good I look forward to having them there there's last question from George is there a place to find the good list of PE firms yes George if you go to Blackmoor connects make sure you're a member both in the bronze and gold plan you can get all access to that and start building your funnel reaching out thank you so much would this ends the recording

we&#39;re going to just do a sound test for those of you on the call please raise your hand find the box with your name raise your hand that you can hear me and you can see the web page called black more partners please raise your hand so I know that you&#39;re there and that you can see the web page good it we&#39;re coming in strong people are continuing to get on we&#39;re just doing a test that you can hear me and you can see the web page if you can&#39;t at any time do write a note in the dialogue the questions box to inform us okay we&#39;re going to go ahead and get started once again my name is Gerald wire managing director blackmore partners we&#39;ve been around since 2005 we have one mission to find executives to work with them to help them monetize their background into a deal that&#39;s fundable by private equity now along the way we&#39;ve grown into many areas my partner on the deal side so Yelena and I we will find great exacts they have a good thesis and we&#39;ll go find targets the exact clients targets we co invest in the deal we bring in other co-investors like pine tree equity and we put the deal together and the exact typically runs it with salary bonus equity etc and certainly a Roberto will talk to this as we go along so that&#39;s how we got started we&#39;ve done numerous deals we just exited the deal just two weeks ago it was called at the time Northwest mailers worked with Tom Regan to put together a thesis to take sleepy mailing houses right the mail documents to your home&#39;s advertising material and combine it with data analytics this was back in 2009 and was really ahead of its time before big data data analytics was the rage and we we had a very successful exit just over 2x time and tom is staying on the company just got bought by RR donnelley so a beautiful thing a strategic exit versus another financial buyer although that would have been okay also we&#39;ve gone on to do deals that were wildly successful when we bought company kinetics with winter capital with it was a management buyout and a total purchase of two companies that were put together for 30 million and in just over a year and a half ago we sold it to golden gate capital for 280 million eight times our money so private equity is a beautiful thing that&#39;s why black more partners exists is we&#39;re an independent sponsor who partners with executives to put deals together along the way we developed we added a few other partners mike johnson mike does our board partner board positions for private equity only last year his group did about 40 of them however according to michael relly if you&#39;ve been on our webinars in the past there are 36 thousand board positions of potentially available private equity firms for the most part are putting one to two board members outside folks on their portfolio company boards that is a trend that I&#39;ve seen Roberto has that been a trend you seen over the last five years have been less sell more so what if what are your thoughts what are you here in the market or see for your own firm there&#39;s ya know look it continues to be more and more focus it always has been a focus for us our strategy since we started almost ten years ago has been to partner with with great operators at both the executive level and bringing in as advisors or on the board level so it&#39;s always been part of our strategy and we see more and more groups doing it that way every day no so 36,000 potential board positions out there just in private equity in the total public and private market over 58,000 according to my corolla LE you can see that webinar up on our blackboard connects website by the way I&#39;m landing board seats input wonderful presentation by Mike on that our other partner is she on ciao she has six full-time recruiters last year they did over 160 searches c-suite searches uh you know once again private equity is always looking for a talent whether it&#39;s talent that they find as the app because they&#39;re being brought a deal or talent they are upgrading talent in their portfolio companies however we did 160 searches there&#39;s over a hundred and thousand according to statistics of potential sea level positions every year the question becomes if if you&#39;re not getting in the offers why is that and that&#39;s where we Blackmore started Blackmore connects so that your source for everything private equity so that executives can take advantage of getting themselves known in the private equity rather than taking a passive approach so on black more partners inc side you know that&#39;s a you&#39;re going to be hearing from our recruiters but only when you when you are a fit for the deal the black more connects allows you to be have a more proactive approach through networking events webinars there&#39;s articles everything that you need to get better educated to make yourself seen and be heard in the private equity market so just as a reminder this is a webinar with pine tree equity and Roberto canto is part of a an insight we call into the mind to private equity and how they think and work in the lower middle market October twelfth is our conference here in Chicago and that will go from 12pm to 4pm for the conference part and then 4pm to 7pm for one-to-one meetings for those attending the conference to meet with the 24 private equity firms that are attending right now we have over 15 private equity firms they signed up and we will close out for private equity we&#39;re now fifty percent filled of our target of of 50 executives who typically have a penile north of 50 million we&#39;re looking for executives to attend the conference who have an idea at the minimum to acquire companies in their industry their industry experts private equity that&#39;s the calling card so these are just some of the private equity firms that will be in attendance and you can see Roberto is right down there here okay so we&#39;re going to go off to Pinetree equity Roberto your when did you start with pine tree I partnered up with with my partner Jeff satin Barrino back in late two thousand six so Jeff was at try this before another private equity firm down here in Miami had spun out to start pine tree and I joined up with him as he was getting it off the ground and we officially launched our first fund in January of 2007 so we&#39;ve been added as pine tree now for a little over nine and a half years excellent well Roberto what are some of the what are you going to cover here today about pine tree well I&#39;ll give just a brief overview of a pine tree what we do how how we operate in terms of the types of businesses that we like to invest in and and very specifically how we like to partner with operators right we don&#39;t look to come in and run the businesses we invest in in the day-to-day we want to partner with successful operators with successful successful executives that have industry experience that we can partner with to help them run the businesses in the day-to-day and an aggressively grow those businesses over time got it why are you attending the conference you you wanted to talk up a little bit about that I know before we got into the meat of pine tree what what makes it important versus just getting an email and a resume by phone and yeah I you know well it&#39;s it&#39;s a gray eight it&#39;s a great setup to be able to meet face-to-face with a large group of executives in one-to-one meetings in in one place at one time right it makes for a very very efficient process we get as I&#39;m sure most private equity of not all private equity groups we have many many emails resumes sent to us by different executives every day every week every month that we just don&#39;t have the time to go through all of them we don&#39;t have the time really to contact all of them or to filter and qualify them or a small group or a small team we&#39;re focused on making great investments and we just we just can&#39;t spend the time so it&#39;s great to have a group like yours Gerald that does that for us right that filters and qualifies these executives and then we can meet with them again in one place at one time it makes it makes for very efficient as I mentioned before our whole strategy is to partner partner with executives partner with operators and we do like spending a lot of time with them in person one-on-one before making an investment or before partnering we one of the things that that we like about the small end of the market which is the space that we&#39;ve been investing in now for almost ten years other things we like about it is that many times we can invest in companies outside of a full auction process right we&#39;re in an auction process you may get a chance to you know have one conversation with the management team spend you know two or three hours maybe in a management meeting and you&#39;re already at the LOI stage we don&#39;t usually like to operate that way we want to get to know our our potential partners much better than that and spend a lot more time with them up front in person getting to those of getting to know them as operators but also getting to know them as people making sure there&#39;s there&#39;s a good fit there so you know want face-to-face time with our potential partners is very important for us and and having the ability to very efficiently meet with qualified executives have already been qualified by you guys is is very important that makes it makes it a lot more efficient for us talk about the range of what qualified executives mean for you let me share my thoughts and then I&#39;d like you to expound that and so we look at you know the number one thing that private equity exists for is to put money to work so if there&#39;s an executive who has an a great investment thesis whatever that might mean and I&#39;d like to have you expand on it boy you want to meet them right now they may not be of always afin we find executives bring us deals they&#39;re not a fit necessarily be the CEO but they could be a good fit for the board uh for being a board member they could be a great fit as a co-investor in the deal they could be a great fit for being part of the due diligence or consulting there can be a full range why don&#39;t you give us your range of what you notice with executives and what you look for from Jerry yeah I think I think you mentioned most of them the one thing I would I guess maybe not agree a hundred percent with you is we don&#39;t think private equity exists to put money to work we think it exists to make great returns for our partners or our limited partners make green vestments returns for them so so we&#39;re very very picky in terms of the investments we make we look at seven eight hundred opportunities in any given year to make two maybe three platform investments because we want to find those really perfect situations so not always will it make sense even though we may have a great executive or operator bringing us a good opportunity it may just not be a pine tree investment like I said we&#39;re very very picky we&#39;re looking for the absolute perfect situations but at the same time knowing that executive even though that opportunity may not be the ones that we want to go forward with we may find another opportunity a year later a couple years later that we do want to invest in and now that we know that executive another than operator we can bring him into that opportunity and partner with them in that case and throughout as you mentioned there&#39;s there&#39;s opportunity to work together on consultant basis as advisors during diligence or after we&#39;ve invested where again it may not be the type of company that that executive is looking to join but after knowing him and knowing his uh uh or what he is qualified at etc we can use him on an advisory rule to not only evaluate other opportunities but as you mentioned at a board level on ongoing consulting or advisory role okay would you like me to move down in the slides here sure if you want to get started and and please as Gerald said to be great to make this as interactive as possible versus me just going through a few slides so send send in your questions at any time okay um if you want Gerald we can just we just skip to the next slide that should have just a executive summary if you will on pine tree Cheryl said before we&#39;re based in Miami started back in January 2007 when we launched our first fund we&#39;re currently investing out of our third fund now and across those three funds we&#39;ve got about two hundred million dollars of equity that we&#39;ve invested and remaining to be invested we are a committed fund right so we do have committed capital as i mentioned across those three funds two hundred million which is important in the in the small end of the market where many times you&#39;ll you&#39;ll come across fund less bouncers or independent sponsors that you know me find a good opportunity may be interested in investing you have a an executive but then still need to go out and find the equity we have the equity we just call it down um focus on a small into the market as I mentioned it&#39;s all we&#39;ve done since we started looking to invest in small cap companies sub 10 million dollars of Eva da typically between two and eight million across business consumer financial services healthcare services as well so we&#39;re services oriented we are generalist within services though and we have invested in financial services it&#39;s been a little bit of a focus of ours we&#39;ve made five platform investments in financial services and then a whole host of other business and direct to consumer services whether it is health care services or oil and gas services industrial services etc so we&#39;re general list but only services we typically won&#39;t invest in more industrial heavy manufacturing businesses we will look at some neat small niche manufacturers but again primarily focus on the services side we want to be always the first institutional investor in any in any business so we are looking to invest in or acquire family or founder owned companies as I mentioned we will look to do two to three investments in any in any given year we look at you know at least seven or eight hundred opportunities so as I mentioned before filtering and qualifying these opportunities is really important for us that&#39;s where we spend most of our time and and that&#39;s why we don&#39;t have as much time to spend filtering qualifying the the executive emails or resumes that we have come in we&#39;ve invested now in the nine and a half years that we&#39;ve been added we&#39;ve invested now in 18 platform investments we&#39;ve also completed I think around 25 add-ons now so you know over 40 total investments and we&#39;re also the last the last point I&#39;ll make we do have to we call my operating partners they are you know full-time pine tree employees or pine tree partners but focus exclusively on working with our portfolio companies in a support role right so like I mentioned before we&#39;re not looking to run these businesses in the day-to-day we want to support our partners help our operators are executives that are running the business help them grow the business more aggressively and we spend our time in a whole host of different areas that I&#39;ll touch on a little later but we we do have again the two internal resources all they do is work with our portfolio companies versus looking for new new investment opportunities so I have a question about operating partners define what an operating partner is what does their day look like what do you look for in operating partners is it is it based around run portfolio company or are they generalist popping in doing strategy strategy execution lean expand please sure so our that the two partners that we have now operating partners both come from a financial background both for cfos of middle market businesses one with CFO / coo as well a little more operating experience as well but we decided to to bring them in with that type of background because over the first few years in looking at valuating small business opportunities and investing in small businesses we found that pretty much all these small businesses needed or the areas where they needed the most help was on the financial side whether it&#39;s putting in the appropriate accounting system bringing a controller bringing a CFO they acted as interim CFO is on many occasions while we recruited and brought in a permanent resource you know spent a lot of time on the expense side looking for cost downs looking for saving opportunities that are so doing a lot of work on the financial side versus the heavy operating side where again we were partnering with either the founder of the business who was continuing to run or we were partnering with an executive that was coming in day one alongside us investing in the business and running it in the day-to-day so that that that&#39;s been or that&#39;s the profile of the two guys that we have now but we&#39;ll continue to look for other operating partners down the road as our portfolio continues to expand and probably not necessarily a a financial background but maybe a little more of an operating background of different businesses so like I mentioned before we&#39;re generalists we&#39;re not focused on a particular industry so less important what specific industry they have experience in and more important just what kind of experience they have ad executives and how they&#39;ll be able to help our our you know partners in the business if you will you know you bring up an interesting point more generalists we find in the lower and the lower middle market is it&#39;s more about executives ability to block and tackle that is critical than industry knowledge what&#39;s your experience in hiring it or working with execs to buy a company do they have to know that industry perfectly or can they just be just great executives I think it depends a little bit on exactly what what we need them for if you will and and what industry the business is in so for example I&#39;ve got a case study here in the back of this brief presentation talking about one of our investments where we did partner with an industry executive who invested it went through one you know with us through diligence and vested alongside us and ran the business through our ownership period in that case for that specific business we thought it was very important to have an executive with industry with industry specific experience and haven&#39;t been in that industry for many years and having the contacts with the customers in that specific industry which is a a very limited customer so I think it depends right and other occasions we have looked for executives that you know you mentioned blocking and tackling i want to say necessarily just blocking tackling experience but my experience running businesses on the operating side or on the financial side but not necessarily important that they have experienced in that specific industry you know were usually you&#39;re constantly hiring CFOs into our businesses we don&#39;t necessarily look for industry experience in that case we we just want good CFOs with good CFO experience right same thing many times we are looking to bring in chief operating officers in in a lot of our investments we will partner with the founder of the business who will continue running the business a CEO many times those founders are very sales-oriented CEOs right and we want them to focus more and more on the sales side and customer relations side which is really what&#39;s going to drive growth and drive value in the business down the road so we&#39;re looking to bring in more operating guys guys with coo experience if you will to help manage the business with the CEO focused on sales again in most of those cases were not necessarily looking for guys with specific operating experience in that industry we&#39;re just looking for good operators a good executives good cos okay great some other questions here let&#39;s see i&#39;m going to tell me i&#39;m going to read them and you can read them respond in the order you want how would you suggest a pre-revenue medical device company with a 1.5 million in a ram a post 1 million angel fund start I don&#39;t I need some clarification on that Bruce but fine oh you&#39;re looking to find one to two million well private equity there&#39;s a difference between private equity I&#39;ll answer it now private equity and a venture capital &amp; private equity is typically looking for cash flow history of ebit da a north of two or three million if it&#39;s a growth company a history of at least 1 million ebit da so private equity really doesn&#39;t do it now blackboard connects Bruce has a whole list of venture capital funds and you could probably work through them send me a note I can introduce you and you can get their list to market okay one of the questions is from a few from Willard please expand on your investments in health care services what is your preferred check size regarding financial services are you seeking firms that deliver software services to the finest financial institutions or other types of b2c financial firms so there&#39;s a three different questions sure I think the first one was health care related in terms of health care we&#39;ve made now several investments in health care i&#39;ll go through case study a little bit later of one of those which was a primary care business down here in South Florida provide providing primarily we had a few specialists on staff but providing primarily primary care physician services to the Medicaid population down here where we were contracted with the Medicaid managed care plans to provide all the health care for those patients we were at risk so you know we get a per member per month fee and we were responsible for all the health care and for coordinating all the care of those patients we&#39;ve recently made another investment in very similar business in Central Florida doing the same thing but exclusively Medicare so working with Medicare Advantage plans we&#39;ve got i believe over 25 close to 30 positions there now and we&#39;ve also invested in a dental business on the west coast of florida or up to i think twenty three offices probably you know general dentists talking to a few home health businesses now we&#39;re actively looking for me for companies in the home health space that&#39;s another area of focus as well as the urgent care space we&#39;re talking to a few there in terms of financial services we would look at add you know called fintech or companies providing technology whether it&#39;s its software or others to financial services but we haven&#39;t invested in those in the past when I say financial services it&#39;s been primarily specialty finance companies so asset-based wonder we own we are factoring business factoring primarily government receivables we own a subprime auto lender we recently sold a couple months ago a third-party administrator of retirement plans doing administration record-keeping for defined contribution retirement plans primarily 401 k plans for small and medium-sized businesses so that&#39;s on the financial services I think you had another question in there about Chuck sighs as i mentioned before we&#39;re focused on the small end of the market so usually companies with sub 10 of aveda we&#39;re usually investing 5 to 15 million of equity capital and anyone investment which which translates to enterprise value companies in the typically 10 to 50 million 10 275 we probably stop out or top out at around 75 million of enterprise value and then equity capital again you know five ten 15 million of equity capital out of the fund many times I mentioned the founder is staying aboard or is rolling over some equity as well so you know that that typically completes the the equity part of the capital structure okay can you give some examples of the debt partners you bring in Luke sure we&#39;ve got a really a couple that we work very very closely with that we&#39;ve worked with now for many years and these are usually small that funds whether they are SBI CS or on their their debt funds providing dead capital for small businesses in the you know usually minimum three million dollars of Eva da we haven&#39;t traditionally worked a lot with commercial banks we&#39;ve had really just a couple of our investments where we finance the acquisition or part of the acquisition with with senior debt from a commercial back we found that commercial banks are just typically very very slow tough to deal with we are usually investing in service businesses so we usually don&#39;t have a lot by way of hard assets we may have some ill receivables that we can finance or leverage with a commercial bank but they&#39;re usually not willing to lend a lot on a cash flow basis to small businesses especially remember we started back in in 07 so you know Oh 809 banks weren&#39;t lending at all 2010-11 they still weren&#39;t lending that much unless it was you know pure acid collateralized loans they&#39;ve started to learn a little more on a cash flow basis but it would be if we were to use some senior debt from a commercial bank and then finance the rest with some subordinate debt or resin een if you look at the blended rate between the two tranches we usually are coming out more or less in the same place working with one of these debt funds that will do a unit ranch as usually easier just to work with with one lender that we know well versus having a senior lender commercial bank and then a subordinated lender we and look we usually move very very quickly we like to close our transactions quickly it&#39;s it&#39;s one of the things that that we think differentiates us as well and commercial banks are just really slow yeah well said well what&#39;s your philosophy and how long you hold companies we really go we usually go into an investment thinking or expecting a typical private equity hole which is around five years right but we&#39;ve we&#39;ve sold eight of our portfolio companies now over the years and we&#39;ve had hold period just the littlest two years and then there&#39;s businesses that that we&#39;ve held now for almost six years right that are still in our portfolio and we&#39;re probably going to hold it for a little longer you know a couple things that I would say to that is many times it&#39;s our partners that are running the business in the day-to-day that are coming to us and telling us when they think it&#39;s time to exit the business whether it is because the industry is getting more competitive or it&#39;s going to be tougher to grow over the next year so it may make sense to seek liquidity at that point it could be that our partner is just ready to retire now you know whether it&#39;s after three or four years and just looking up i&#39;d i&#39;d like to hang it up now i&#39;m getting tired you know we we&#39;ve had a great run Asik liquidity dial you know I&#39;ve been running 100 miles an hour for the last four years I I need to take a break so most of them again most of the time it&#39;s our partners coming to us and starting that discussion for different reasons that they&#39;re seeing in the business and the other thing that I&#39;d say and it&#39;s it&#39;s a presentation one of the later slides we can be very flexible we can be very patient in terms of our hold period because of our investor base where we don&#39;t have any institutional investors all we have is very high net worth individuals family office type investors that have been investing private entity for many years we&#39;re a very small piece of their portfolio at our small size so we don&#39;t feel that pressure we don&#39;t have to provide distributions we don&#39;t have to show realization for us to continue to raise additional small funds so we can be patient and one of our recent investment our partner told us what we we we love to partner with you guys but we want to hold this business for 10 years at that point we&#39;ll be on our in our early 60s and we&#39;d love to sell the business at that point and retire are you willing to do that was an absolutely we don&#39;t have any problem holding the businesses longer if if it makes sense great here&#39;s a question and I&#39;ll start off with my answer I&#39;m a transformational season software executive with proven track record of turnaround engineering and operations how do I get on the radar with PE well yogi it&#39;s like your if you just present your resume and your record to private equity they&#39;re overwhelmed with people unless they you happen to hit the need at the right time what I recommend to you and everyone else on this webinar and those listening in the future is come up with an angle for an industry in the industry to acquire companies that will differentiate you from ninety-nine point nine percent of the executives out there so that when you&#39;re using and reaching out to you know we recommend you have a list of about 200 private equity firms in the industry you know so when you&#39;re reaching out to those PE firms with hey here I have a thesis here&#39;s what I think we could be acquiring they go wow that&#39;s interesting let&#39;s talk more your thoughts on that Roberto you you hit it right on where you hit the nail right on the head as I mentioned before we get we get those emails every day and we just we just can&#39;t respond to all and we can&#39;t even look through all of them many times but if we get something that says this is a business that I think we can acquire I&#39;ve already talked to them or I&#39;m experience in this industry I know these 10 companies I&#39;ve talked to some of them already what I need is an equity partner to go out and acquire one and this is my experience then that makes a huge difference or if it comes from a black more right if Gerald calls me up and says hey I&#39;ve got this great executive in this industry I know you guys like this industry he&#39;s already identified several opportunities we can help him identify a few others I think it makes sense for you guys to talk to him he&#39;s a great operator great executive then that backhaul take any time right because I know if it&#39;s coming from Gerald he he already knows the executives he&#39;s prepared him in terms of you know what he should be looking at businesses and I know that blackboard can also help find additional businesses is with our potential acquisitions with that executive so you know that that works perfect yeah so so there you go yogi another you know comic get yourself into the conference uh you know just register or send me a meeting notice yogi and if you can get to the conference we can see if you&#39;re a fit for it we&#39;re over half full but not everyone can come and we turn down a lot of people because there&#39;s a certain requirement which we can go over on the phone for your portfolio companies do help them with Lean Six Sigma best practices to grow their sales new product development that&#39;s a question from dick yeah we not necessarily lean or six sigma we don&#39;t we don&#39;t spend too much time on that from from a pine tree perspective in terms of growing sales in which you mentioned on the sales front we do spend a lot of time in helping our partners build out a sales organization most of these small businesses don&#39;t have anything by way of a sales organization most of or many times our partners in these businesses have no experience in you know recruiting properly for the sales function managing a sales are going to say organization properly incenting them tracking their production or productivity properly etcetera etcetera so we do spend a lot of time on on that side in in helping our are operating partners rate okay let&#39;s go on to the next slide slide number four it&#39;s about you yeah this is just just a brief blurb on me as I mentioned about 10 years now almost 10 years at pine tree before that I was with UBS investing in small businesses on the on the public side so it&#39;s almost 20 years now of investing exclusively in the in a small end of the market but you know the next slide a little bit more on our criteria in terms of the types of businesses that we look at you know in terms of size again usually sub 10 Aviva dot 10 to 50 of revenue I think everything everything else is pretty typical of what private equity likes to see in a business you know good growing businesses defendable market positions with high entry barriers switching costs you know predictable cash flows we look for businesses they&#39;re typically non-cyclical or recession resistant not a lot of capex some degree of visibility everyone particularly in private equity everyone wants businesses that have good recurring revenues but I think there&#39;s there&#39;s very very few businesses that have real recurring revenues but we really want to see at least some degree of visibility and and nice and nice margins or high margins I think that the lowest Eva da margin business we&#39;ve invested in was right around fifteen percent which again goes to show that you know they do have high barriers to entry high switching costs they they do have a good good fundamentals right and obviously these are small businesses they&#39;re not they&#39;re never the leader or the call 800-pound gorilla and then the industry but what we are look for our are leaders in either a particular niche or particular geography and and you can usually see that in in the nice margins question for you ah it&#39;s built dead that private equity already owns anything of value you know and given government regulation on smaller companies and green shoots out there there just isn&#39;t much to buy how do you ascertain in any one of the market areas that you&#39;re going after for business services are there enough potential targets even yeah I mean I didn&#39;t put potential targets we&#39;ve we&#39;ve never really had an issue with in the small end I mean I could see that as you get bigger and bigger but at the small end of the market they&#39;re just so many businesses right thousands and tens of thousands hundred thousand businesses in the you know two three four five million of EBITDA that there always are many targets the the issue for us historically has been more filtering right taking that seven eight hundred potential opportunities that we see and and filtering it down to the ones that we really should be spending our time on and looking at more closely but you know we&#39;re looking to make a couple of platform investments a year there there there plenty of targets out there that that hasn&#39;t really been been an issue at least all right for us as tourists plenty of targets in that two plus may need da that haven&#39;t been previously owned by private equity that&#39;s good news correct crotty well it&#39;s in and it&#39;s you&#39;re saying that potentially they meet the criteria right so there&#39;s enough of them out there that have them it&#39;s just a matter of finding and buying them yep exactly it&#39;s a matter of of filtering and and finding the really really good ones that that we want to invest in next to probably skip skip to the next it really skip to the next slide gerald a skip to the value of pine tree and and again this is this some of where we spend our time including obviously are operating partners that we have internally and you know we always look at it as just as our partner or executive that&#39;s running the business in a day day obviously has a job to do we also have a job to do for our executive for our partners again in a support role and these are just some of the things or some of the places where we spend our time whether it&#39;s and lender negotiations are really just taking care of the balance sheet we tell our executives you never have to worry about where your next dollar of capital is coming from if you find good opportunities whether its internal investment opportunities or add-on acquisition opportunities you know just let&#39;s go out find him and execute on those will take care of where the Capitals coming from you never have to talk to the bank you never have to worry about anything like that yo management recruiting again we spent a lot of time bringing in additional depth into the management team whether it is on the financial side CFO&#39;s and/or controllers see photos pruiting a question had come up earlier and what you tend to do use mostly outside recruiters or is your first place to go is people that you already have that you&#39;ve gotten to know over the years both but usually we are using outside recruiters so in some cases there will be people that we&#39;ve gotten to know over the years either add up conference like the one you&#39;re putting on in a couple months or or just oh in different ways and you know when we have an opportunity or we have they need will say well yeah this guy would be perfect we we&#39;ve known and we&#39;ve been talking to them for a while makes perfect sense that happens rarely but it happens occasionally most of the time we are going out and and bringing an outside recruiter but we will we will pretty much handle that process ourselves so that our partner or CEO doesn&#39;t have to spend too much time on that yeah you know in terms of doing again sifting through the 100 or 200 resumes funneling that down to a few interviewing those qualifying them to the point where you know we&#39;re putting two or three guys or girls in front of our partner and at that point it&#39;s more than anything just making sure there&#39;s a good fit personality wise or which one is the best fit because we&#39;ve already done all the work previously to qualify them etcetera got it same slider next slide I mean there again we&#39;ve talked a bit about it on the financial side etc looking for cost improvements or cost downs or operating improvements and then obviously on the add on front it&#39;s always part of our strategy in order to help the businesses grow faster than they could just organically again we spent a lot of time going out finding add-ons we&#39;ve made I think it&#39;s a 24 25 now add on investments for our 18 platform companies taking you can go to the go to the next slide and just just a few additional things of that make us maybe a little bit unique in terms of private equity perspective and and the small and the market we are as a group internal here were the largest investors in our funds with around twenty percent of the committed capital is actually coming from the team so yes our our success is your success in terms of our partners you know we every time we make an investment we look at it as principles we don&#39;t look at it as we&#39;re putting money to work on behalf of other people we&#39;re putting our own money to work and that&#39;s that&#39;s very important right because there&#39;s there&#39;s a good alignment of interest from from everyone yeah just I&#39;ve gotten slide here in the back but we we like the fact that a few several of our executives three of them now where we sold businesses with them in the past have come back around not only invested in our funds but we&#39;ve actually or they&#39;ve actually come back around and wanted to partner with us again in acquiring another business so we were actually pretty proud of that I mention speed to close which is which is something that that that we always or that we think differentiates us a little bit there&#39;s no there&#39;s no investment committees here my partner Jeff and I like the investment we go forward quickly right we don&#39;t or we won&#39;t sit in front of an entrepreneurs in front of an executive say we&#39;re going to do something this is what we&#39;re going to do and then come back a week later it&#39;s that well actually once we sat down with all my best committee they had different ideas they don&#39;t want to do it&#39;s right here we are the decision makers so it makes for a very very streamlined process imagine the the exit requirement we talked about before in terms of the whole period and having the ability to hold for longer any of you want to go to the go to the next slide which I think most of this we&#39;ve talked about before we only make a couple of essence a year we have a very concentrated portfolio we want to make sure that we&#39;re spending a lot of time with our portfolio companies again in a support role but you know we don&#39;t want to have a you know 30 company portfolio we&#39;re spread and we want to make sure that we know exactly what we own and we&#39;re spending the time and the resources to help them grow as quickly as possible talk about server side and the operating partners and just the last bullet point he or something obviously were very proud of through 18 investments we&#39;ve never had a we&#39;ve never had an impairment we&#39;ve sold eight of our portfolio companies now generating a little over six times return on the cat on our capital for our investors but more importantly that&#39;s generated as seven times return on the equity capital that our operating partners that our executive partners have invested in the business and part of the reason they are or the reason it their returns are higher than ours is because we always put in option pools in place to incent or additionally intent and align the interest of our executives right so if we&#39;re all very successful we&#39;ll push more and more equity back to the executives that have been primarily responsible for that success and lastly I&#39;ve got the case study I mentioned a little bit earlier Community Medical Group which is the business down here in Miami we invested in in august 2013 partnered with an industry executive with extensive experience in the in the industry and great relationships with the managed care plans in Florida working on the Medicaid side so we were able to acquire this business from the two owners that had started the business back in two thousand and and partner with a very successful executive from the industry went through diligence with us invested alongside us in the business and ran the business from day one of our investment if you look at if you go to the next slide just just some of the things that that we helped with or where we spent our time in a support role again bringing in the CEO bringing in a COO under him and putting in all the financial monitor and facile reporting we typically do now he secured or he really helped secure contracts with pretty much every single managed care plan operating in in South Florida except Humana which was a competitor on the provider side so we didn&#39;t want to partner with them but it was a great success story and and it was a great success again in large part because of of the executive that we partnered with and he did a great job bringing in additional business and growing that company with our support you know from essentially 13 million Aviva done doubling the size in in two years and so it was a it was a great exit it was a it was a quicker exit than normal for us but you know we had we had some strategic interest that approached us so based on that we decided to actually start a full process and ended up selling to another private equity firm where the the executive CEO stayed aboard you know he took some money off the table that actually kept more money in continues to run the business today with the new partner and they&#39;ve actually continued to extremely well talk to them last week and they&#39;ve continued to grow very very nicely so just an all-around great story there and then finally he&#39;ll mention mention some of the executives that that we&#39;ve worked with in the past that have come around and partnered up with us again Jamie Davis ran business for us as CEO in the testing space a great result they&#39;re made 12 times our money he stayed aboard with the new owner for a couple years and then decided you know he he didn&#39;t want to continue their wanted to partner up with us again found this safety services business and we partnered up with him to acquire that business yeah but that&#39;s that&#39;s just one of the examples I&#39;ve we don&#39;t we don&#39;t need to go through all them but again we&#39;re very proud to have had several of our executives not only invest with us in enough funds after after their experience with us but but actually want to come back and partner with us again in a new investment great well this has been very informed of here and i want to invite everyone to consider the Blackmore conference on october 12 it is by application only so you do need to schedule a meeting with me once again we really need to make sure it&#39;s a fit for you one of the last questions came from one of the participants is well how do I find out about more private equity opportunities well what you need to do is build your funnel and there&#39;s some articles that i sent out and i&#39;ll send out again to everyone on building your funnel private equity firms as you as Roberto said they only do a few deals two to three deals a year they look at 700 so if you think about that you need to have a funnel of 200 to 500 private equity firms and get on their radar and the best way to get on their radar is to give them something from the point of view of hears about reason to invest here&#39;s an idea for investment here&#39;s a here&#39;s some companies that I have in mind that I&#39;d like to buy and I&#39;d like to get your backing you want to do that with as many private equity firms as possible build your funnel get noticed become aware go to conferences like Blackmore connects conferences and you can do that by the way for those of you coming up besides the October 12 conference we have in a one on November 29th which is focused entirely on health care I believe and then on December first everything food so if you&#39;re an executive a generalist or in any industry the 12th is open to you but if you have specific industry knowledge on the November 29th its healthcare and on the December first is all things foods a Roberto thank you for your generous time and attention and anything what in closing no look thing thank you for setting this up Gerald thanks everyone for for you know taking the time this morning to to dial in and and participate yes we are going to look forward to meeting some of you I really look forward to meeting some of you and in a couple months good I look forward to having them there there&#39;s last question from George is there a place to find the good list of PE firms yes George if you go to Blackmoor connects make sure you&#39;re a member both in the bronze and gold plan you can get all access to that and start building your funnel reaching out thank you so much would this ends the recording

Transcript for:Getting into the Mind of Private Equity with Roberto Canto MD, Pine Tree Equity

Transcript for:
Getting into the Mind of Private Equity with Roberto Canto MD, Pine Tree Equity