Scott Estill, a partner in Skillcapital’s New York office who has nearly 20 years in M&A, saw something amiss with the valuation process in his previous positions.
“The frustration point when I was a banker was that it is hard to model out returns with any sort of certainty,” Estill said. “There is often a fair amount of discrepancy among assets that seemingly should be similar in their return (same industry, size, etc.).”
The key factor isn’t numerical, Estill said. It’s personal.
“The real ‘alpha’ generation lies with the executives who run the business, and not with the model or through financial engineering,” he said. “It is all about the management, and they really drive the returns.”
With that in mind, Skillcapital helps PE funds find executives to advise on potential acquisitions and to run portfolio companies. For executives, the firm offers access to potential investors and job openings. Estill explained.
“My job is to be a bit of a river guide and say, ‘Listen, here are some opportunities that are interesting,” he said. “‘I know the PE guys from working with them as a banker,’ or ‘I know you like that kind of asset.’”
In the current market, Estill said, “there’s no shortage of public companies and PE firms wanting to do M&A, wanting to buy assets. The question is: If discretion is the better part of valor, how do you decide which asset to buy, and why? It’s very hard for [buyers] to get comfortable paying the multiples that are out there right now for assets that are perceived as super-high quality.”
Skillcapital works with PE firms before there’s an auction for a given asset, drawing on the experience of executives who know the business to help decide whether the high purchase price is worth it. “Our niche in the market is very unusual,” Estill said.
A graduate of Gettysburg College, Estill recalled his path to high finance. “At the time, in the mid-’90s, you went to one of five schools to get into investment banking. I didn’t go to one of those five schools.”
He took an M.Phil. in economics and political science at Cambridge, then went to work managing money at Hambrecht & Quist. At 4 o’clock he’d head to the investment banking floor and do drudge work for free.
Now he’s on the New York board of the Association for Corporate Growth, a global network of more than 14,000 middle-market M&A professionals.
Among his duties are lobbying in Washington, “decoding the mystery myth of what is this thing called private equity” to lawmakers, “to help them see things through a different lens, or maybe more acutely, why it would be helpful to them or their constituents.”