5 questions with David McKenna

Advent International earlier this month announced that it has closed its sixth global buyout fund with $10.4 billion. So Editor-at-Large Dan Primack posed five questions to David McKenna, an Advent managing partner who has for 14 years focused on buyouts in the industrial sector.

Q: You just raised $10.4 billion for what is termed a middle-market fund. Isn’t that a contradiction?

No, there’s no contradiction at all. We’re pursuing the same strategy we’ve had for previous funds. The size is designed to let us maintain our middle-market focus, but do more in terms of number of deals.

In the past two years our typical deal profile has been a $875 million enterprise value. We’ve really just solidified the strategy we already had, with a heavily resourced team that will continue investing the way it has been over the past several years.

Q: Advent also has smaller funds dedicated to regions like Latin America and Eastern/Central Europe. How do they interact with the new global fund?

For the most part those [regionally-focused] funds invest on their own with their own deal teams. They are all Advent employees, but are set up to operate independently. Sometimes we co-invest, but it’s on a deal-by-deal basis. For example, we might find a U.S. deal with expansion opportunities in Latin America, which then might make sense to team with the Latin America fund. But it’s the exception rather than the norm.

Q: You invest all over the world, so what region is it currently easiest to get a deal done?

A: The [credit crunch] broke across the U.S. first but is now coming into Europe. And it’s going to keep sweeping across the world, so we’re girding all of our team internationally.

‘Easy’ is probably a tough term. I look at it as needing to proactively source deals more than ever, in every region. And we have a team that’s been in place for a long time to do that. This includes a portion of strategic restructuring deals we’ve done, where we go in, and work with management, or bring in management, to help turn around an income statement or fix the balance sheet.

It’s that type of value creation that’s going to be needed no matter what geography you’re in.

4. As you said, though, the credit crunch hit North America first. Do you expect a smaller percentage of your new fund will go to North American deals, as compared to your last fund?

No, I’m not expecting that. One of the real strengths of our program is that, by drawing in so many investment activities, it gives us a rich set of opportunities. We look at each deal on a case-by-case basis, and don’t have predisposed allocations by geography.

5. Advent once had a fairly large venture capital program. What are the chances that you’re going to revive it?

I don’t think so. We’ve got a clarity of strategy right now on middle-market buyouts, which is what we plan to move forward with.