1. Jeff, earlier this month you joined the financial sponsors group at Baird after jumping from Bear Stearns. How did you hook up with Baird?
I’ve known a variety of folks at Baird for a number of years, dating back to the folks that had left Kidder [Peabody & Co.] in the early ’90s to join Baird. So I’ve chatted with them over that span of time. Furthermore, I have Baird in my blood: My father actually was a partner of the firm going way back in time. Having grown up in Milwaukee, it was a natural place to consider.
2. How do you feel about joining a financial sponsors group for a mid-market advisor as opposed to a major Wall Street bank?
I’m excited at the opportunity. Over the span of the last eight or nine years that I’ve covered sponsors at Lehman and Bear Stearns, a significant number of my clients were middle market-oriented firms. Yet we were not always well situated to cover those firms. So I look forward to the Baird platform where there’s a terrific fit with, frankly, the vast majority of private equity firms out there.
3. How is it different advising mid-market firms as opposed to megafunds?
Fundamentally the difference for me is going to be that at a larger firm covering larger clients, the balance sheet and the ability and the willingness to provide capital was a key component of the products we had to offer. At large firms like Bear Stearns, we would provide one-stop financing for leveraged buyouts, whereas at Baird we are a pure advisory firm, with the added twist of a significant equity underwriting capability and research platform that can be leveraged with middle-market firms. So my focus at Baird will be primarily around M&A and equity origination.
4. What challenges and advantages does Baird have in helping sponsors in today’s market?
The firm has tremendous momentum in its sell-side M&A business, having sold over 40 companies in 2007. Baird serves a part of the market that’s not being as adversely affected as the bigger firms. Baird has a longstanding list of corporate clients the firm has been serving over many years. These are clients we can continue to rely upon, and clients that over time tend to interact with private equity in one form or another.
5. When you’re talking with buyout firms, what’s the mood like?
I think people continue to be somewhat concerned with a few trends. One is that we’re continuing to see a fairly strong pace in fundraising, though I expect that will slow down markedly over the next year. I sense from most people I speak to that there continues to be erosion in IRR expectations priced into transactions. Clearly, people remain concerned about the sustained level of tightness in the credit markets—again, that’s more pronounced in the big-deal side of the market though still impacting the middle market. Buyout professionals also worry that they have quite a bit of competition from new, alternative sources of capital such as hedge funds, sovereign [wealth] funds, SPACs and even infrastructure funds.
Edited for clarity.