Does being part of a family investment firm like the $5 billion Pritzker Group mean that you are more focused on preserving capital than growing capital?
No, but the first rule of making money is don’t lose money. So that clearly is an important part of any investor’s lexicon. But we’re in the business of making investments, growing companies, creating value and generating returns. The Pritzker Group has a family as its source of capital. So, first and foremost, we bring a family perspective that can appeal to family sellers, people who have their name on the door and who have grown their businesses up over many years. That permanent capital also brings competitive advantages, such as flexibility in the hold periods we have for our investments and in how we structure our transactions. All that served together creates a competitive advantage for us.
Where specifically in the middle market are you seeing opportunities?
We’re sector oriented and invest in three main areas: manufactured products, the services sector and the health care sector. And we’re seeing interesting opportunities in all three. We also have a subsector focus in each one of these areas, and specifically, we’re seeing interesting opportunities in transportation logistics, in agricultural products and services, and in the commercial-industrial manufacturing space. We’re also seeing select opportunities in hospitality. And in health care, we’re looking at medical devices and health care services.
How long does the Pritzker Group expect to hold on to companies?
J.B. Pritzker and Tony Pritzker have been quoted saying that they’ll hold onto an investment for 40 years if it’s the right company. But the main point is that they don’t have to hold it for 40 years. It’s not a buy and hold strategy in that, strategically, that’s all we do. When we make an investment, whatever the right duration is for that company, whether it’s 40 years or 4 years, we’ll work towards that goal.
How do longer holding periods appeal to family and entrepreneur sellers?
If a family has owned a business for many decades, they may be concerned about taking that next step and financing a significant capital expenditure program. Maybe it’s a family that has established a culture and approach to doing business, and they care about what happens after the closing. In that case we become a very interesting option for them. We can provide them with liquidity while still allowing them to participate in the growth of the business. We can finance expansion initiatives and maintain a family orientation and culture because the Pritzkers understand those issues and know how to deal with them. And finally, we really take off the table the need to sell the business again in three to five years, as traditional GPs would have to do, and have a company go through that whole process again without knowing who the next buyer is. In short, we offer solutions that are different than traditional private equity and strategic acquirers.
What is your outlook for private equity with respect to the economy and politics?
It’s an interesting time to invest. We’re not seeing stratospheric growth, but we are seeing growth. We’re seeing good fundamentals across most sectors. And I guess I’m an optimist in that I believe that the issues we see looming in D.C. will get solved. We can’t allow political agendas to impede the progress we’re seeing in the economy. So, I tend to believe that we’re going to work our way through the issues and obstacles that are looming out there, because what’s most important is that this economy continues to grow, and we don’t do anything to nip it in the bud.
Edited for clarity by Gregory Roth