Five Questions with Paul Carbone of PPC Partners

PPC Partners was formed in February as the exclusive acquirer of middle-market companies for Pritzker Group Private Capital. Led by Tony Pritzker, president and CEO, and Paul Carbone, president and managing partner, PPC Partners has made two acquisitions and several add-ons since inception.

Carbone spoke with Buyouts.

How did the idea of PPC Partners originate?

The idea of PPC Partners grew from the desire to create a committed structure with like-minded family offices for the next phase together. Together we could compete in the marketplace with speed and certainty and decisiveness. Such a structure would help us deploy capital and compete in the commoditized capital market.

We invited like-minded family offices to invest in the capital pool that PPC would use to acquire companies. This collaboration with other family offices has added a dimension to our deal flow. It advanced the dialogue and added credibility to our efforts. Our relationship base also expanded. For instance, for our most recent acquisition, Plaskolite, a family in our committed club was very helpful in developing the relationship.

How do you see the family office environment evolving?

There is a great deal happening in the family office space and this evolution is part of natural progression.

Family offices earlier invested in funds-of-funds or private equity funds to benefit from higher private equity returns. Later they began coinvesting, and then moved to direct minority deals and informal syndication on a deal-by-deal basis. Some also evolved to form committed clubs to invest together and created holding companies to serve their interests.

We went a step further and created a capital pool that would help us all utilize the synergies of working together and benefiting from them.

There will be multiple other models that will evolve as more family offices look to make direct investments and dip their toes in this business.

What differentiates your pool of capital from private equity funds?

We like to think of ourselves as differentiated buyers and preferred partners. We don’t think of our companies as portfolio companies because we believe it sounds too transactional. We invest in family and entrepreneurs who prefer our kind of capital and know that we understand family dynamics and will grow the company.

There is increased competition in the middle market space but we understand the dynamics of the sector and the mindset of family businesses that look for differential capital. We understand the importance of preserving what makes a company great and are sensitive to how we handle ownership transitions.

Our capital is long-term. Since our capital is unconstrained by business models we can make the right commercial decisions for our companies. Importantly, we honor legacy, family pedigree and history. Most families and entrepreneurs value those characteristics.

PPC Partners focuses a great deal on human capital. Why?

People think investing is about capital. We consider it investing in human capital. Human capital is a critical dimension. You want A-plus talent in the investment and operations teams.

When we look at a business, we think about the team, processes and procedures that will impact the bottom-line. Strong management teams at companies are such an important part of the executive value creation plan. Management should also be able to participate in value creation and we design their compensation accordingly.

We look to put together, or work with, the great teams at the businesses we invest in, and they are engaged in the investment and operations decisions with us. We try to organize it so everyone points in the same direction.

Because our capital allows us to be longer-term investors we can afford to invest in human capital in ways different from traditional PE firms. We recognize that team development takes time, effort and money and we don’t expect payback in the short-term.

What makes you an investment partner of choice?

We bring both investment and operating expertise along with patient capital to our investments. We have about 40 people in both investment and operating roles [who] are quick decision makers.

We bring value to our companies in several ways. For instance, PPC acquired Cookietree Bakeries as an add-on to our company C.H. Guenther & Son, a producer of branded and private-label food products. We also brought Kevin Hunt and Stan McCarthy as senior advisers to C.H. Guenther. Both gentlemen have wide experience in the industry.

We are not following a time schedule for investments so we are not in a hurry to acquire. We will typically make one to three platform investments in a year and then add-ons and acquisitions for value creation to those companies.

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