When Jim Hill was beginning more than 30 years ago to practice private equity law in Chicago, some of his first clients were the late Stan Golder and Carl Thoma.
It was an informal business in those days, said Hill, who now is the executive chairman of the Cleveland law firm Benesch, Friedlander, Coplan & Aronoff LLP, as well as the chairman of its private equity group. “Now even small companies [hire] investment banks.”
While the firm
“If you’re a seller it’s a good thing,” Hill said, because it gives you the best chance to get what you want out of a deal. “On the buyer’s side, it’s gotten a lot tougher.” To be successful these days, firms must be much more focused in the way they deploy their funds, he said. “The real key is being very industry specific.”
With growing pressure to drive performance for limited partners, many buyout shops have turned against capital-intensive businesses because of the focus on free cash flow. But Hill cited
He also cited
Such rifle focus can make a specialist firm more effective in dealing with today’s more sophisticated sellers, Hill said.
“You can probably pay more because you have more comfort with the industry,” he said. “If I hear people say they are agnostic, I sort of flinch.”
The same principle applies to specialization in functions within firms. In the past, partners perhaps could take a generalist approach, sourcing deals, negotiating deals, closing deals and working with portfolio companies. Today’s market demands a greater division of labor. He compared it to an attorney who focuses on a trial for six months to achieve a victory for a client, then finds his in-box empty when it comes time to take on the next case.
Many buyout firms in the past farmed out business development functions to junior staffers who would not participate in the profits from carried interest, Hill said. But today, many firms, like