- Specializes in valuation, using iLEVEL to access clients’ portfolio monitoring systems
- Has expertise in valuing management companies, with GP stake sales on the rise
- Defends against SEC deficiency letters concerning valuation procedures
Right out of college, Michael Athanason went to work in the oil business — not in an office in Houston but out on a rig in the North Sea, “24 hours a day, two weeks a month,” as an engineer with Schlumberger. “It was a fun six years,” he said, “almost like being in the army.”
When the price of oil collapsed, the company sent Athanason to get an MBA. “When you go to business school in the ’80s, you’re thinking about finance,” he recalled. The mental distance from engineering wasn’t far: In both fields, “you’re dealing with the physical world and numeric realities.”
In financial consulting, “people are looking for alpha. They want to know their alpha is as safe as it can be, is measured as best as it can be. That’s what valuation people like me do. We’re constantly looking at different investments, both from a financial-calculation perspective but also from a qualitative industry perspective.”
In 2015, having worked at KPMG, Duff & Phelps and Ernst & Young, Athanason joined Berkeley Research Group as a managing director. He spends most of his time on portfolio valuation: “We’re helping people quantify things who are actually putting down money the next day.” His team uses the iLEVEL platform, which enables them to link directly into clients’ portfolio monitoring systems. Athanason calls it “the future of portfolio management.”
He also specializes in valuing fund-management teams. At Duff & Phelps, Athanason worked alongside Goldman Sachs and Simpson Thacher & Bartlett on the IPO of Blackstone Group. Ten years later, sales of GP equity stakes are on the rise, driving demand for the expertise of consultants who can price these complex and opaque assets.
“There’s a whole generation of funds and sponsor founders who want to cycle out and monetize,” Athanason said. As private equity matures, becoming “more corporatized and regulated, consolidation happens. … The amount of this work has quadrupled in the last three, four years.” Some firms have launched funds dedicated to buying GP stakes to capitalize on the trend.
Athanason’s approach breaks down a manager’s business into seven buckets, including six types of fees as well as the firm’s investments. The fees are divided into management fees and carried interest, for three categories each: existing investments, dry powder and future funds. These buckets can be separated and organized according to the transaction structure (for instance, if only the fees from dry powder and future funds are being sold).
Another aspect of his practice is defending against SEC deficiency letters. If the agency finds a firm’s valuation procedures lacking, a contingency plan becomes necessary. “We understand what the SEC requires and we tell our clients what’s reasonable to adopt,” Athanason said, “and we help them do it without pain.”
Photo of Michael Athanason courtesy of Berkeley Research Group.