- Firm to act ’as an owner’
- More ’modest fee structure’
- Seeking $1 billion, not necessarily a fund
Andrew Sheiner, leaving Onex Corp. after 17 years, has officially launched his new firm, Altas Partners, effective July 1.
Toronto-based Altas will have a “different orientation,” said Sheiner, who spoke at the Buyouts Chicago conference in June. Altas will seek to acquire high-quality North American businesses and act “as an owner,” said Sheiner, who officially left Onex on June 30. ”We will seek to hold those businesses for a longer term if they have the potential to continue to generate attractive risk adjusted returns,” he said.
This can be longer than 10 years or shorter than five, he said. “Whatever is most sensible for that business.”
Altas, which currently has a staff of five, will also be hiring, Sheiner said. He said he expects to have seven or eight executives, including some former co-workers, on board by Labor Day.
Another difference: Altas will be offering potential LPs a “different fee structure” with the goal of generating greater long-term risk adjusted returns, Sheiner said. However, he declined to disclose what the fee structure will be at Altas. “We’re still working on it,” he said.
Sheiner, who spent the last decade overseeing ONCAP, Onex Real Estate Partners and Onex Credit Partners, said investors are increasingly “uncomfortable” with the large number of sponsor-to-sponsor deals taking place. Roughly half of current private equity-backed M&A involves such transactions, he said. “That involves the churning of businesses from one firm to another,” he said. GPs are driven to sell companies in order to get compensated and that model can be inconsistent with the long-term objectives of owners, Sheiner said.
It is this conflict that has driven Sheiner to create a “new” type of buyout firm. Altas will seek to impose a more “modest fee structure” and, by using less leverage, retain ownership of companies longer. In this way, Altas hopes to achieve the same net return profile as other firms but with lower gross returns and less risk, he said.
“We’re taking the Berkshire Hathaway model and applying it to PE,” he said.
Altas will seek mainly majority positions and look to invest in companies headquartered in the U.S. and Canada. The firm will focus on most sectors but not natural resources or high tech.
As a new firm, Altas will be fundraising but this won’t necessarily be for a fund, Sheiner says. Altas will be targeting a “pool of capital” of roughly $1 billion, he says. The firm will be established with five to 10 large institutional investors that are “like minded” and “keen to work with a partner that has Altas’ orientation and approach,” Sheiner said.
(Luisa Beltran is a senior writer for peHub.)