Bruce Rogoff wants private equity investment professionals to send their rotten deals his way. “Give me your tired, your poor, your huddled masses,” says Rogoff, a new partner with Triax Capital Advisors, a New York-based financial advisory firm, which is sending Rogoff to Boston to open an office that will focus on getting private equity firms to outsource the management of their troubled portfolio companies.
Rogoff, formerly a partner with Boston-based private equity firm Great Hill Partners specializing in distressed deals, will be serving private equity firms as a turnaround professional. He sees his experience with Great Hill as essential in serving the interests of private equity firms, although he maintains private equity firms are often not the first priority of advisors working with distressed companies. Many companies are brought to distressed and turnaround professionals by banks that have competing interests with private equity investors.
“To be recommended by the lending community means you have to work hard, know people, do a good job, but also take care of the lenders. I don’t think that in general our industry focuses on private equity firms and helping their portfolio,” he says.
Rogoff sees the private equity world as coming to a realization that they need outside help to manage their troubled deals. “I think that private equity funds that were hoping that their portfolio companies were going to just get better will finally come to the conclusion that they’re not,” he says.
Others agree that companies are going to need more professional help going forward. “I call it the ripple effect,” says Martin Davis, partner with Atlanta-based turnaround firm Grisanti Galef & Goldress. “A lot of big companies have gone into bankruptcy. You get an ever-increasing pool of distressed companies as a result, and there are management issues,” says Davis, adding that many managers today “have never seen a downturn like this and don’t know how to react to it. The best advice I can give to these people is to hire a good turnaround professional.”
Work for turnaround firms has boomed. The Turnaround Management Association, which Davis started with only a handful of people 15 years ago, now has more than 5,000 members.
In addition to more work for turnaround and distressed company professionals, Rogoff thinks today’s economic environment will help turnaround and distressed company professionals make better decisions. “[Private Equity professionals are] going to spend more time outwardly focused instead of inwardly focused, employing the capital that their investors have entrusted them with and making more crisp decisions,” he says.
Despite the lagging economy and first quarter venture numbers that were dismal, private equity investment is poised to get better, Rogoff says. “My unscientific surveys tell me that private equity investors are more active in looking for new deals than they were a year ago. I think there’s a great feeling today that we’re past the bottom and bouncing back up, rather than we’re still going down today. The reason that’s good for us is that we leverage private equity firms, we allow them to focus their efforts on the higher value stuff.”
Rogoff is certain that firms will outsource rather than abandon their troubled companies. “A lot of people I meet say I wish you luck, I hope I don’t need your services.'”