Firms & Funds

Wynnchurch has turned down multiple offers to sell minority stake: Hatherly

-
Wynnchurch, John Hatherly, Private Equity
John Hatherly
  • Firm approached by about 10 firms to sell GP stake
  • Would only sell to next-gen leaders of firm
  • Wynnchurch’s last fund closed in 2014

Wynnchurch Capital has been approached by about 10 firms over the past few years to sell a minority stake in its business, but it is not likely to do so, said John Hatherly, the firm’s president and managing partner. 

Hatherly made the comment on a panel at Buyouts Insider’s PartnerConnect Midwest conference in Chicago on June 25.

“We’ve had lots of offers to sell a stake and expand into five different areas,” he said. “If we did it, it would go to the younger generation,” Hatherly said.

Wynnchurch has not felt the need to expand into new strategies, he said on the sideline of the conference. 

The Chicago-based firm targets corporate carveouts, distressed and underperforming businesses, growth and family-owned companies in the middle market. 

It has become fairly common for a third-party investor to buy a minority stake in a firm’s management company, rather than in a firm’s funds. The stakes are usually for 25 percent or less. The third-party investor makes the investment in exchange for some sort of revenue sharing, like a share of management fees and carried interest. 

Several firms have built robust businesses around this strategy, including Neuberger Berman’s Dyal Capital, Goldman Sachs’s Petershill Group and Blackstone Group. Other “non traditional” buyers include large limited partners, Hatherly said in an interview. 

Such investments can either be for a firm to expand its product offering into other strategies. Or a firm may use a minority investment to pay off older executives and potentially set up a succession plan for the next generation of leadership. 

Expansion into other areas will lead to more fundraising and growth of assets under management, but it could also mean compression of returns, Hatherly said. 

Wynnchurch closed its last flagship Fund IV on $1.2 billion in 2014. The firm is led by Hatherly and Managing Partners Frank Hayes and Christopher O’Brien. 

Action Item: See Wynnchurch’s Form ADV here: https://bit.ly/2FxXZqk