Center Stage with CohnReznick: Cornerstone Capital Partners, Inc.
As the independent sponsor community is growing in size and relevance, sponsors face a variety of unique challenges related to sourcing transactions, raising capital, and maximizing the value of their investments. At CohnReznick, we’ve noticed that successful independent sponsors meet unique challenges with unique solutions, and we’ve invited members of the independent sponsor community to take Center Stage to share their achievements, contributions, and unique approaches to achieving their goals.
This month we’re featuring Cornerstone Capital Partners, Inc.
ABOUT STEve ALTMAN, PARTNER, CORNERSTONE CAPITAL PARTNERS, INC.
Years in business
- My partner, Jerry Donatelli, founded Cornerstone Capital in 1990. I joined Cornerstone in 2006.
Number of investments
- We have 3 current portfolio companies. To date, Cornerstone has had 13 platform investments.
Typical size of investments
- We invest in privately held, lower middle market businesses located in North America and Canada generating a minimum of $3 million of EBITDA and with an enterprise value of $15 to $100 million.
- While we will consider investments in most industry verticals, we have deep experience in manufacturing, industrial, engineering, and business service companies owned by entrepreneurs.
Q&A WITH STEve
What motivated you to strike out on your own as an independent sponsor?
It enables me to work more closely with successful entrepreneurs to help them take their company to the next level.
I wanted to be more entrepreneurial, and the independent sponsor structure allows me to benefit more from my own performance.
What advice do you have for those who are just getting started?
It may take a while to succeed, but you can build a career as an independent sponsor. When I first started, I thought we should do our due diligence prior to attracting an equity partner. Now I would recommend that you find an equity partner early on in the process either to share or pay for broken deal fees. I would also develop relationships with a select group of professional advisors, especially a law firm and accounting firm accustomed to working with independent sponsors like CohnReznick.
To date, what has been one of your greatest breakthrough moments?
For me, it was closing my first independent sponsor deal with Cornerstone. We acquired a manufacturer located in Quebec and worked with a large Canadian pension fund to finance the transaction. Our strong relationship with the seller and management team coupled with the successful growth of the company was very rewarding.
When compared to other investors, what do you consider your key differentiators?
Private equity is a competitive industry, and a key differentiator is being able to relate to the seller in terms of their challenges and overall experience as well as developing a respectful relationship. We never presume to know more about the owner’s business then he or she does, but we strive to be good partners in working together toward a common goal with open and honest communication. Typically, an entrepreneur is not going to sell his or her company to just anyone. In most cases, the entrepreneur will have various bids for the business. All things being equal in terms of consideration, the seller will select someone he or she is most comfortable partnering with for the next 3-5 years. We have a combination of private equity as well as operational experience because we have run businesses ourselves. We try to emphasize that we know how challenging managing a business can be and that we will not have all the answers. However, our past and current management teams will tell potential partners that we are good partners who are willing to roll up our sleeves to help their business succeed. We feel that our experience and hands-on approach differentiates us from other firms.
What are some of the best reasons that capital providers should be attracted to you?
We have a history of strong investment returns and have demonstrated an ability to work through difficult situations. We also treat all our financing providers as partners and believe open communication is important to develop an ongoing relationship.
What are your greatest challenges right now?
Until the middle of March 2020, the greatest challenge was finding good companies at reasonable prices given the frothy environment. After COVID-19, the greatest challenge will be the ability to meet with existing and new management teams. It is going to be difficult to complete new deals without face-to-face interaction.
What are some of the things you love about being an independent sponsor?
We have no time pressure to make an investment, and each investment stands on its own in regard to investment terms and incentive compensation.
Favorite ice cream flavor
- Heath Bar Crunch
- Hot Tamales candy
Name of your first or current pet
- “Forrest Gump”
Best business book
- “Too Big to Fail”
Best vacation spot
- Great Barrier Reef, Australia
- Rossellinis in Ravello, Italy
Favorite charitable organization
- Interfaith Food Pantry
Best concert you ever saw
- Rolling Stones
Favorite beverage (adult or otherwise)
Most surprising thing about you that nobody would guess
- Die-hard Boston sports fan
InsightDEALMAKERS: COVID-19’s choppy waters bring out the best in independent sponsorsThe pandemic has given independent sponsors an opportunity to demonstrate their operational capabilities and staying power. Read more.
InsightCenter Stage with CohnReznick: Frisch Capital PartnersGet to know Bob Frisch and Drew Brantley of Frisch Capital Partners as they share their stories and insights as members of the independent sponsor community.
InsightIndependent sponsors take center stageGet to know members of the independent sponsor community as they share their stories and insights. This month we’re featuring DuneGlass Capital.
InsightRisks and rewards of freedom: How independent sponsors can increase their chances of successAn abundance of ready capital and growing interest in direct investment have brought the independent sponsor model off the sidelines and into the mainstream of the M&A market. And with no barriers to entry, the model is open to anyone willing to accept the risks. With your personal capital and reputation at stake, there is virtually no room for error.