Independent sponsors take center stage

About John Sheffield and Mark Tedford, Managing Partners of Valley Ridge Investment Partners

About Valley Ridge Investment Partners

Years in business

• Two

Number of investments

• One

Typical size of investments

• $5 million EBITDA; $20-100 million TEV

Industry preferences

• Industrial manufacturing and services

Q&A with John & Mark

What motivated you strike out on your own as an independent sponsor?

After more than two and half decades of increasingly broad experience in large corporations, we both had a desire to get back to our roots working with and advising lower middle market companies. Under the right circumstances and with the right partnerships in place, we believe that there is tremendous value creation opportunity in the lower middle market. We were both looking to have greater impact on the companies we worked with, through our relationships with the people at these firms, and felt the lower middle market offered the greatest opportunity to achieve these end goals. We strive to help good businesses become great enterprises.

What advice do you have for those who are just getting started?

Be innovative, flexible, and persistent. Think about new and creative ways to partner with lower middle market business owners, management teams, and their advisors to achieve their short- and longer-term objectives. Whether they are concerned about liquidity for retirement planning, supporting long-term customer relationships, or maintaining their cultural heritage for future generations of employees, finding creative solutions to help them achieve their goals has been key to our initial success. We have found that flexibility is key in responding to the numerous unknown issues that inevitably arise in every initial and confirmatory due diligence process surrounding lower middle market ownership transitions. We do not have a prescribed playbook and prefer to develop bespoke solutions to unique situations as they arise. And finally, persistence is critically important, whether in contacting M&A advisors to inquire about upcoming deal flow, or financing partners about supporting investment opportunities in process. We’ve found that each of these has played a significant role in helping us get started and achieving the progress we have to date.

To date, what has been one of your greatest breakthrough moments?

Receiving our first signed Letter of Intent without a nickel of confirmed financing and then going on to source five separate proposals from established financing partners for all of the debt and equity capital needed to fund the acquisition. We always believed that we would eventually find the right combination of owner/management team we wanted to invest in, as well as the right financing partners we wanted to invest with. Our breakthrough learning was that both were readily available if we worked hard to find them and cultivated productive long-term relationships along the way.

When compared to other investors, what do you consider your key differentiators?

There are a wide variety of independent sponsors in the market today. Some have deep operating experience from years leading companies. Others have significant transactional experience from years of service with investment banking or traditional private equity firms. We believe, and have been told, that we have a unique and complementary combination of both backgrounds to offer our portfolio companies and their management teams. In addition to our combined backgrounds, we are honest, earnest, thoughtful, and transparent. We like to tell the true story that we met almost a decade ago as oncoming trustees of the board at our church. We will tell you exactly what we believe and what we would propose and execute in time and manner with the expectations we set. 

What are some of the best reasons that capital providers should be attracted to you?

As trite as it may sound, we have an overt focus on developing healthy, productive, long-term partnerships. In fact, that is why we chose the name “Investment Partners” for our firm. We think it is critically important to bring the right people together and build credibility and respect for what each member brings to the table. It is easy to work well together when times are good. The real test begins when the unexpected occurs and partners need to work together through difficult times. We are also incredibly detail-oriented and spend an inordinate amount of time researching every aspect of the companies we invest in, to understand the opportunities and mitigate any risks that we can foresee during diligence. We also do not have specific requirements in terms of board governance or control. We invest in each of our own deals but realize and expect that our financing partners, who are providing the lion’s share of the equity, should have a substantial role in board governance. Finally, we both have extensive experience supporting, advising, and participating on private, public, and nonprofit boards of directors, which we believe offers potential financing partners greater confidence in their ability to delegate board management responsibilities to us. 

What are your greatest challenges right now?

Managing our time. With limited resources, we would prefer to spend the bulk of our time working with and supporting growth initiatives at our portfolio company. We are investigating and evaluating add-on acquisition opportunities while supporting organic growth initiatives that resulted from our strategic planning process. At the same time, we are sourcing and assessing new platform investments, all with a team of two experienced executives and limited back-office resources.

What are some of the things you love about being an independent sponsor?

Having the flexibility to focus on value creation in our portfolio company without having to worry about general fundraising activities. We also highly value having deal-specific financing partners rather than LPs in a committed fund. They know what they are invested in and why and have specific expertise to contribute to the value of our collective investment. Rather than generic institutional investors in a blind pool of capital, they are hands-on partners in our efforts to help our portfolio company increase market share, improve operational and financial performance, and create value for the management team and all of our investors.

Fun Facts

Favorite ice cream flavor

• John: Cookies and cream
• Mark: Chocolate chip

Favorite snack

• John: Mixed nuts
• Mark: Pretzels and iced tea

Name of your first or current pet

• John: My wife has a cat, Catalina
• Mark: Golden retriever named Morgan

Memorable movie

• John: “The Princess Bride”
• Mark: “The Family Man,” starring Nicolas Cage

Best business book

• John: “The 7 Habits of Highly Effective People” by Stephen Covey
• Mark: “What It Takes” by Stephen Schwarzman

Best vacation spot

• John: Had a weekend house in hills of northwest Connecticut, with a great view
•  Mark: Our lake house

Favorite restaurant

• John: The most elaborate was Restaurant Paul Bocuse, outside Lyon, France
• Mark: The George V, at the Four Seasons in Paris

Favorite charitable organization

• John: Volunteer first responders such as fire and EMS
• Mark: Save the Children

Best concert you ever saw

• John: Jerry Jeff Walker, Gruene Hall, near New Braunfels, Texas, multiple times
• Mark: MercyMe, Radio City Music Hall, 2019

Favorite beverage (adult or otherwise)

• John: A cold beer after yard work
• Mark: Silver Oak Cabernet Sauvignon

Most surprising thing about you that nobody would guess

• John: At 37, I survived cancer, Non-Hodgkin lymphoma (yes, from extensive weed-killer use at that weekend house), 2006
• Mark: At one point I was conversant in Japanese

ABOUT BEN FRAZIER, MATT JOEN AND BRITT BARCLAY, MANAGING PARTNERS OF Timoneer Strategic Partners, LLC

About Timoneer Strategic Partners

Years in business

• 1 year; our dedicated independent sponsor effort really took off in mid-2019

Number of investments

• Pending, but targeting a carefully curated portfolio of 3-5 investments at a time

Typical size of investments

• EBITDA of $1 million to $25 million
• Transaction values up to $300 million

Industry preferences

• While we view ourselves as “industry opportunistic,” we generally target opportunities within the following industries:

• Aerospace & Defense
• Business Services
• Consumer, Food, & Beverage
• Healthcare Services & Providers
• Niche Manufacturing & Distribution
• Industrial Products and Services
• Software and Technology
• Other sectors selectively

Q&A with Ben, Matt & Britt

What motivated you to strike out on your own as an independent sponsor?

For all three of us, our individual motivations stemmed from deep entrepreneurial roots and a strong desire to build something special from the ground up. Matt and I [Ben] met each other early on in our careers in New York City and became close professional and personal friends. And, we were fortunate enough to be introduced to Britt several years later. Collectively, we discussed the idea of starting a firm for several years before actually making the formal commitment to do so. We all share a similar thesis around the opportunity that exists in the lower- and middle-market and characterize the space as being underserved from a professionalized private equity approach. We look forward to making our distinct mark on the industry.

What advice do you have for those who are just getting started?

Plan ahead and do as much research on the independent sponsor model as you can before setting out on your own. Early on, do not underestimate the importance of formulating solid sourcing strategies and developing strong relationships with market participants (capital partners, service providers, banks, and brokers). Having a strong and consistent rhythm with capital partners is key, and understanding where and how they “play” is critical. In terms of runway, it can take up to two years to complete your first deal. We cannot stress enough the importance of setting an overly conservative budget that gives you 18-24 months of flexibility in getting your efforts up and running. Lastly, you may find yourself coming across a lot of distractions and “shiny objects.” Be sure to remain mission-driven and focus on your core competencies.

To date, what has been one of your greatest breakthrough moments?

It would have to be the execution of our first LOI (a transaction which is currently in diligence). While not completed/closed yet, it was the first step towards achieving the “ah-ha” moment of proving out our independent sponsor effort.

When compared to other investors, what do you consider your key differentiators?

We are young, hungry, and nimble, and our unique DNA brings together unparalleled experience (across industries and situation types) and an expert team of critical thinkers. Our values define who we are and how we do business. We place an outsized focus on developing genuine partnerships, maintaining a stewardship-first mindset, and ensuring that the entrepreneurial spirit is alive and well in everything we do. As business owners ourselves, we think like entrepreneurs and bring an unparalleled level of passion and intensity to every transaction we play a part in. We differentiate ourselves through our creative thinking and action, and nimble and opportunistic nature – factors which distinguish us in our approach to investing in the lower- and middle-market. 

What are some of the best reasons that capital providers should be attracted to you?

We are laser-focused on building Timoneer into an investment firm armed with all of the relevant capabilities and resources of a larger, funded private equity firm. As such, we are capable of running investments from initial idea generation through eventual exit. Our collective investment team and bench of operating resources maintain proprietary relationships with countless governments and multinational government agencies, industry experts, and professional services resources that provide us with a unique ability to efficiently source, diligence, and execute on a proprietary pipeline of high-quality and actionable investment opportunities. We remain focused on making 3-5 investments at a time, and acting as a hands-on, valued-added extension of the management team.

What are your greatest challenges right now?

We are highly selective in the deals we pursue as a firm, and as such place a very high value on where we invest our time and resources. We are in the process of working through diligence on our first deal under LOI and view it as our top priority (and also must be considered as, and met with the mindset, that it is our top challenge). 

What are some of the things you love about being an independent sponsor?

A very large part of it comes back to the team we have assembled and how we view the world of investing. First, the spirit of partnership and collaboration drives the independent sponsor model and affects everything we do; we work as a team, share recognition and accountability, and communicate with candor and transparency, believing that strong partnerships thrive on honest, two-way feedback. As an independent sponsor, a very large part of that partnership mindset is focused around relationships built within the capital partner universe. We take pride in being a value-added partner and building those long-term relationships. Second, the flexibility associated with the independent sponsor model aligns perfectly with our view of the broader opportunity in the lower- and middle-markets. We take a truly opportunistic view to investing (size, industry, situation), and believe one size hardly ever fits all. This allows us to be creative and nimble and thrive in situations where we can “squeeze water out of a rock,” while still staying true to our overall strategy.

Fun Facts

Favorite ice cream flavor

• Matt: Chocolate peanut butter cup 

• Ben: Cookies & cream
• Britt: Chubby Hubby (Ben & Jerry’s)

Memorable movie

• Matt: Hard to beat Chevy Chase in “Caddyshack”
• Ben: “Field of Dreams”
• Britt: “The Shawshank Redemption”

Best vacation spot

• Matt: So far, Spain. But so much more to see!
• Ben: Mission Beach, San Diego, every summer with my Dad’s extended family
• Britt: Tuscany

Favorite restaurant

• Matt: Hudson Malone (New York, NY)
• Ben: Bear Flag Fish Co. (Newport Beach, CA)
• Britt: Osteria Francescana (Modena, Italy)

Favorite charitable organization

• Matt: National Canine Cancer Foundation
• Ben: Surfrider Foundation
• Britt: Global Sports Foundation

Most surprising thing about you that nobody would guess

• Matt: Motorcycle enthusiast (prefer Italian or German) 
• Ben: I have a deep passion for big-wave bodysurfing. The thrill and adrenaline are one of a kind.
• Britt: I’ve ridden a motorcycle through the Himalayas in India from New Delhi to Leh (and back).