Independent sponsors take center stage
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.
ABOUT BEN FRAZIER, Matt Joen AND BRITT BARCLAY, MANAGING PARTNERS OF TIMONEER STRATEGIC PARTNERS, LLC
About Timoneer Strategic Partners
- Years in business
o 1 year; our dedicated independent sponsor effort really took off in mid-2019
- Number of investments
o Pending, but targeting a carefully curated portfolio of 3-5 investments at a time
- Typical size of investments
o EBITDA of $1 million to $25 million
o Transaction values up to $300 million
- Industry preferences
o While we view ourselves as “industry opportunistic,” we generally target opportunities within the following industries:
Aerospace & Defense
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.
- Favorite ice cream flavor
o Matt: Chocolate peanut butter cup
o Ben: Cookies & cream
o Britt: Chubby Hubby (Ben & Jerry’s)
- Memorable movie
o Matt: Hard to beat Chevy Chase in “Caddyshack”
o Ben: “Field of Dreams”
o Britt: “The Shawshank Redemption”
- Best vacation spot
o Matt: So far, Spain. But so much more to see!
o Ben: Mission Beach, San Diego, every summer with my Dad’s extended family
o Britt: Tuscany
- Favorite restaurant
o Matt: Hudson Malone (New York, NY)
o Ben: Bear Flag Fish Co. (Newport Beach, CA)
o Britt: Osteria Francescana (Modena, Italy)
- Favorite charitable organization
o Matt: National Canine Cancer Foundation
o Ben: Surfrider Foundation
o Britt: Global Sports Foundation
- Most surprising thing about you that nobody would guess
o Matt: Motorcycle enthusiast (prefer Italian or German)
o Ben: I have a deep passion for big-wave bodysurfing. The thrill and adrenaline are one of a kind.
o Britt: I’ve ridden a motorcycle through the Himalayas in India from New Delhi to Leh (and back).
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.
InsightIndependent Sponsors ForumIndependent sponsors are emerging as an impactful asset class due to their nimble and entrepreneurial approach. Through their ability to craft smart investment criteria, build focused deal-sourcing strategies, and develop relationships with symbiotic capital partners, independent sponsors are positioned to deliver outsized returns.