~ NEWS ~
July 29, 2009 "On the Left," Churchill Financial
OTL: What’s the most striking feature of this market to you?
The most surprising thing we’ve seen is a number of management teams, given a choice, are opting to sell to, and work for, a strategic competitor rather than a private equity firm. They’ve seen how too much leverage wrecks companies and they don’t want to take on PE risk at this point in the cycle.
OTL: Wow. That flies in the face of PE traditionally being seen as much friendlier to founders.
That’s what happens when earnings forecasts get thrown out the window. Are you willing to have your bonus tied to a base case Ebitda? Or would you rather have the parent company guarantee it?
OTL: Sounds like a few bankers we know.
Plus the last twelve months have taken their toll on managements. It was a lot more fun when you’re doing deals and growing like clockwork. It’s tough work operating in a slow or no growth environment.
OTL: What do you see as the biggest challenge to operating in this environment?
Many of our portfolio companies have been used to double-digit growth. Now they’re missing those budgets. There’s still growth, but its single-digit: “up 5 is the new 10.” That takes some adjustments.
OTL: And no one loves cutting costs.
We’re past the first stage of cost-cutting. The obvious low-hanging fruit – such as marketing and advertising – was easy. We’re now in the second stage. Companies need to rethink their processes and initiatives. They need to fundamentally restructure their businesses.
Churchill PE Spotlight: Tailwind Capital (Part I)
In the first of two parts, we speak with Douglas M. Karp, Managing Partner, Tailwind CapitalOTL: What’s the most striking feature of this market to you?
The most surprising thing we’ve seen is a number of management teams, given a choice, are opting to sell to, and work for, a strategic competitor rather than a private equity firm. They’ve seen how too much leverage wrecks companies and they don’t want to take on PE risk at this point in the cycle.
OTL: Wow. That flies in the face of PE traditionally being seen as much friendlier to founders.
That’s what happens when earnings forecasts get thrown out the window. Are you willing to have your bonus tied to a base case Ebitda? Or would you rather have the parent company guarantee it?
OTL: Sounds like a few bankers we know.
Plus the last twelve months have taken their toll on managements. It was a lot more fun when you’re doing deals and growing like clockwork. It’s tough work operating in a slow or no growth environment.
OTL: What do you see as the biggest challenge to operating in this environment?
Many of our portfolio companies have been used to double-digit growth. Now they’re missing those budgets. There’s still growth, but its single-digit: “up 5 is the new 10.” That takes some adjustments.
OTL: And no one loves cutting costs.
We’re past the first stage of cost-cutting. The obvious low-hanging fruit – such as marketing and advertising – was easy. We’re now in the second stage. Companies need to rethink their processes and initiatives. They need to fundamentally restructure their businesses.