On June 24th, 2020, we held a webinar to understand how various firms view investing amidst this unprecedented time. It was lead by our Vice President of Customer Success & Operations, Josh Giglio. Panelists included Dave Evans from Apax Partners, Sanjay Patil from Bessemer Ventures, Ilan Jacobson from FirePower Capital, and Ray Wagner from Thompson Street Capital Partners.
Read the transcript of the first question and then click below to download the full recorded webinar.
Josh Giglio, Sourcescrub: "I think a great place to launch off today is just to get a state of the union. I mentioned prior, we engaged in a survey at Sourcescrub where we just wanted to see along various typical investment or M&A activities that firms are doing - where are they focusing their attention right now?
For the capital providers side of the coin, we found that the majority of firms were mainly focused on portfolio management and getting the internal wheels turning about three months ago, early April.
And so, I wanted to see for each of you - what's your current firm's outlook three months later? How are we talking and thinking about the new norm? What's the focus on today? Let's start with you, Dave."
Dave Evans, Apax Partners: "Sure. As I said, Apax Partners is investing out of a $10B buyout fund out of seven officers and 125 investors. In Apax Digital, there's about 20 of us. We now have 9 portfolio companies. Given the global footprint and the number of partnerships we have, at the beginning no one planned for this. No one could prepare for this. Nobody had a 'In case of Emergency, Break Glass Here'. So I think everybody hunkered down and certainly looked at the portfolio. We have a number of internal operators, but we have an investment in a large ventilator business. The emergency they had was rapidly scaling their production to meet the demand. Then, you have other businesses where they're calling our internal CFO's saying 'help me with 13 week liquidity cash flow forecasts', so portfolio companies are often like children where each one has their unique quirks.
When it first happened, we started having weekly meetings with all portfolio companies to try to cross-pollinate ideas. People were dealing with similar issues but in different industries and end markets. Certainly, deal flow - no one was launching new processes at that point. We did face internally trying to make sure every company had the liquidity and access to capital that they needed. Obviously, over time, people have developed plans. Some companies have had to have furloughs or reductions in force. But, people have now been seeing this for three or four months and therefore at least in the balance of deal teams, we are back out looking for opportunities.
I think COVID is obviously a hot topic, and we can discuss more later on how that affects the type of deals you're looking for. Just last week we announced an investment into a business called PayPhone, and hopefully we'll have another signed deal next week. We're trying to deploy capital. We're trying to be prudent and asking questions you probably wouldn't have asked five months ago about COVID preparedness. I think after those initial two months, people have stabilized and are trying to adapt to the new normal."
Sanjay Patil, Bessemer Ventures: "I think the Bessemer story really was just to try to maintain status quo for the last three months or so. I think we are fortunate as an early-stage firm to really be invested in businesses that are still in the early product development stage and early go-to-market stage where a lot of our investments can be seen as a longer-term horizon than the next 12-18 months.
So, our story over the last three months was really more around adjusting some of our investment thesis and saying 'hey, how do we want to try and look at the next 12-18 months of investing with a new lens?' From a roadmap perspective more so than a 'hey, how are going to change how we allocate our capital and how we deploy it?'. For us, it was looking for opportunities at the same pace. I think we've maintained our investment pace over the last three months since march. What has shifted has been our focus areas and where we are looking to make some of those investments."
Ilan Jacobson, FirePower Capital: "I could talk about our Private Equity model, but it is our own balance sheet. We are very opportunistic, so I wouldn't say there's a massive thesis change. We will continue to be opportunistic. Maybe they'll get some more distress stuff. I think what is more interesting is looking at our advisory business and the anecdotes we've drawn from that. We work under just 30 exclusive mandates where we're one of the largest - if not the largest M&A advisor - in Canada. What we've found is the sell-side mandates that we're kind of in process just got delayed. We're about to close three transactions right now.
Obviously, we wanted to play out what was actually going on. I think they're now feeling more comfortable to actually close transactions. We didn't go sell-side with any new mandates, but the interesting thing is we saw an incredible influx of buy-side requests. We get 3-5 requests from PE firms who know about our buy-side process and how we go about it who were looking to engage us for buy-side mandates. Those that actually have liquidity - that aren't scared by the environment - are looking at this as an opportunity to get more aggressive and opportunistic. Although, you don't want to use 'opportunistic' in this environment. Let's just call a spade a spade. So, very very interesting to see how incredibly fast things change to the buy-side and it continues to get more aggressive on the buy-side."
Ray Wagner, TSCP: "We took a hybrid approach. We definitely spent a lot of time on portfolio management, making sure that our house was in order. As small business owners ourselves in these companies, we felt like we owed it - not only to our investors - but to the employees at these companies, the management teams at these companies that have chosen us to be a partner, to help guide through this process. We spent a lot of time internally to make sure we were checking every box and that these companies were performing well to the extent there were risks or hurdles we needed to get over that we were helping our teams do that.
At the same time, we have a five person origination team at TSCP. I'm one of them. We've used it as an opportunity to try to find new ways to invest capital. Whether that's speaking with hundreds of thousand of investment bankers or brokers out there to try to figure out what was pulled from the market or what didn't go to market that was going to. We're trying to position ourselves better for when those deals finally do come to market. Or looking for new investment themes that we can get behind and start getting smart on sectors. Have industry expert calls. Meet executive advisors and position ourselves really well to go after more opportunistically new opportunities in some of those investment themes post-COVID.
We've really taken a hybrid approach, and I think we have a pretty clear outlook of the rest of the year. It seems like the past week or two, more deals have been launched. We're starting to see an opening up of new deals coming to market or new deals progressing to the extent that they had been paused during diligence so that people can get their arms around the daily KPIs of COVIDs impact. We have an optimistic view of the back half of the year, but we're also planning for a situation that we might have to be more proactive on our side at identifying interesting companies to at least start building a relationship with."