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Investors mostly access critical turning points in a company's lifecycle via private investments
Key Takeaways
- Gregg Lemkau, CEO of MSD Partners, discusses how accessing companies at critical turning points can lead to huge value creation - and is often only possible via private capital.
- These opportunities demand industry networks to access and flexibility in terms of deal structure. Public investors are often only able to participate after the fact, with less upside.
- For example, they were able to finance the acquisition of UFC by Endeavor, which changed the underlying fundamentals of both businesses to generate returns.
Transcript
My name is Gregg Lemkau. I'm CEO of MSD Partners. I joined the firm about a year ago after spending 28 years at Goldman Sachs, where my last job was the head of global investment banking. MSD Partners is really two things, there's MSD Capital and MSD Partners. MSD Capital was started in 1998 really as the family office of the Dell Family. In 2009 we started MSD Partners, which is a registered investment advisor that allows us to take third-party capital. So today, we've actually got MSD Capital and MSD Partners. In aggregate, we manage about 23 plus billion dollars of capital, 16 or 17 for the Dell family, and the rest of it being employees and partners of the firm and outside investors. And we try to do so across four asset classes for places where we feel like we've got real differentiation. We've got a private capital business, credit business, a real estate business, and a growth equity business.
If you can get the ability to deploy capital when one of these companies is at a strategic turning point, it's great because those are usually meant to unlock a lot of value. M&A is a great example of that. We were sort of the fulcrum security when Endeavor bought UFC Ultimate Fighting Championship. You know, Endeavor was owned by Silver Lake and KKR. They were both putting more capital and there was sort of a weird set of circumstances that neither could put more capital in. They needed a third party to come in and kind of create this fulcrum security. So it was a great situation of an asset. We knew the sponsors. We knew that we could structure something unique. And I wouldn't say only we could do it, but we were uniquely positioned to do it.
I think it's all about your network and the flexibility of capital. And so I think that we've tried to position ourselves around situations so that we can take advantage of that. But I think it really is about kind of sourcing network depth of relationships and then flexibility of capital. And if you can find yourself in a position where you're one of the few providers and a source of capital, you can generate pretty strong returns.
The opportunity for kind of uniquely structured things is probably more open for private equity and private credit. Oftentimes the public market investors get the ability to participate but it's often after the fact. The deal will get structured privately and then the take-out financing will happen in the public markets, potentially on less favorable terms because the risk has been taken by the private provider.
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