From Bonnaroo to Bernstein - Twenty-four hours of Tennessee

A growing financial center, it's difficult to separate Nashville from its music. Hence, in a Bruce Davidson style of participant observation, join me as an Outsider on the Inside for a behind the scenes fun jam through Private Equity and The ‘Roo [or skip directly below and fast-track to the ?? for the ACG event recap].

Erik Ginsberg and Doug Song were among the panelists that weighed in on ACG Tennessee’s 'Independent Sponsors – A Fund without a Fund' topic hosted at AllianceBernstein's newly unveiled Nashville HQ. The evening prior, a small crew of artists and festival vendors coming off a very delayed flight — led by a dear friend — convinced me to shuttle them to Manchester, TN because I was “kewler than Uber” (how do you argue with that?). ?

Though it wasn’t clear the destination was the Bonnaroo Music and Arts Festival until we were well on the road, it was hardly a detour from the upcoming Association for Corporate Growth’s monthly event considering all the parallels:

The venue: 700B+ assets under management [A | B]

vs. 700+ acres of Tennessee Farmland

Delayed gratification: Independent Sponsors do not get paid to source deals. Whereas the Net 30 payroll industry standard for many of the festival event staff for them seems quite long, Doug Song advises new independent sponsors be bankrolled for up to two years (what it can take to close your first deal). Really puts things into perspective, doesn’t it.

(+) Stunning views: Peering out from the twenty-fourth floor of 501 Commerce street in the heart of Nashville, the double-height floor to ceiling windows afford breathtaking sites of the downtown center — though ‘The Zoom Room’ really takes the cake. Yet step away from the tower, drive out through the Country, and amid those open fields, it was there that June’s strawberry Supermoon illuminated the sky in pure brilliance. Both events were staged amongst inspiring backdrops.

(-) Each group has a proprietary term for aggressive, self-indulgence:

Festival Wooks vs. Sharp-elbowed PE investors

(+) The Hospitality: Invitations to be hosted were nearly identical in warmth and charm. A lavish invitation to sample the works from AB in-house Italian chef was presented by Nicholas Birren, whereas an invitation to be hosted in a botanical vendor’s holistic workshop sat on the metaphorical table; underlying theme in both was transferring intentional work into an experience of delight.

?? Alas, we’ve digressed. So what were some key takeaways?

When it comes down to it, success as an Indy Sponsor (a.k.a. Fundless Sponsor) boils down to two principles, according to Doug:?

??1. Can you source a good deal?? [i.e., source an attractive deal like a lightning shop with a low multiple; make sure you’re not just winning a broad auction*]

??2. Can you find an angle? ?[operating partner connections; corporate divestitures]

* Which reminds me of one of my many favorite Charlie Sell quotes - ‘In an auction, the winner is the loser because you paid too much.’

Other factors also play into account. According to John Pontius of Capital Alignment Partners, if/when money is not as abundant, “certainty of close becomes more important.”

That’s all relevant on the uphill climb. But what happens when your firm reaches success and even nearing capacity? For example, for a firm with three managing partners overseeing five platform companies- with two LOIs out and one in the pipe - you’re essentially faced with the decision to either expand your staff or start selling assets.

With a typical three-to-five year turnaround time, rather than a buy-and-hold strategy, first generation entrepreneur-led companies were mentioned as a potential preferential target for Independent Sponsors. Though Doug, quoting his partner at Prodos Capital, succinctly cinched the ideal business profile categorization for his firm in three words:

“Boring is Beautiful.”