Hughes Associates (a fire protection engineering services firm) is one I’ll mention. We’d been building that platform with the management team and our operating partners for about two and a half years. That’s one that’s been very successful for us. We’ve grown that significantly through organic growth and add-ons. We’re not ready to sell it. We’re completing a very meaningful add-on for that. So we decided to do a recapitalization, which were able to complete in about 45 days. The lending community (was) very supportive of it. We were able to take out nearly all of our risk capital and distribute it back out to the LPs. And we were able to do that in three other cases with our companies, and there’s one other one in the works.
Huron Capital has managed to raise most of its funds with only one closing, which seems unusual for a private equity firm. Could you walk us through how that works?
Having a strong, diversified limited partner base with the capacity and desire to provide support over multiple funds has been critical. We’ve been very fortunate in that regard, having raised four funds totaling over $1 billion without the assistance of an outside placement agent. Our team strives to run an efficient process where investors have easy online access to detailed due diligence materials that clearly articulate our key partnership attributes, such as track record, tenure of our management team and differentiation of our investment model. This efficient process coupled with high demand has often supported a swift, single closing.
On the acquisition side, has it been hard to find deals nowadays? Lots of buyout firms say they’re seeing lofty prices in auctions …Can you talk about your sourcing efforts?
Prices have been high. So we focus most of our efforts on processes that are either privately negotiated or limited. There are a number of things that we do through executive sourcing to find (unique) deals. Right now we’re closing 13 deals, nearly of all which are proprietary—purely the result of the efforts of the folks of our firms plus our CEOs and our operating partners. It’s very much a pick and shovel kind of activity. It takes time. It’s a lot of extra work. We find it’s a better way to get on the board with new investments.
Huron has been good at finding niche businesses with high barriers to entry. Is that skill set being applied to any new types of companies?
Albireo Energy. It’s an energy efficiency firm. They focus on solutions for property managers and building owners to lower the operating costs of buildings, regardless of how a building generates its energy. The company we’re setting out to build helps them lower that overall cost, in a variety of ways, using technology, or it could be a mechanical solution. We partnered with a successful industry veteran, Phil Bomrad. This was the product of about a year’s worth of work, looking at many many platforms with Phil, and we’ve landed our first two companies, which will form the platform, and we’re set to close those in about 60 to 90 days. These are companies with very high barriers to entry. Building owners are very picky when it comes to (awarding this kind of contract.)
As a business based in Detroit, how do you feel about the prospects for the city during the bankruptcy process? Do you see potential for business growth in the Motor City?
We’re very bullish. The bankruptcy had to happen in order to move forward. Since we’ve been down there, we’ve never seen more activity, more energy. Our building is right in the heart of it. It’s an exciting place to work. There’ s a lot of new energy and new development going in downtown. Vacancy rates are very low. We think it’s a very positive time.
(Edited for clarity by Steve Gelsi)