- Gamut closed debut fund on $1 bln
- Has flexible investment style
- Deployed 30 pct of fund so far in tough environment
Ex-Apollo Global Management executive Stan Parker, co-founder of Gamut Capital Management, says the current environment is the worst he’s seen for buyers since he started in the business in 1998.
People were complaining about deal multiples at the end of 2007, and the market is running about 15 percent above that today, he said. “I don’t feel good about it at all. For us that macro environment is not providing any tailwinds for sure,” he said.
Still, since announcing the closing of its debut fund on $1 billion in January 2017, Gamut has deployed about 30 percent of its capital across three deals. “We’re clearly finding ways to deal with it,” he said. “But it’s not an exciting buyer’s environment.”
Cycle ‘is fiction; it’s not real’
The environment is especially tricky because high valuations were driven not necessarily by strong earnings but because central governments flooded the market with cheap money. “This is a liquidity-driven cycle,” he said. “It’s fiction; it’s not real. We’re very concerned about what’s going to happen in the economy.”
Parker gave a keynote address at Buyouts Insider’s Emerging Manager Connect conference in New York in late July. He talked about Gamut’s fundraising process, which for a first-time fund was successful, ending up a third beyond its $750 million target with a $1 billion final close. UBS was placement agent on the fundraising.
“It’s not a decision to be made lightly: A, to go out on your own, and B, to try and raise an ambitious amount of money,” Parker said.
Parker and Partner Jordan Zaken formed Gamut in 2015, prior to which they both were senior partners at Apollo.
Parker joined Apollo in 2000 and was sector lead of transportation/distribution and sector lead of cable, telecom/technology. Zaken joined Apollo in 1999 and was sector co-lead of chemicals and sector lead of power/coal and agriculture. Both left Apollo in 2014.
Gamut started out using free space at a law firm and hired an executive assistant to help coordinate travel, Parker said. The firm hired half the team before the first close, he said.
The firm has since hired two more investment partners: Michael Kreger, who joined in 2016 from Oaktree Capital Group, where he focused on distressed investments; and Shane Tiemann, who joined earlier this year from Veritas Capital, where he worked on investments in energy, industrial and healthcare sectors.
Gamut also hired a marketing and investor-relations partner, Allyson Alimansky, who joined from Credit Suisse’s private fund group in late 2015.
When Gamut initially hit the market, it considered a $500 million target for the debut fund. But it saw the demand and pushed the target up to $750 million, he said.
The first close was boosted by a large investor that came in early, giving other LPs confidence in the firm, even though it was a first-time fund. Gamut ended up holding around 300 LP meetings in a year, “which was painful,” Parker said.
Gamut’s strategy has been described as a “mini-Apollo,” which means the firm has the flexibility to do regular-style buyouts but also to invest in companies’ debt. It can operate in good and bad markets, sources have told Buyouts.
The firm will do leveraged buyouts, corporate carveouts, strategic partnerships and distressed-for-control investments. Its target investment size ranges $50 million to $150 million with the ability to scale up capital committed in partnership with limited partners.
Gamut’s target industries include agriculture, chemicals, telecom, industrials, mining, power, distribution, tech and energy and transportation.
Gamut’s three investments so far are: IAC Group, an automotive-parts supplier; PaperWorks Industries, which provides recycled paperboard and folding cartons for packaging applications; and JPW Industries, which makes machinery and equipment.
Gamut invested in IAC earlier this year through a refinancing, acquiring a minority equity interest. Invesco remained the company’s majority shareholder. Last year, the firm acquired JPW Industries from Tenex Capital Management through a regular buyout transaction.
And it acquired PaperWorks earlier this year out of bankruptcy, buying into the debt and converting it to debt and equity through a restructuring process. Gamut also provided a debtor-in-possession loan to PaperWorks.
The investments showcase three of Gamut’s four strategies: regular-style buyout, a debt refinancing giving the firm a minority stake, and a distressed-for-control investment.
Gamut has not yet executed on the fourth leg of its strategy: corporate carveouts, Parker said.
Parker said he expects to deploy the fund within its investment period, even though the firm is being cautious in the current high-priced environment.
“One of the hallmarks of who we are and who I am … we’re very methodical. We think about things a lot before we do them.”
Action Item: Check out Gamut’s Form ADV: https://bit.ly/2vkcZlK