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Monroe’s Ted Koenig: Invasion of Ukraine to exacerbate supply chain disruptions, raise commodities prices

PEI Media is seeking nominations for Women of Influence.

Good morning, Hubsters. MK Flynn here, with today’s PE Hub Wire.

As the week draws to a close, I’m continuing to think about the impact of the Russian invasion of Ukraine on the private equity industry. Last night I exchanged emails with one notable dealmaker.

Ted Koenig, chairman and CEO, Monroe Capital, reached out to reporters to say: “I take the 2022 Russian invasion of Ukraine very seriously and as a leader in the business community, I feel it is important to take a stand: As the son of a holocaust survivor, I am shocked and deeply saddened by the events in Ukraine and the plight of the Ukrainian people. I firmly believe in a country’s sovereignty and right to self-determination and I share the concerns of citizens around the world and extend our sympathies to those affected. This senseless invasion and war must stop immediately.”

In a follow-up email, I asked Koenig if he’s seeing, or anticipating, any impact on PE-backed loans. He replied:

“Yes, we are concerned about this. Even before the Russian invasion of Ukraine, we were closely monitoring supply chain issues with our borrowers and rising commodities prices. We have added access to raw materials and commodity products pricing to our matrix of key portfolio management reviewed items, no different now than revenues, expenses, gross margin, client retention, liquidity and cash flow. Supply chain was a 2021 priority, and now with the invasion of Ukraine, it is likely to exacerbate an already difficult situation.”

If you have insights on how the crisis in Ukraine may affect PE deals, I’d love to hear from you. Please email me at mk.flynn@peimedia.com

And, for thoughts on how the crisis in Ukraine may affect private markets portfolios, see this story.

Switching gears. Earlier today, we published the latest installment of PE Hub’s ongoing series of Q&As with high-profile private equity pros continues today with insights from Kirby Fine, partner, ATL Partners. New York-based ATL was formed in 2014 to make private equity and preferred securities or debt investments in the aerospace, transportation and logistics (ATL) sectors, principally in North America.

In February, ATL and BCI sold Pilot Freight Services to AP Moller – Maersk for approximately $1.7 billion in cash. I asked Fine about that deal and trends in the sectors in which ATL invests.

What’s driving deals in aerospace, transportation and logistics?
“Capacity constraints and shortages at each leg of the supply chain, along with the increased service requirements of e-commerce, are making it increasingly important for transportation and logistics providers to control their own capacity networks in order to provide reliable service to their customers,” he said. “This is driving consolidation in the transportation and logistics sectors, as strategic acquirers look for differentiated access to capacity.”

How are returns and hold times are changing in the sectors in which ATL invests?
“Secular trends, including increasingly complex supply chains, the proliferation of e-commerce, and increased outsourcing, have underpinned consistent and strong long-term growth (with the US 3PL market having grown at a 9 percent CAGR over the last 25 years),” Fine explained, referring to third-party logistics. “In recent years, structural shortages of capacity to meet demand across nearly all legs of the supply chain and the shifting requirements of e-commerce have further accelerated the increasing need for transportation and logistics providers, which has supported continued strong returns for investors in these sectors.”

Read the full interview here.

Role models. Earlier this week, PE Hub and Buyouts announced our Women in private equity: The class of 2022, and throughout the month, we’ll be featuring dealmakers from the special report in the Wire.

Today, let’s take a look at Clara Jackson, director, TA Associates.

When Jackson first encountered Caprock six years ago, it was too small for TA to invest in, but she never lost track of the wealth management firm. Since then, Caprock has evolved into a multifamily office that advises on more than $7.5 billion in client assets. Last year, Jackson led TA’s strategic growth investment in Caprock, a testament to her tenacity. Earlier this year, she was promoted to the role of director.

“As a female in financial services and as a female in fintech, I’m very often the only woman in the room,” Jackson said. But within TA, that dynamic is improving. Jackson is one of eight post-MBA women on the investment staff, the largest number to fit that category in TA’s history.

For more on Jackson and all the dealmakers in our Women in private equity report, read the story.

PEI Media is continuing to look for women to recognize. Private Equity International currently seeking nominations for our Women of Influence in Private Markets list 2022, which celebrates trailblazing women in alternative assets. The deadline for nominations is end of day Wednesday, March 30. The list will be published in July. The list recognizes influential and pioneering women who have achieved something notable over the past 12 months. To be eligible, nominees must work in the private funds industry, namely private equity, private debt, infrastructure, venture capital or real estate. We welcome nominations for women working in a variety of roles at investment firms (such as on the investment team, IR, operations, marketing and portfolio support), LPs, as well as advisory firms (such as law firms, placement agents, capital advisory firms, fund administrators). Submit your nomination here.

In case you missed. Earlier in the week, Private Equity International announced the winners of The PEI Awards, which celebrate the private equity industry’s standout firms, highlighting their contributions to the worlds of fundraising, secondaries and more. This year’s industry-voted awards recognize the achievements of GPs, investors and advisory firms across more than 70 categories, spanning the Americas, Asia-Pacific, Europe, the Middle East and Africa. Among the winners were TPG for Healthcare Private Equity Firm of the Year; Clearlake for Technology Private Equity Firm of the Year; and L Catterton for Consumer Private Equity Firm of the Year. Click here to read about all of the winners.

And finally, today is Employee Appreciation Day, so it’s a good moment to recognize all the editorial team members who work on PE Hub and the Wire: Thank you to Chris Witkowsky, Chris Wood, Aaron Weitzman, Karl Shmavonian, Kirk Falconer and Iris Dorbian.

Wishing everyone a safe and healthy weekend,
MK