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Vestar and the focus on data-driven companies, Stone-Goff runs single-asset on JSI

A Vestar Capital partner holds forth on the firm's focus on data-driven companies.

Morning –

Tough to get too excited about the morning with yet another horrific school shooting, this one involving kids my daughters’ ages. It’s hard to send them out the door to elementary school and feel confident they’ll make it home safe. That’s America, today.

Back to business: My colleague MK Flynn chatted with Nikhil Bhat, a partner at Vestar Capital and co-head of business and tech services, about the firm’s focus on data-driven companies.

Below is a sample of the Q&A. Read the full piece here on PE Hub.

What is driving dealmaking in the sector?
We are in the middle innings of a shift in what drives value and differentiation for information services businesses. Previously, it might have been enough to provide a proprietary data source, and deliver a raw data product to customers in a database or spreadsheet. Today, value is driven by providing customers with self-service tools to quickly extract actionable insights from the data, and seamlessly integrating these tools into client workflows to support augmented decision-making. The most advanced companies, agnostic of size or industry, are using artificial intelligence and machine learning to further enhance speed and quality of analytics.

Every company is at a different stage of this transition. We get most excited by opportunities to help management teams invest behind technology and innovation to accelerate their evolution along this curve. Industry consolidation is another major opportunity; acquiring adjacent data sources or analytics technologies and combining them into a single solution that integrates into multiple client workflows can drive significant value for the customer, which in turn drives growth and value creation in the investment itself.

More time: My understanding is secondaries activity is slowing down, perhaps inevitably so, because of the broader volatility. Still, processes that have been in the market are getting done, including a single-asset deal from small shop Stone-Goff Partners. The firm is running a process to move its portfolio company JSI out of an older fund and into a continuation pool for more time and capital to keep growing the business.

Stone-Goff invested in JSI in 2018. The company provides regulatory and compliance consulting services to telecom providers in rural communities in the U.S. The deal would allow LPs in Stone-Goff’s third fund to either cash out of their interests in the company, or re-invest through the continuation fund.

For this deal, Stone-Goff will invest in the continuation fund process using capital from its fourth fund, which is in the market fundraising, according to a Form D fundraising document. Unlike cross-fund M&A transactions, GPs using capital from a new fund to back a continuation fund is looked upon favorably by both LPs and secondaries investors, sources have told Buyouts.

“When a GP is willing to roll their carry, write a new check and have the new fund participate, they’re saying, ‘We trust our entire brand with this asset,’” a secondaries market professional said in a prior interview. Read more here on Buyouts.

That’s it for today. Have a great rest of your Wednesday. Reach me with tips n’ gossip, feedback or story ideas at cwitkowsky@buyoutsinsider.com or over on LinkedIn.