Native American PE Strategy
Are there PE strategies that incorporate Native Americans for some kind of tax arbitrage? Or are there industries where Natives do best?
Trending Content - Private Equity Forum
Career Resources
My firm almost closed on a buyout of a peace pipe manufacturer, but our tribal shaman said that the full moon was a bad omen so we bought a Buffalo meat packager instead
Sorry, you can’t say that. The moon is sacred to our tribe, and we are deeply offended.
Casinos
Tell me more
"Casinos run by Native Americans occupy a special place in the overall casino and gambling industry; because Indian reservations are considered independent nations, gambling is mostly unrestricted."
This is a complete state-by-state listing of all federally-approved Indian gaming operations in the U.S.
These casinos are authorized and regulated by the National Indian Gaming Commission (www.nigc.gov.), a regulatory agency of the U.S. Interior Department created by the Indian Gaming Regulatory Act (IGRA) in 1988.
UPDATED JAN 5, 2021
Indian gaming is played in 29 states. There are 511 gaming operations which include casinos, bingo halls, travel plazas and convenience stores. These are owned by 245 tribes.
List of Casinos State-by-State (500nations.com)
Casinos outside Vegas are basically this. Also payday / small dollar lenders, a lot of the big ones have ties to native tribes specifically to skate certain regs to the point where it has its own segment with some software providers called "tribal lending".
This is an uninformed comment, but I am completely convinced that there is substantial low-hanging fruit in veteran-owned businesses, women and minority-owned businesses, various government contracting programs, Native American designations, and all sorts of things like this where the government establishes some sort of identity-based subsidy to encourage private enterprise.
All it takes is for a financial sponsor to identify the loophole, find an operating partner who fits the bill, and then lever the dickens out of it.
yeah same thing with FHA and VA loans in RE. any time the government gets involved by definition there’ll be a market inefficiency you can exploit
For the most part this doesn't work due to ownership requirements. To maintain those designations the business typically needs to be owned >50% by the individual it's receiving it for. It's used a lot in SMBs though where a husband will technically transfer 51% of the shares to the wife, but unless doing minority deals will be tough in buyout world.
Similar story in gov contracting, for SBIRs and a few other funding vehicles the company's status gets pooled with all other companies owned >50% by a >50% shareholder. So when filling out the forms a portcos revenue and employee counts have to include the sum of revenue and employees for ALL of the portcos in the fund.
How is ownership defined? I presume is financial and operational control but I am confident there’s ways to loophole that too.
Basically this. No reason to carve out regulation to support marginalized people and groups, and then let Stephen Schwarzman come monopolize it for another 0 on the end of his NW.
I started a Native American owned federal contractor…I’ll follow up with a comment on this post if I become the next Akima, Yulista, Tyonek or Cherokee Federal.
First of all, I’m extremely grateful for the response, as I was spitballing from the original comment.
What would it look like to have a corporate pyramid structure like the early Goldman Sachs partnerships where Native American A owns 51% of TopCo, which owns 51% of another entity, and keep adding layers and layers with the 49% being held by the sponsor? The Native would only need control of TopCo with minimal equity, which qualifies for the program, and the sponsor owns everything else. Constructively, the sponsor obviously owns >50% of the OpCo economics, but the Native technically has governance control over all of the structure.
The other way to do it is with really onerous preferreds. Have the Native open a company as a strawman, the real money comes through debt and preferred from the sponsor, and everyone knows the Native’s equity is worthless because the debt and preferred sucks the money out (liq pref, cumulative dividends, etc.).
This is true but it's capped and opportunities for growth are super limited. Pretty much just a door to allow X identity people into the playing field...but at a certain point, the designation and minority stamp becomes obsolete/non-value add and you are now competing with traditional players
In short - the government will aid underrepresentation and help provide a foundation, but once you demonstrate growth/value increase (most PE / investor strategies), you're on your own with the usual players.
Almost. Take a look at how many entities ANC’s have and then think about their continuous 8a eligibility. Sole source direct award capped to $100M ain’t bad.
If I remember correctly that’s part of how Carlyle got started but other than that, no clue
Good ole' Scott Tucker - who got sentenced to 16 years in prison and who caused his brother's...
I also recently saw Killers of the Flower Moon
Velit ratione est sunt repellendus doloribus temporibus autem. Mollitia asperiores nobis exercitationem harum iure. Hic vero officiis error excepturi facere nisi. Nam autem unde eum ipsa labore aut.
See All Comments - 100% Free
WSO depends on everyone being able to pitch in when they know something. Unlock with your email and get bonus: 6 financial modeling lessons free ($199 value)
or Unlock with your social account...