Hi all, looking at an associate role at a special situations fund. Wanted to understand the perceptions of these funds and exit opportunities.
The fund is focused on privately originated investments, backed by financial or real estate assets. 2/3rds of their investments tend to be debt, and 1/3 equity.
The focus is on distressed or turnaround situations where the company is suffering a liquidity event. Investments are typically $20mm + in sub $50mm EBITDA companies, with a five year hold.
Clearly quite a specific focus, so I wanted to get a view on the likelihood of exiting into traditional Private Equity if I wanted to make that switch down the line.
Thanks.
It definitely sounds like an interesting fund to work at. However, due to the nature of the style of investing, I feel that as an associate you would be doing a lot of sourcing. If you are into that kind of stuff it sounds like a pretty cool gig.
I asked them about the sourcing model. I would be a senior associate, running the analysis and execution of opportunities. More focus on structuring investment. A lot of opps are sourced from existing JV relationships.
Anyone else have a view? Keen to get some insight as deciding between this and continuing down the M&A advisory route.
Can you clarify this part?
"The focus is on distressed or turnaround situations where the company is suffering a liquidity event."
The sentence doesn't make sense to me. Just trying to see which area you are coming from.
Basically, where the company's business plan is solid, but they have got into trouble because they aren't able to source financing from the banks due to risk, or current underperformance. In this situation the fund invests via debt which is backed by some asset (be it property or a financial asset which can be liquidated). The fund, will therefore structure the investment to minimise downside by being able to take the property and will maximise the upside by taking an equity position in the company or getting warrants. The rate on the debt will be around 20%.
This sounds like a Mezzanine fund, not an SSG fund.
I think the other thing that makes them less of a straightforward debt fund, is that they also buy assets out of bankruptcy (such as hotels) and roll them up into operating companies which they have ownership in.
My real question is this strategy will work today given the number of investment opportunities out there, but may not tomorrow. I also would ideally like more equity investing long term, but the structuring and debt knowledge is valuable for the short term. Versus the alternative of staying in IBD, is this an attractive opportunity to gain investing experience that won't limit my chances to switch into traditional private equity in the future?
It sounds like a solid opportunity. DD or SS funds are well-respected IMO b/c the work they do is complex and there is a ton of risk. You need a strong stomach for DD investing, as my contact at Victory Park would say.
Exit opps are sound for other DD or SS funds (think Wayzata, TPG Credit, Sun Capital, Victory Park, etc.). You could also land a job at a top consulting firm focusing on turnaround and restructuring.
Thanks for the thoughts there really appreciate it. And what do you think about making the switch to a pure private equity shop 2 years down the line as a VP? Fundraising is difficult now in that space, but thinking out to the upswing that's where I think you want to be. Is it difficult to make that cross from debt to equity investing at a junior level? Clearly I have a strong background in equity from the advisory perspective, and will do some equity investing in this potential role.
Interested as well...
Have done a fair bit of work in the asset class - if you want some firm specific feedback shoot me over a PM, if I know them I'll let you know a LP perspective.
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