Doing "direct" deals
Background: I currently work as an associate at a with an owner/operator on the investment team. We are the GP in all of our deals.
Recently spoke to a firm about a new role that has around manages 3x what my firm does with a leaner team. They have plenty of cash and are bringing someone onto their investment team to not only be an experienced member of the investment team but also because they "would love to start doing direct deals". What does that mean? Are they looking to be the GP in those deals? Initially, I thought they meant they would take control via larger ownership percentages but each of the investments they make are already 51%.
It could mean direct to seller and doing ‘off market deals.’ It could also mean directly owning the deals and being the GP or actually owning 100% outright. I think you should just ask them to clarify.
Plan on in it when I go back in. Is there a scenario where they own 100% and not be the GP?
Yes. Technically you can be a gp with no skin in the game (AKA a recap with a new LP and the GP stays in but cashed out). It’s rare for it to be $0 in though.
A 'direct deal' is an unbrokered, off-market deal (in my personal parlance). If I was brought on to lead 'direct deals' I'd imagine lots of cold-calling/outreach - unless of course I have existing relationships by which to source direct deals.
Its not a cold calling role. They are a have done a decent amount of deals in the last few years and manage between $5-$10B
In my experience they're likely saying they want to begin buying deals with no partner - "direct equity" with typical financing. This is becoming more common in big shops because the yields are tight and there's less money to go around in a typical JV structure.
Has the firm historically taken more passive, LP type stakes in deals? If so, I would interpret this as they see you as someone who knows how to get deals done as a GP, which would enable them to start being the GP.
So that's what was initially confusing to me. It doesn't seem like they haven't done that. They have a handful of operating partners that they partner with and invest as an LP with majority ownership and control. The team is small so I guess "control" could mean a number of things and the rights are rather limited and they would like to give more actual oversight but I am still not sure.
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