Welcome back to PE Value Drivers.

In this latest issue of PE Value Drivers, I talk with Parker Davis from Slate Capital Group. Parker is a Partner at Slate Capital, which he joined in 2010. Slate Capital is an independent sponsor originally based in Baltimore and recently expanded to Nashville and Cincinnati. In his role, Parker focuses on developing new opportunities and managing the firm’s current portfolio.

As an independent sponsor, Slate partners with other investors such as wealthy individuals, family offices, and institutions to raise money for individual investments, rather than managing a fund. This structure allows Slate to be creative and flexible in its investment approach and plays well with owners who often roll over their equity into the new structure. While generally industry agnostic, Slate often focuses on companies with a business services component like distribution, light manufacturing and food and beverage.

Some highlights from my conversation with Parker – view the video to hear more.

• Over the last five or 10 years, Parker has noticed an advancement of the due diligence process with investors diving into market and industry dynamics earlier in the process and emphasizing the target firm’s ability to execute and likelihood of success.
• To support these diligence efforts, Slate (and others) have developed their own networks of experts to tap into before and following the deal. This synergistic relationship allows them to access broader expertise as advisors or supplements to management of the company.
• This access to a set of individuals that have expertise in an industry provides both “pattern recognition” and an understanding of the financial dynamics of private equity investing. It also provides a paradigm to think about what to do with the company re add-on acquisitions or who the future buyers might be.
• Parker and his partners think about and like both organic growth and growth through acquisition when it comes to value creation. Common areas to look at include additional opportunities with the company's current customer base, new customer acquisitions, as well as regional or national growth. It all starts with good management and an understanding of the dynamics and players in the business.
• When dealing with portfolio company management teams, the right balance of consistent communication is critical. This is usually through a regular cadence of call (e.g., weekly or biweekly) to talk about what's going on operationally and strategically in the business. This often extends to the management team and beyond, which allows for a broader set of views, as well as a forum for problem solving and sharing of best practices. The key is to provide support, not to meddle unnecessarily in the day-to-day running of the business.
• Having the right toolkit of support and resources is a critical goal for Slate in adding value to its portfolio of investments. Maintaining a dialogue with firms like Chief Outsiders allows Slate to bring in targeted expertise and to know where to maximize their contribution. Knowing when to bring in a firm like Chief Outsiders for help with marketing and top-line growth, or to supplement the team inside a portfolio company is an important part of Slate’s playbook. A key to success in private equity investing is having the humility to broaden your network to access specialized resources to support growth, rather than trying to be all things to all people.

Please view the video for the full discussion with Parker and be sure to check out the whole PE Value Drivers series. If you are interested in being interviewed for the PE Value Drivers series or have any questions, feel free to reach out to me at skobran@chiefoutsiders.com.