If you read about or talk to private equity firms, most will try to differentiate themselves from other firms. But the reality is that most are very similar to one another. Sure, there are the obvious differences, like the investment areas they target, or the size of the deals they typically go after. But there are lots of commonalities as well.
Most PE firms have one or more funds whereby dozens or hundreds of people, pension funds, or other types of firms invest as limited partners. They all need to have a prospectus that outlines what they do, who their targets are, how they are managed, what fees they charge and how profits are split, etc.
They are staffed primarily with people with financial transaction experience. These individuals rarely have the operational experience of people who have actually run companies or parts of companies previously. Many of those same PE firms address this shortcoming by keeping some operating executives on staff or on contract. That said, typically there are far more financial people than operational people at any given PE firm.
Finally, one other common principle of nearly all PE firms: The only way they make any money for their investors is by selling the companies they buy (or go public, which is essentially the same thing). They generally have targets in the 5–7-year timeframes for such a sale.
So, How is New Degree Growth Different?
A Singular Investor
We are different in many ways. First, rather than having a fund with dozens or hundreds of investors, we are funded by one singular investor. This is a distinct advantage over other PE firms, as we don’t have to prepare a prospectus and be limited by the various commitments made in it. We simply focus on any business that we feel is good and that we can improve over time. We also don’t have to create a board of directors for each company either.
A Long-Term Approach
Perhaps most importantly, we don’t have to sell the companies we buy. In fact, we prefer keeping for the long term, and don’t have to conduct financial engineering to “pretty up” the P&L and balance sheet. By focusing on the long term, all our businesses put together strategic plans that go out 10 years or more and we believe that enables our businesses to make better, long-term decisions that make the company stronger.
A Lean, Operational Staff
Another key difference – we have a lean staff, primarily focused on people with operational experience. We have people that have built businesses for decades. So, when there are challenges in any particular business, we have likely encountered something similar and can offer good advice and potential solutions to our companies.
New Degree Growth has a focus on Logistics and Transportation, Media, Quality and Affordable Single and Multifamily Housing, Geothermal Energy, and African American owned businesses, but we are not solely focused in those areas.
A Dedication to Preserving Legacies
Last, many companies that have been purchased by PE firms are completely unrecognizable within 2-5 years after a transaction. We prefer to preserve the legacy and culture of the companies we buy – we think this is critically important to the business as well as its customers and employees. Along these lines, while we can buy companies whose owners want to leave as soon as possible after closing, we prefer to keep the owners and management teams on board for several years to help ensure the continuity of the company. As such, we don’t force multiple companies to merge into one – we keep their individual identities.
Want to connect? Contact us. Our team is ready to talk and address any questions you may have.
