Coffee Break With…

By Camilla Cameroni

BSPEC had the pleasure to unofficially interview the managing director[1] from an American global asset management firm, which is one of the largest credit investors in the world. The firm pursues a value-oriented and risk-controlled approach to investments in distressed debt, corporate debt, private equity, convertible securities, real estate and listed equities. As of December 31, 2016, the company manages more than $100 billion for its clients.

On behalf of BSPEC, thank you for accepting our invitation for this “Coffee Break with”. Would you like to shortly present yourself with a brief overview of your professional and academic background?

I am a former Bocconi graduate as well: I did my MBA at SDA Bocconi in Economics and Finance back in 2002, with a special focus in Institutions and Financial Markets.

During my career up to now, I have worked for Merrill Lynch Investment Banking as an associate for four years. After that, twelve years ago I moved into the Private Equity industry. Currently, I am working in the same firm where my Private Equity career first started.

Looking at your educational history it seems that you knew you wanted to pursue a career in Finance. How did your specific interest for Private Equity started to grow?

My interest for Private Equity started growing while I was working at Merrill Lynch Investment Banking. I slowly became aware that I wanted to be an investor, rather than a financial adviser. However, my instruction also had an influence on the matter: during my MBA at Bocconi I grew a strong interest for understanding businesses and finance, although the Private Equity path was not clear in my mind at the time.

Regarding the activity you perform, how would you describe your responsibility in the firm? In particular, which are your day-to-day tasks and which one do you enjoy the most?

I am responsible for searching information and the execution of operations that are aimed at acquiring or financing other firms. My job also consists of other tasks: on one side it is about meetings with intermediaries and firms to find potential targets, then it is about due diligence and negotiations with the targets on the other. I personally prefer the second task.

I also monitor the investment once it has been bought. That is why I can say I am deeply involved into the different phases of the investment, starting from the very first moments when research is done, until the end when the acquisition is over.

How does the fund you work for stand out from the rest of the funds?

What differentiates my fund from the others is certainly the attitude. The fund I work for shows a very flexible approach to investments: it offers many solutions, such as equity and debt, to firms that need financing and the complete buyout of course.

Throughout your career, is there any remarkable deal that contributed to your personal and professional growth?

I had two critical moments during my career and I tried to learn as much as possible from both of them. The first deal was the acquisition of an Italian bank and the second one was the acquisition of British real estate firm. But every deal is different from the previous ones, and it entails new obstacles, new ways to capital gains, and so on… Experience in the Private Equity industry is very important: every deal consists of a precious source of learning and information, which is necessary to improve investor skills.

As suggested by a Bain report dealing about Private Equity, longer holding period are today the new trend. Is there any impact this new trend is having on your business?

Yes, it is true but it is a fair consequence of how the Private Equity world has changed in the latest years. Investors of a valuable and profitable investment of course are willing to stick to that. I must say, however, that longer holding periods really had no impact on my business or on my job, in particular. My fund had always had holding periods that are longer than the average, as our investors permit this.

What are the procedures used by your firm when choosing the ideal target?

The ideal target normally complies with two models. The ideal target is either a firm with a very solid business, a great competitive advantage, but a balance sheet that needs to be restructured or it is a firm characterized by great potentiality but low financial resources. In both cases my fund has a role: it helps the restructuring or gives financing to the firm.

In addition, ideally speaking the business model should be escalated with just a few investments, according to the so-called “buy-and build” theory, typically used in the private equity sector to generate value and increase returns. The theory entails buying a company with established management and leveraging off the company in the prospect of subsequent acquisitions. Usually, a buy-and-build strategy works better in industries where the Private Equity firm already has significant experience, and in cases where there are good management teams.

In Italy many firms tend to be managed by families and the natural passage from the old to the new generation is an important source of operations in Private Equity as well.

With respect to the Italian market nowadays, what is your opinion about the Private Equity industry? How does the current situation differ from the previous setting? How do you expect it will develop in the next years?

The market is becoming more competitive and intermediated, compared to the moment when I first started working, thus demonstrating that Private Equity is a growing industry that will not disappear soon. Years ago when I first started working there was just a small number of funds and those funds used to deal directly with firms. Instead, nowadays all the acquisitions and sales are intermediated via auctions, as the main firms are becoming bigger and more structured.

Profits are lower too: unfortunately the 25-30% earnings of the “buy and hold” type have nowadays disappeared. Today’s great profits only come from well-prepared growing strategies: thinking outside of the box is all it takes to be successful.

What type of investor are you? How would you describe your relationship with the management of the portfolio companies and with the other shareholders?

I personally work together with the “management” sector of the acquired firm after the acquisition has been completed. Me and my team have a big presence on the acquired firm so we are either owners or “majority shareholders” of our portfolio companies, with all the obligations and opportunities that come together with that.

In most cases, my fund becomes a 100% shareholder or, less frequently, a “majority shareholder” so contacts with other shareholders are limited to mutual information exchange but are periodic and continuous.

What advice would you give to our readers that are willing to embrace a career in Private Equity?

I suggest you to start working a few years, maybe two or three, for an Investment Bank before you send your CV to Private Equity firms. Although the two worlds are partially related, there is so much to learn from Investment Banking and all the things that you learn will certainly come at hand one day: once again, experience is the key in a Private Equity job.

Apart from experience, other “ingredients” that Private Equity aspirants need are a good educational background, but most importantly passion and persistence, because the Private Equity world is tough and competitive. Good luck!

[1] The interviewee agreed to answer questions upon the promise that she and her firm would not be nominated in the article.