Coffee Break with Byron Wilson, Partner at Manhattan Atlantic Capital

Mr. Byron Wilson is a London-based partner at Manhattan Atlantic Capital LLC, a PE firm that focuses on healthcare and the consumer space. The company targets mid-cap firms in countries such as Brazil and Africa. Concurrently, he is a visiting professor at University College London (UCL).

On behalf of BSPEC, I would like to thank you for taking part in this informal “Coffee Break with” session. Let us start with a brief introduction. Could you walk us through your background?

Sure. I am currently a partner at MAC, a PE firm that focuses primarily on mid-cap companies in the healthcare and consumer space. We have made our foray into places like Brazil and Africa. We are looking at markets that are fragmented and lend themselves to consolidation. I am also a visiting assistant professor at UCL, teaching at the Infrastructure Investment and Finance course. I have also taught economics at Anglia Ruskin University and the global financial markets course at Coventry University.
I have previously held the roles of a Director at Putnam Capital and VP at Clairfield International. Before that, I interned at the United Nations, a company that is now Pfizer, and Barclays.
I have completed the MSc in Strategic Marketing at the John Hopkins University, and the MPA in Economics at the University of Michigan. Finally, I did a Finance MBA at the University of Cambridge.

Tell us a bit more about your transition from the US to the UK. What made you pursue the MBA in Finance at the University of Cambridge?

I had many considerations at the time. When I finished Michigan, I had this feeling that I should get an MBA. Once you get it, you know it’s out of the way. There is also the cost consideration as universities in the states are really expensive. I also had the notion that getting an international experience would be a helpful addition. Why not add an EU experience that would give me a more global outlook? That was a competing thought as well.
As for why this particular MBA, I found it relevant to my career goals. I was an intern at the UN in NY at the time, and my thought process was the following: I don’t want to be just about finance. I also want to do some “good”. If I could articulate it well back then, it could be some kind of social impact. Combine it with investments in the environment or things related to people who don’t have access to capital—a multiplier effect. This MBA would be good for that.

What made you stay until today in Private Equity? Tell us about your experience working in PE and your tasks as a partner. How have your responsibilities evolved?

In PE, there are so many levers you can pull, and you cannot be finance per se. It requires you to understand a bit about Strategy, Marketing, Finance, etc.

• Strategy: Let’s go over an example. Assume we’re looking to buy some clinics in Brazil, potentially oncology clinics. One of the things to look at is that these clinics are fragmented. If we buy one of them, where are the synergies going to come from? From the drug itself. If you are one clinic and suddenly become three clinics, the synergies come from the drug itself, where the overhead is. If you add several clinics together as a PE firm and consolidate them, when you purchase a drug you get a discount. You can also fix the back-office functions, such as centralizing the payroll and operating systems to reduce costs.
• Marketing: When you buy these clinics, you have to go out and market it. You are telling customers you are rebranding the clinics. That would attract more high-end customers. You will use certain platforms such as TV, online, word-of-mouth, etc. Also, you will need to talk to GPs who refer patients to the clinics. It is essential to understand the marketing part.
• Finance: What is the valuation of this company? As you create strategies and grow sales, how does that change the valuation? Are they better off selling one at a time or as a whole entity being sold?
• Psychology: You are buying clinics usually from doctors who usually started them with some intentions in mind. When you buy and want to get a discount, you need to be careful about how you get your point across.

The role as a partner is pretty much a staple. There are several aspects to it.

• Fundraising: I go out and talk to institutional investors- pension funds, for example. I present our firm and the reasons they should invest in it.
• Deal Origination: There are criteria for the different types of deals we want to invest in. We might want to invest in healthcare or consumer goods deals with a valuation that is now more than US$ 40 mln, and then we could use that valuation as the motherboard—the company we’ll add other companies to.
• Leveraging Contacts: Many times, we want to originate deals without advisors—PwC, for example. We prefer not to have an auction process that bids up the value. As a PE firm, you can only control the price before you begin the process. Once you take over, you can control other things too. Before that, you can have some say in the valuation, how high your IRR should be.

All in all, I look for targets and am involved in the execution of deals, whereas analysts/interns are doing the valuation. I would ask questions about assumptions, the origin of numbers, comparables, and so on.
Another thing is when there is a lot of traffic, which means that there is less time spent in origination. But it depends. Sometimes you have a lot of traffic, sometimes not.

You mentioned using a company as a motherboard. Besides the valuation, what are the main criteria for choosing one?

The criteria for using a motherboard would fall into these items:

1. Debt-to-EBITDA ratio of x3 or less. That is because when we add more leverage to this company, we are going to use some of that to purchase the company. If Debt-to-EBITDA is for example x2, we can move it to x4 or x5 at maximum.
2. This company has very strong cash flows—very important for the business. It has to have a fairly strong balance sheet going forward too. We need to make sure the company in question could have—when we add the other companies to it—really good synergies going forward.
3. The motherboard itself has to be operationally excellent in terms of the ability to actually act as a consolidator of sorts. The question is: Is this motherboard in a fragmented ecosystem?
4. Barriers to entry. If you purchase an oncology clinic and all of a sudden there is a shark next to you, e.g., an insurance company buying hospitals and clinics to create their own ecosystem. How it works is that once the GP refers patients to the clinic, the clinic or hospital is going to refer to the other within the ecosystem. The insurance might then say that only the hospitals and clinics of the particular group are covered. If you are out there with the oncology clinic on your own, these insurance companies can really eat your limb. So basically, you are looking for a company without many sharks around.

Let’s switch from your professional life and the intricacies of your work. You have been an active professor in some renowned universities. What motivated you to pursue this path, and how do you combine both worlds?

The opportunity basically fell on my lap. At some point, I was also thinking of a Ph.D. I said to myself, maybe academia might be interesting—to lecture every now and then and provide a practical insight to students. There are people in PE who do that. Steve Schwartzman is a good example. I do not compare myself to him, but I am aware that he lectures too. It is just interesting to have academic and real-world experience. And of course, you are still able to do other projects—as professors actually do. For example, professors in robotics set up robotics companies. Professors in certain fields work in those fields.

You have a fairly broad background, with both professional and academic experience outside finance. Nowadays, we see firms, particularly investment banks, hiring students outside finance. Do you think that this phenomenon is here to stay?

These are trends, and they tend to change over the years. In the early 2000s, Marketing was a big thing, then consulting and then finance. They come and go.

Unfortunately, we have reached the end of our conversation. Do you have any suggestions for students that are currently trying to get their foot into PE?

If you want to get into PE, the typical step is to start off in investment banking doing M&A for 2-3 years. That is the typical path. Then transition. The reason is that in IB you are doing a lot of M&A valuation and in PE you are going to be doing the same thing. What are these companies worth? These skills are transferrable. Ideally, start off with an internship in IB and afterwards get a full-time job before you transition to PE. While doing M&A deals, it is also important to have a lot of emotional intelligence to network within PE because you will interact with them as an investment banker.

Tip for students – Important to know
SPAC vehicles, to some degree, are impacting the PE world. That’s because you can put together a prospectus and say, for example, I want to raise 300 mln. and people might give you that amount based on the prospectus, and the IB underwrites that. Then you can use it to buy companies. Therefore, not using the traditional way. As a student, you should be able to answer the following question: Is this a trend or a one-off?

Author: Stefanos Ymeri
Editor: Tiago Guardão