Shiv interviews Brian Boorstein, Co-Founder and Partner at Granite Creek Capital Partners.
On this episode, Brian shares how to leverage flexible investment structures to unlock growth in lower middle market companies. Learn about the importance of aligning capital, talent and opportunity, and hear about how rigid investment mandates can cause PE firms to miss out on high-potential businesses.
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Episode Transcript
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(00:00):
I do believe that there are there's a widening gap between
pro forma or hoped for EBITDA than real EBITDA.
And as EBITDA falls, then you know buyers expectations move
immediately. Sellers expectations love a
little slowly. So someone can go out and start
looking for refinancing or selling at one let you know at 1
(00:24):
hope for structure only to find that the buying market tells
them slightly different. Welcome to the Private Equity
Value Creation Podcast where we interview leading investors,
operators, bankers, and advisorsto help you answer one question,
how do we increase the enterprise value of our
companies? My name is Shiva Narayanan, and
(00:45):
each episode I will dive deep with a guest to help you become
a better value creator and capital allocator.
So with that said, let's jump right in and let's get started
with today's episode. My guest today is Brian Burstein
and he is the co-founder and partner at Granite Creek Capital
Partners. And what's really interesting
(01:05):
about the conversation with Brian is that we talked about
how they're not married to one specific type of deal or
structure when they're looking at investing in companies.
And it's very different from what I hear from a lot of
private equity investors that have a of a laser focus or
intent on deploying a certain amount of dollars in the form of
(01:26):
equity in their investments and then debt being a certain
proportion of that, or they're very focused on certain
industries. And that approach has benefits
because you really tell the market what you're about and
what types of companies that youwould be the best fit for.
But Brian and his firm have taken a different approach by
leveraging structure as a competitive advantage.
(01:47):
And that is allowing them to invest in many other types of
companies, which I think would often get ignored or overlooked
by some of those other firms that are more focused in in
specific areas. So it's a really interesting
conversation and I actually think Brian's approach is likely
giving them deal flow that otherfirms are just not able to
access because they've already told their LP's that these are
(02:08):
the kinds of companies that we're investing in.
And I found that to be super interesting and something that a
lot of private equity firms can can learn from.
So with that said, I'd love you to kind of hear, hear the
conversation and take a lot awayfrom from Brian's wisdom there.
And I hope, hope it helps your firm as well.
Thanks a lot and enjoy the episode.
(02:32):
Alright, Brian, welcome to the show.
How's it going? It's going well.
How are you? Good, good.
Excited to have you on. So why don't we start with your
background and Granite Creek andthen let's go from there?
OK, my background, I've been in private equity for 3637 years
now. It started in the mid 80s and
place called Gold Atonement Chrissy, which is now that was
(02:54):
the precursor to GTCR and and then and then I and then I
started the private equity arm for Heller Financial.
We call it Heller Equity CapitalCorporation.
I left there to get into more entrepreneurial setting into
something called Dakota Capital Partners, which we were then
(03:16):
independent sponsors, but that was even before the term
independent sponsors was around.It wasn't even funny sponsors.
We were just deal people, deal guys.
And then after after Dakota I, Idid it on my own for a little
while, but then I founded Granite Creek Capital Partners
(03:38):
with my then two only partners, Mark Redza Computer, Lehman.
Granite Creek has been around for 20 years now.
We have overtly we are buyout shot.
We're actually up multi strategyfirm.
We we have 3 private equity funds.
The first one is resolved now still that's the second one is,
(04:00):
is, is still up and running though making new investments
out of it. We've we're, we're doing add-ons
to the portfolio. Third, third fund is, is
continue to invest. We also manage a fund that
invests in control and minority equity of Agri business
(04:21):
companies, more upstream businesses.
Things are closer to the farm than the table.
We have raised and manage a company found similar fund.
I mean that that buys and improves farmland.
Most of the farms that we own are in Illinois, some are in
Indiana. And what we do is buy B&C
(04:43):
properties and and bring our knowledge of seed selection,
investing in the land and and knowledge of chemicals to make
yields improve and then sell them at A&B prices and then
separately not in a fund structure.
We started a company from scratch all Renovo Financial.
It is a it is a lender to experience rehabbers of single
(05:06):
family and multifamily homes andwe literally wrote the business
plan in 2011 and it's grown exponentially this year.
We're on target to originates onthe about $3.5 billion in loans,
half of half of half $1,000,000 average loan size.
So we we tried to take an entrepreneurial approach to
(05:29):
investing. Sometimes you could think that
we look somewhat like a an aggressive family office.
Sometimes we are are are acting like independent sponsors, but
in the funded environment and the breadth and depth of what we
look at kind of reflects that. Yeah.
That's one of the things that jumps out is just how broad some
(05:51):
of the investments that you're making here are somewhere in the
finance, finance space, agriculture like you mentioned,
as I see insurance. So what's the common thread like
how are you filtering through these companies or figuring out
where you kind of want to deployyour capital?
Sure. So the common thread is that,
that the companies at least start as, as middle market or
(06:13):
lower middle market companies. And, and we do that.
We do that for a number of reasons.
One is it fits the size of the capital that we have.
You do what you do in this business as your source of
capital. And, and so our sources of
capital do two things. One is they target the small to
middle market, small middle market companies and, and, and
(06:39):
they're there and they allow us to have to bring flexibility in
the securities that we hold to the, to the size.
It's not just the amount of money or the amount of EBITDA
that they generate. We spent the last numbers of
decades thinking about and worrying the, the, the, the
(07:01):
issues and the problems that small to middle market companies
have. Those are different than larger
size companies. In these we, we play, you know,
many different roles and one, one day we may be a, a finance
person, one day we may be a corporate coach, one day we may
be a psychiatrist, one day we may be an operator, one day we
(07:22):
may be a strategist. But those companies usually have
not had much institutional capital or at least
institutional growth capital. Usually they've, they've had
borrowings from banks. But we, we, we come in, we worry
about scaling of the businesses,growing the C-Suite, making sure
(07:45):
that, that the, the talent matches the opportunity matches
the amount of cash. So I always look at it as a
tripod. You need to have these things
each leg standing around. If you have too much money and
not enough management, you better straighten that out.
You have too little management and, and, and too many
(08:08):
opportunities, you got to straighten those things out.
So we're trying to find a good balancing act in there and and
make capital decisions, personnel decisions along those
lines. Yeah.
And I guess my, I get the starting point and the check
sizes that you can write in the profile and the lower middle
market. Yeah, once you're investing in
these companies, doesn't it become a bit of a challenge when
(08:30):
you have such a different profile or portfolio companies
kind of across the board in different industries?
Like how do you manage complexity at that level?
That's a very good question because it is complex and it's
different. And one of the things that we
try to do is early on as we're assessing the deals, we'll,
we'll get, you know, we'll, we'll either reach out to people
(08:54):
that we know or, or beyond people that we know to get some,
some extra advice. We, we typically refer to them
as river guides. So we're going to find somebody
who has been in that, in the, inthe, in the industry far longer
than we have to be able to help us understand the diligence, the
(09:15):
opportunities, the risks. You know, you know, we, we, we
usually come up with a pretty long list of what you need to
believes. And that's going to cover what
you need to believe, not only tomake the investment, but to
oversee the investment and ultimately exit the investment.
As things have gone on though, we do become somewhat
(09:36):
knowledgeable as investors and somewhat as operators do in
certain segments. So Agri business for one is I
alluded to, you know came out ofyou know a number of investments
that we made and we began to develop true insights and true
contacts. And then we mirrored that up
(09:57):
with with people who have owned and run and sold their business.
We brought them into the GP. So we can go out there and, and,
and source deals with the knowledge that we have.
We can do diligence like we've always done by bringing in
experts. But now in, in that fund, we
have people who have been lifelong participants and
(10:20):
investors and operators that then find the deals for us, help
us diligence them, but also bring value add in terms of
business development, finding other people as we go along.
And we can do that in the, in the, in the, in the range of
industries that we were until, you know, we're very operational
focused as a team, not necessarily as the individual
(10:42):
members. And so we try to bring that in
and it really comes with a very simple idea, small, the middle
market businesses, they need capital and they need people and
we try to bring both of those tothe table.
Yeah, it's really interesting. In a way.
It's a form of like as an investor looking for and quote
UN quote like product market fitbecause you're trying to, you're
(11:03):
buying good companies and overtime you develop competency
and then there's a learning curve there.
And then at some point, it becomes almost like a playbook
that you can rinse and repeat across other companies as well.
And the rinse and repeat again just to go back to what the what
the focus is. The rinse and repeat is, is, is
knowing that you know, where thestress points and the
opportunities and the, and the places you need to Polish the
(11:26):
gem for smaller middle market businesses.
You know, if you're dealing with, you know, you know,
billion dollar companies, financing is different than it
are with companies that do, you know, 5 to 10 million of Evida
MNH transactions are different. The, you know, the, the building
out of some of the systems so that you can scale and advance
(11:49):
are different. And that's where we spent a lot
of our time. Yeah, yeah.
Talk about structure. So when you're buying these
companies, are you mostly comingin as a majority shareholder or
are you buying out the company entirely or as a minority
investor? So as I touched down, we have
multiple strategies, but let me just focus on what we're
primarily known for, which is our buyout funds.
(12:13):
What is maybe more unusual or a throwback to it was years ago,
we overt overtly raised our money to be flexible in the
securities that we hold. We can do control equity, but
we'll also do minority equity. We'll do sub debt, we'll do
preferred stock, common stock. We've done senior debt doesn't
(12:35):
look like a bank senior debt, but the, but the collaterals,
the collaterals there to to to get security and making us the
the the senior lender. We've done dip loans, we've done
bridge loans. But when we really winnow it
down because we're in the small middle market and we come to the
table with 15 to $40 million, ifwe were to come with all equity,
(12:58):
we would usually crush the, you know, the, the normal partners
that we've got owner operators. So with the flexible capital
that we've got, we would scrunchthat out and we will make it so
that, you know that the, the, the incentives of the outsides
are far more aligned instead of us owning 99% of their own 1%.
(13:18):
So we use that flexibility to tostructure each deal differently.
So every, every deal has different risk returns and, and
it upsides and, and people's capabilities.
So we'll create a bespoke structure for for everything to
reflect the needs and the wants of our partners, which
(13:40):
parenthetically have to work with our needs and our wants.
And talk about that a little bitmore.
So when you talk about these different structures, like when
you look at returning your fund as a firm, how much of that is
like built on the assumption that part of these structures
would be heavily leaning towardsdebt because the return profile
(14:00):
on the point capital in that wayis very different than on the
equity side. So how do you look at that?
So we do, we do look at when we put equity and debt and we will,
we will certainly view, you know, the debt and its risks and
it's upside as that piece of paper.
And we'll look at the equity slightly different.
But at the end of the day, we, you know, we don't lose sight of
(14:23):
the fact that we're in, you know, we have an investment, you
know, a global investment debt and equity.
If we lose, if we lose a dollar of equity or a dollar of debt,
it's equally as painful. So you know, so you know, it's
not lost on us. It's just our investment.
But the, you know, the, the first part of it is, you know,
(14:45):
you can't, you know, the, the last thing that small businesses
need are just too much debt. So what we typically do is not
over lever the companies with third party debt.
So we can play, we can put the debt into the company not have
not have it, you know, crushingly, but dad to its
knees. But we're not really over
(15:07):
leveraging the whole company. We're we're we're confident in,
in, in doing that. We also have the ability, unlike
most commercial senior lenders of going interest only.
So, so while people look at the fixed charge, you know, the,
the, the cost of the debt might normally be higher, but if
(15:27):
you're growing and you have lessuse of cost, less use of cash to
pay to pay that, pay that debt for a little while, you know, we
look at that somewhere, it's growth capital.
So, so you know, we can marry them together and be the fat
middle, if you will, of, of, of the transaction small middle
(15:47):
market company, knowing that we have the capacity to close with
just the money sitting around the table and we've got the
ability to, to, to, you know, control most of the capsules.
We have to take out the smaller senior debt because there's
problems. We'll do that.
We have to be more patient on the debt.
We'll do that. And then if we, if we trade it
(16:11):
out with debt versus equity, as I alluded to before, our
partners who either are rolling,rolling some of their holdings
in or writing checks, it's more meaningful, right?
So if the if we can still come with us sizable check in total,
but trash out more that debt andequity than you know, they can
(16:33):
own more. When we look at the fat middle,
I I always prefer to call it we we invest in equity.
So our debt is really more coming from the equity part in
mindset versus a lot of senior stretch lenders or or one stop
shop guys who will start from the debt in their in their
mezzanine will be more debt like.
(16:55):
Why? Why?
Why more PE firms take this typeof an approach?
This is just because of the way they've set up the fund where
they are less flexible and different structures that they
can deploy. I think there's two things and I
can't really answer for everyone, but I'll tell you what
we think, right? It's it gets back to it.
When I said earlier, you do whatyou do is you source of money.
(17:17):
So if you're going to go out andraise money and you say I'm
going to control equity investor, you're going to make a
control equity investor. If I go out and say I'm going to
be, you know, mostly a credit for a mezzanine investor, then
you know, then you're the returns you're probably seeking
as well as the terms that you'regoing to get in the deal.
You're in a creditor agreements,all those various things are
(17:40):
going to be more debt like if you're a, if you're a Unitron
person, you'll look the same waytoo.
We've really come from it that we can be flexible.
Our backgrounds are in control equity.
We don't have a problem being a sponsor, whether we're the
sponsor from the control side ora sponsor or, or the first
institutional investor or only institutional investor will be a
(18:03):
sponsor even in a, in a, in a minority position.
So it's a lot more work that we might do because we're really
offering up even when we're minority investors.
A lot of the time and effort andexperience that we've got is
sponsors. But the, you know, it's a, it's
it, it takes up more, takes up some time and you know, it's
(18:24):
just a different time and attention in the various
companies. Right.
Yeah, I think you have to kind of be proactive on the when I'm
here, from what I'm hearing fromyou is more at the stage when
you're actually raising the funds from LP.
So the decision is already made.Yeah, I mean it.
Look, if you know if we would goand it was put the stake in the
(18:45):
in, in, in the sand and saying we're going to be senior lenders
and we wind up doing venture deals.
Yeah, exactly what they, what they signed up for, what we did
was, is to say here's our backgrounds And in the small,
the middle, in the middle marketsegment, it's not as clear that
(19:08):
the lines of demarcation betweenwhere senior debt and mezzanine
start and stop or mezzanine and preferred stock stocks start and
stop or or any of those sorts ofthings.
So we leave it somewhat fluid again, trying to structure it so
that we're not over leveraging the company of bringing it to
(19:28):
its knees and also making it work to, to, to, to marry up
with the reasons why we're getting into the deal, whether
it's growth, buyout, recap, working capital, whatever it
might be. Right, Yeah.
Do you think the pigeonholing that happens inside other PE
firms when they're saying we want to be control investors
like almost prevents them from investing in good deals because
(19:51):
there are a lot of these companies that are in the middle
market that are profitable, they're just solid businesses,
Yes, but I think get overlooked simply because it's structure.
Yeah, it's structured. But again, it's, it's because
they told people they do that. So they have they have to
structure that way. And I think what happens then is
it in, in times when the controlequity people who said they're
(20:12):
gonna do certain deals and it gets, you know, frothy.
So they can't buy and they don't, they, they, they, they
don't, they don't do them. They moved down in size, right?
So, so, you know, they, they, they solve the, they solve the,
the, the, the promise that they made if they were in control
equity. But instead of doing a, you
(20:33):
know, $100 million deal, they doa $50 million deal.
And they probably then over equities it, it's safer.
It's tougher to get the returns,but it's safer.
So, so I don't know if they're pitching on themselves or
they're doing, they're doing theright thing, but they have to
answer to the promises that theymade.
Otherwise they're not gonna get their, their, their money, their
(20:55):
money next. And, and from our standpoint, it
sounds like our funnel is very, very wide and it is.
We hate to see a very, very goodcompany go by because we were,
we were, we were una focused in what we had promised.
Some of the best deals that we've had are finding phenomenal
(21:16):
entrepreneurs who would never going to give up control.
We can't, we couldn't walk and say, Oh my God, it's your lucky
day. You've done all this great work
to put this thing here, will nowbe in charge.
So we've invested in some of some, some of America's greatest
entrepreneurs had outsized returns because we were able to
(21:37):
make our flexible structure workwith what they wanted and we
were happy to be along with the ride.
The only issue in that is at times if we want to get out and
nobody else wants to get out because we don't have control
and we've proven in many different strategies that you
have to go out. They'll get me wrong.
The best way of getting out is we all hold hands at the same
(21:57):
time and jump off the Cliff and we land in the water perfectly
nice with a nice splash. That's the best, but doesn't
always happen that way. And in, in the, in the, in the
trick then is to make sure that we have the the right
contractual rights and really the right reach into the market
to be able to get out alone if we if we if we want to or need
(22:18):
to. Yeah.
Do you, do you see that with thetypes of companies that you're
investing in and these differentstructures?
Like do you find that you've been able to take advantage of
macroeconomic trends like like that was much easier to come by
five years ago or four years ago, Now it's harder.
And about a year ago, the interest rates were much higher
(22:38):
than they are even now, right. So how have you capitalized on
that? Yes.
And I think the, I think the best, I think the best example
is 29/29/2010. You know when the Great
Recession was, it was happening.So when that happened, probably
(23:00):
the, the, the biggest change wasthat the debt markets seized up.
So the, so the, the traditional senior lenders instead of
extending, you know, the multiples of credit that they
were pulling in their hearts. And that either that created an
opportunity for flexible investors like us to be just
(23:20):
below them. So, so either they wanted to get
refinanced out of their holdingsto a degree or they weren't
extending the credit to the new deals that allowed us the
opportunity to fill the void. I think that was a a big impetus
for the private credit markets to come in.
We had already been doing that, but we would find some senior
(23:42):
lenders that said, boy, you know, the EBIT does down.
We're getting a lot of pressure from the regulators.
If we could get down to, you know, two turns of capital would
be great. So we would say, fine, we'll pay
you down, you know. And so we were we were now
taking what was the day before senior debt risk.
We were able to price like mezzanine and equity because the
(24:03):
macro environment got the got the the commercial bankers to
have to pull in their horns a little bit.
Have you seen more deal flow in today's market with, I know LP's
are trying to find liquidity, companies are harder to exit,
Yeah. Are you seeing opportunities
come up there because you have more flexible structure within
(24:25):
your firm? I, I'll parse that real quickly,
but there are a lot of opportunities, There's not a lot
of Closings. And, and so yes, there's,
there's, there's always need forcapital.
That's why, you know, broadly speaking, I think a lot of
capital's been raised, but buyers and sellers aren't
necessarily seeing eye to eye given all of other macro things
(24:47):
are going on. How do you underwrite a
companies that are going to be affected by tariffs until you
know how they're affected by tariffs?
How do you underwrite companies that may be in the face of some
of the dodge things are going on?
I do believe that there are there's a widening gap between
pro forma or hoped for EBITDA than real EBITDA and that and
(25:12):
and and and as EBITDA falls thenyou know buyers expectations
move immediately. Sellers expectations look a
little slowly. So someone can go out and start
looking for refinancing or selling at one let you know in
one hope for structure only to find that the buying market
tells them slightly different. Yeah, that makes total sense.
(25:34):
Let's shift focus a little bit. How do you support your
companies as you're coming into investments?
And does that vary based on the structure that you've deployed,
whether it's more debt, whether you're minority investor or
control? That's one of the bands around
here. Tell you the truth is, is, is we
really should be doing a little less work if we're more debt
(25:55):
heavy than we are equity heavy. But you know, again, our
backgrounds is really one of thethings we're trying to to sell
and bring to the to the management teams is we're going
to be an augmentation of what they do.
There's some things that they'll, they will always do and
always do better than us. Some things that we do
day-to-day, you know, dealing with the banks, financings,
(26:18):
sometimes dealing with the auditors, there are times that,
you know, some of these companies are still graduating
into more sophisticated areas. We try to Polish the jam by, you
know, moving that move, moving them into those areas.
So we're happy to to work fairlyclosely with them.
Yes, the ones that we control, that is for sure the the buck
(26:38):
stops with us our job. But even ones that were minority
holders, it's our tendency to get in, roll up our sleeves and
help them, you know, in small businesses, in small middle
market businesses, you don't, you know, we'd like to say we're
back a management team, you know, but usually there's a
really strong, you know, two people in the C-Suite.
(27:00):
We help them with recruitment ofmore upgrade and if it's going
to be, and that's a big part of it.
So, you know, one of the things that we really primary care
about people. So hiring and firing, if that
needs to be upgrading capital expenditures, which is a little
bit of an outflow of, of, you know, a better but or you know,
(27:21):
more intense budgeting and then what are you gonna spend capital
on? Financings too.
That's what we, that's, you know, how we started.
That's what we do. And that ultimately
acquisitions, dispositions, liquidity, those are the big
things that we spend our time on.
We're not where we can help and suggest some, you know, systems
(27:42):
changeovers, but we're going to hire somebody to go do that.
And and then, and then there's just sort of like being outside
of the forest in the trees, right?
You know, sometimes they they have been doing their phenomenal
sales people, but they may be, you know, overlooking some other
things that we help to help see them and you know, identify that
(28:03):
and Polish them. Is it practical to be putting in
so much time when you're more debt heavy on an investment
because it's like the returns you're putting in a lot of
operational resources when you're getting that involved,
aren't you? Yeah, that's again the part that
that's that's the bane. So you know, you know, it's, you
know, it's hard to say. You know, we've only a handful
(28:24):
of times, a handful of times we have been only, only debt or
without the upside. So we are not underwriting our
debt investments as just as necessarily an interest rate
concern. We're looking, we're looking for
our total investments to be multiples of the money.
So somehow we have the aspirations that they're all
going to to you know turn into equity.
(28:46):
The difference in time though admittedly is somewhat
correlated to the size of the company, the development stage
it's at as well as you know how developed is the entire C-Suite.
So usually the ones that are larger have had the capital and
the time to have more of the C-Suite filled out.
(29:10):
We could spend less time at the time at that time and and even
in companies that we control. So really, and we and we talk
about it, you know, how much howmuch time is this quote project
gonna be? But other times we'll find just,
you know, the the best business and it needs some help and if it
(29:31):
can break through, it's phenomenal.
So so we've had success in in with with, you know, people that
we knew didn't have a fully developed business and all the
disciplines around. We came in, we didn't, you know,
we didn't have control. We came in and we made a market
difference and the returns are as if you had control.
(29:52):
Do you ever have situations where you've invested with debt,
you've put a debt facility on orthat's the main source of
investment? And then because you've built a
relationship and gotten in with a high quality business, it's
translated into a future round where you're investing more with
equity and get to get to be a bigger part of that business
where maybe you would have been harder otherwise.
(30:14):
All the. Time, all the time, yes.
And part of it, part of it is again, getting back to the needs
that the wants of the partner, some people to us and say, you
know, we want only that. And, and, and we'll say, well,
you know, you probably don't want to leverage it that much,
take some of it in equity. And then as you go forward,
we've got dry powder and then wefigure out what it is.
(30:35):
They kind of see that if we worktogether, that, you know, we're
not just the lender, but we're avalue added player.
And then they say, OK, well, youknow, we need more equity.
They they come in and and it happens it you know, happens all
the time. It's not everything, you know it
we don't come in everything withcompletely pre proscribes.
What's gonna be, you know, you know, part of this is you don't
(30:56):
know what acquisitions may come down and on acquisitions may
come down the Pike or or where you may fall short and you need
to shore up the balance sheet with more equity.
What I find interesting about that is a lot of private equity
firms are often talking about finding deal flow and more
places to invest capital. But in a way you're flexibility
(31:17):
on structure and having different facilities to deploy
enables you to find more deals and more deal flow.
Whereas if a firm is more rigid,yeah, it's harder to find the
exact deal than meets the profile of what you're looking
for and so you kind of self selected into lesser deal flow.
There's a flip. There's a flip side of that too,
(31:37):
though. You know, if you, if you, if you
out there and telling everybody that we'll do, you know, we'll
invest in every quadrant. Do you lose the do you know, do
you imbue in the mind of the bankers the deal sources what
you are? So if you'll do anything, then
you're in, then you're lost. So what we really try to what we
really try to say is, you know, we've got the capability to it,
(32:00):
but really think about think, think about, you know, that
company, you know, that company that needs to know it can have
that fat middle that I keep referring to to close the senior
debt. We can always go get usually
always go get senior debt. But if you're looking for the
junior capital on down, you know, sort of a one stop shop if
(32:22):
you need it, that's that's wherewe shine.
Right. Yeah, I think, I think that's
that's fair as well because on the flip side, if you just say
this is exactly what we do, you almost look like a specialist
firm and then you end up winningmore of those deals.
So I think that's a big trade off, yeah.
And if we would just if we were just packaging people, right,
people would know his packaging people and deal fall comes for
(32:45):
that. We're kind of known as we're
we're we're sort of known as the, you know, using that
flexibility to South s s the issue at hand of of closing and
growing. Yeah, yeah.
That's, that's, that's really good advice.
And I think a lot of people firms listening could benefit
from that. And as we're coming up on time
here, Brian, if there are firms listening or founders listening,
(33:06):
what is the best way that they can get a hold of you?
You know, we have the website where you go to our website
offices, you know, you know, W granitecreek.com, you know what,
you know my, you know my, my, you know, my e-mail is
brian@granitecreek.com. And, and again, you, you never
know what's going to come acrossthe transom.
So we look at everything. So anyone who's out there who
(33:28):
has an equity need, a debt need a lift, the growth need and
you're a middle market business,you know where we've been around
for a long time. So obviously we have to, we have
to do as we say track record. Our returns have been very
strong. So we're we're good at helping,
you know, founders and owner operators take their love, take
(33:50):
their business to the next level.
We do, we do try very hard and work with them so that we're
building for perpetuity. We want, we want to be able to
go and sell to the next person. We want the next person to make
money because that way if, if wehave that track record, then
(34:10):
everybody knows that for doing that and that it's, it's
reasonable for them to come and pay us for what we've done cause
they can make money too. Got it.
Yeah, that's awesome. And we sure to include the
website and your e-mail and the show notes and what that said.
Brian, thanks for coming on and sharing your wisdom.
I think really interesting to learn about how you're
leveraging structure as almost like a competitive advantage in
(34:32):
this marketplace and driving value for your LP.
So thanks for doing this and appreciate you coming on.
Thank you for having me, appreciate it.
Too, Thanks for listening to today's episode.
Before you take off, just a few requests from our side #1 if you
haven't done so already, please subscribe to the podcast on
iTunes or Spotify or YouTube or wherever you go to listen to
(34:53):
your podcast #2 if you are in the market for due diligence
services, strategy consulting, or fractional CMO services,
please get in touch with us at www.hassas.com.
And 3rd, please buy a copy of mynew book, Exit Ready Marketing.
It covers a ton of concepts thatwe take our customers through
(35:13):
private equity investors, B2B company CEOs, operating partners
and marketers, and there's a tonof great value in there.
That expands on my previous book, Post Acquisition Marketing
as well. So with that said, I hope you
enjoyed today's content and we'll see you on the next
episode.
I do believe that there are there's a widening gap between
pro forma or hoped for EBITDA than real EBITDA.
And as EBITDA falls, then you know buyers expectations move
immediately. Sellers expectations love a
little slowly. So someone can go out and start
looking for refinancing or selling at one let you know at 1
(00:24):
hope for structure only to find that the buying market tells
them slightly different. Welcome to the Private Equity
Value Creation Podcast where we interview leading investors,
operators, bankers, and advisorsto help you answer one question,
how do we increase the enterprise value of our
companies? My name is Shiva Narayanan, and
(00:45):
each episode I will dive deep with a guest to help you become
a better value creator and capital allocator.
So with that said, let's jump right in and let's get started
with today's episode. My guest today is Brian Burstein
and he is the co-founder and partner at Granite Creek Capital
Partners. And what's really interesting
(01:05):
about the conversation with Brian is that we talked about
how they're not married to one specific type of deal or
structure when they're looking at investing in companies.
And it's very different from what I hear from a lot of
private equity investors that have a of a laser focus or
intent on deploying a certain amount of dollars in the form of
(01:26):
equity in their investments and then debt being a certain
proportion of that, or they're very focused on certain
industries. And that approach has benefits
because you really tell the market what you're about and
what types of companies that youwould be the best fit for.
But Brian and his firm have taken a different approach by
leveraging structure as a competitive advantage.
(01:47):
And that is allowing them to invest in many other types of
companies, which I think would often get ignored or overlooked
by some of those other firms that are more focused in in
specific areas. So it's a really interesting
conversation and I actually think Brian's approach is likely
giving them deal flow that otherfirms are just not able to
access because they've already told their LP's that these are
(02:08):
the kinds of companies that we're investing in.
And I found that to be super interesting and something that a
lot of private equity firms can can learn from.
So with that said, I'd love you to kind of hear, hear the
conversation and take a lot awayfrom from Brian's wisdom there.
And I hope, hope it helps your firm as well.
Thanks a lot and enjoy the episode.
(02:32):
Alright, Brian, welcome to the show.
How's it going? It's going well.
How are you? Good, good.
Excited to have you on. So why don't we start with your
background and Granite Creek andthen let's go from there?
OK, my background, I've been in private equity for 3637 years
now. It started in the mid 80s and
place called Gold Atonement Chrissy, which is now that was
(02:54):
the precursor to GTCR and and then and then I and then I
started the private equity arm for Heller Financial.
We call it Heller Equity CapitalCorporation.
I left there to get into more entrepreneurial setting into
something called Dakota Capital Partners, which we were then
(03:16):
independent sponsors, but that was even before the term
independent sponsors was around.It wasn't even funny sponsors.
We were just deal people, deal guys.
And then after after Dakota I, Idid it on my own for a little
while, but then I founded Granite Creek Capital Partners
(03:38):
with my then two only partners, Mark Redza Computer, Lehman.
Granite Creek has been around for 20 years now.
We have overtly we are buyout shot.
We're actually up multi strategyfirm.
We we have 3 private equity funds.
The first one is resolved now still that's the second one is,
(04:00):
is, is still up and running though making new investments
out of it. We've we're, we're doing add-ons
to the portfolio. Third, third fund is, is
continue to invest. We also manage a fund that
invests in control and minority equity of Agri business
(04:21):
companies, more upstream businesses.
Things are closer to the farm than the table.
We have raised and manage a company found similar fund.
I mean that that buys and improves farmland.
Most of the farms that we own are in Illinois, some are in
Indiana. And what we do is buy B&C
(04:43):
properties and and bring our knowledge of seed selection,
investing in the land and and knowledge of chemicals to make
yields improve and then sell them at A&B prices and then
separately not in a fund structure.
We started a company from scratch all Renovo Financial.
It is a it is a lender to experience rehabbers of single
(05:06):
family and multifamily homes andwe literally wrote the business
plan in 2011 and it's grown exponentially this year.
We're on target to originates onthe about $3.5 billion in loans,
half of half of half $1,000,000 average loan size.
So we we tried to take an entrepreneurial approach to
(05:29):
investing. Sometimes you could think that
we look somewhat like a an aggressive family office.
Sometimes we are are are acting like independent sponsors, but
in the funded environment and the breadth and depth of what we
look at kind of reflects that. Yeah.
That's one of the things that jumps out is just how broad some
(05:51):
of the investments that you're making here are somewhere in the
finance, finance space, agriculture like you mentioned,
as I see insurance. So what's the common thread like
how are you filtering through these companies or figuring out
where you kind of want to deployyour capital?
Sure. So the common thread is that,
that the companies at least start as, as middle market or
(06:13):
lower middle market companies. And, and we do that.
We do that for a number of reasons.
One is it fits the size of the capital that we have.
You do what you do in this business as your source of
capital. And, and so our sources of
capital do two things. One is they target the small to
middle market, small middle market companies and, and, and
(06:39):
they're there and they allow us to have to bring flexibility in
the securities that we hold to the, to the size.
It's not just the amount of money or the amount of EBITDA
that they generate. We spent the last numbers of
decades thinking about and worrying the, the, the, the
(07:01):
issues and the problems that small to middle market companies
have. Those are different than larger
size companies. In these we, we play, you know,
many different roles and one, one day we may be a, a finance
person, one day we may be a corporate coach, one day we may
be a psychiatrist, one day we may be an operator, one day we
(07:22):
may be a strategist. But those companies usually have
not had much institutional capital or at least
institutional growth capital. Usually they've, they've had
borrowings from banks. But we, we, we come in, we worry
about scaling of the businesses,growing the C-Suite, making sure
(07:45):
that, that the, the talent matches the opportunity matches
the amount of cash. So I always look at it as a
tripod. You need to have these things
each leg standing around. If you have too much money and
not enough management, you better straighten that out.
You have too little management and, and, and too many
(08:08):
opportunities, you got to straighten those things out.
So we're trying to find a good balancing act in there and and
make capital decisions, personnel decisions along those
lines. Yeah.
And I guess my, I get the starting point and the check
sizes that you can write in the profile and the lower middle
market. Yeah, once you're investing in
these companies, doesn't it become a bit of a challenge when
(08:30):
you have such a different profile or portfolio companies
kind of across the board in different industries?
Like how do you manage complexity at that level?
That's a very good question because it is complex and it's
different. And one of the things that we
try to do is early on as we're assessing the deals, we'll,
we'll get, you know, we'll, we'll either reach out to people
(08:54):
that we know or, or beyond people that we know to get some,
some extra advice. We, we typically refer to them
as river guides. So we're going to find somebody
who has been in that, in the, inthe, in the industry far longer
than we have to be able to help us understand the diligence, the
(09:15):
opportunities, the risks. You know, you know, we, we, we
usually come up with a pretty long list of what you need to
believes. And that's going to cover what
you need to believe, not only tomake the investment, but to
oversee the investment and ultimately exit the investment.
As things have gone on though, we do become somewhat
(09:36):
knowledgeable as investors and somewhat as operators do in
certain segments. So Agri business for one is I
alluded to, you know came out ofyou know a number of investments
that we made and we began to develop true insights and true
contacts. And then we mirrored that up
(09:57):
with with people who have owned and run and sold their business.
We brought them into the GP. So we can go out there and, and,
and source deals with the knowledge that we have.
We can do diligence like we've always done by bringing in
experts. But now in, in that fund, we
have people who have been lifelong participants and
(10:20):
investors and operators that then find the deals for us, help
us diligence them, but also bring value add in terms of
business development, finding other people as we go along.
And we can do that in the, in the, in the, in the range of
industries that we were until, you know, we're very operational
focused as a team, not necessarily as the individual
(10:42):
members. And so we try to bring that in
and it really comes with a very simple idea, small, the middle
market businesses, they need capital and they need people and
we try to bring both of those tothe table.
Yeah, it's really interesting. In a way.
It's a form of like as an investor looking for and quote
UN quote like product market fitbecause you're trying to, you're
(11:03):
buying good companies and overtime you develop competency
and then there's a learning curve there.
And then at some point, it becomes almost like a playbook
that you can rinse and repeat across other companies as well.
And the rinse and repeat again just to go back to what the what
the focus is. The rinse and repeat is, is, is
knowing that you know, where thestress points and the
opportunities and the, and the places you need to Polish the
(11:26):
gem for smaller middle market businesses.
You know, if you're dealing with, you know, you know,
billion dollar companies, financing is different than it
are with companies that do, you know, 5 to 10 million of Evida
MNH transactions are different. The, you know, the, the building
out of some of the systems so that you can scale and advance
(11:49):
are different. And that's where we spent a lot
of our time. Yeah, yeah.
Talk about structure. So when you're buying these
companies, are you mostly comingin as a majority shareholder or
are you buying out the company entirely or as a minority
investor? So as I touched down, we have
multiple strategies, but let me just focus on what we're
primarily known for, which is our buyout funds.
(12:13):
What is maybe more unusual or a throwback to it was years ago,
we overt overtly raised our money to be flexible in the
securities that we hold. We can do control equity, but
we'll also do minority equity. We'll do sub debt, we'll do
preferred stock, common stock. We've done senior debt doesn't
(12:35):
look like a bank senior debt, but the, but the collaterals,
the collaterals there to to to get security and making us the
the the senior lender. We've done dip loans, we've done
bridge loans. But when we really winnow it
down because we're in the small middle market and we come to the
table with 15 to $40 million, ifwe were to come with all equity,
(12:58):
we would usually crush the, you know, the, the normal partners
that we've got owner operators. So with the flexible capital
that we've got, we would scrunchthat out and we will make it so
that, you know that the, the, the incentives of the outsides
are far more aligned instead of us owning 99% of their own 1%.
(13:18):
So we use that flexibility to tostructure each deal differently.
So every, every deal has different risk returns and, and
it upsides and, and people's capabilities.
So we'll create a bespoke structure for for everything to
reflect the needs and the wants of our partners, which
(13:40):
parenthetically have to work with our needs and our wants.
And talk about that a little bitmore.
So when you talk about these different structures, like when
you look at returning your fund as a firm, how much of that is
like built on the assumption that part of these structures
would be heavily leaning towardsdebt because the return profile
(14:00):
on the point capital in that wayis very different than on the
equity side. So how do you look at that?
So we do, we do look at when we put equity and debt and we will,
we will certainly view, you know, the debt and its risks and
it's upside as that piece of paper.
And we'll look at the equity slightly different.
But at the end of the day, we, you know, we don't lose sight of
(14:23):
the fact that we're in, you know, we have an investment, you
know, a global investment debt and equity.
If we lose, if we lose a dollar of equity or a dollar of debt,
it's equally as painful. So you know, so you know, it's
not lost on us. It's just our investment.
But the, you know, the, the first part of it is, you know,
(14:45):
you can't, you know, the, the last thing that small businesses
need are just too much debt. So what we typically do is not
over lever the companies with third party debt.
So we can play, we can put the debt into the company not have
not have it, you know, crushingly, but dad to its
knees. But we're not really over
(15:07):
leveraging the whole company. We're we're we're confident in,
in, in doing that. We also have the ability, unlike
most commercial senior lenders of going interest only.
So, so while people look at the fixed charge, you know, the,
the, the cost of the debt might normally be higher, but if
(15:27):
you're growing and you have lessuse of cost, less use of cash to
pay to pay that, pay that debt for a little while, you know, we
look at that somewhere, it's growth capital.
So, so you know, we can marry them together and be the fat
middle, if you will, of, of, of the transaction small middle
(15:47):
market company, knowing that we have the capacity to close with
just the money sitting around the table and we've got the
ability to, to, to, you know, control most of the capsules.
We have to take out the smaller senior debt because there's
problems. We'll do that.
We have to be more patient on the debt.
We'll do that. And then if we, if we trade it
(16:11):
out with debt versus equity, as I alluded to before, our
partners who either are rolling,rolling some of their holdings
in or writing checks, it's more meaningful, right?
So if the if we can still come with us sizable check in total,
but trash out more that debt andequity than you know, they can
(16:33):
own more. When we look at the fat middle,
I I always prefer to call it we we invest in equity.
So our debt is really more coming from the equity part in
mindset versus a lot of senior stretch lenders or or one stop
shop guys who will start from the debt in their in their
mezzanine will be more debt like.
(16:55):
Why? Why?
Why more PE firms take this typeof an approach?
This is just because of the way they've set up the fund where
they are less flexible and different structures that they
can deploy. I think there's two things and I
can't really answer for everyone, but I'll tell you what
we think, right? It's it gets back to it.
When I said earlier, you do whatyou do is you source of money.
(17:17):
So if you're going to go out andraise money and you say I'm
going to control equity investor, you're going to make a
control equity investor. If I go out and say I'm going to
be, you know, mostly a credit for a mezzanine investor, then
you know, then you're the returns you're probably seeking
as well as the terms that you'regoing to get in the deal.
You're in a creditor agreements,all those various things are
(17:40):
going to be more debt like if you're a, if you're a Unitron
person, you'll look the same waytoo.
We've really come from it that we can be flexible.
Our backgrounds are in control equity.
We don't have a problem being a sponsor, whether we're the
sponsor from the control side ora sponsor or, or the first
institutional investor or only institutional investor will be a
(18:03):
sponsor even in a, in a, in a minority position.
So it's a lot more work that we might do because we're really
offering up even when we're minority investors.
A lot of the time and effort andexperience that we've got is
sponsors. But the, you know, it's a, it's
it, it takes up more, takes up some time and you know, it's
(18:24):
just a different time and attention in the various
companies. Right.
Yeah, I think you have to kind of be proactive on the when I'm
here, from what I'm hearing fromyou is more at the stage when
you're actually raising the funds from LP.
So the decision is already made.Yeah, I mean it.
Look, if you know if we would goand it was put the stake in the
(18:45):
in, in, in the sand and saying we're going to be senior lenders
and we wind up doing venture deals.
Yeah, exactly what they, what they signed up for, what we did
was, is to say here's our backgrounds And in the small,
the middle, in the middle marketsegment, it's not as clear that
(19:08):
the lines of demarcation betweenwhere senior debt and mezzanine
start and stop or mezzanine and preferred stock stocks start and
stop or or any of those sorts ofthings.
So we leave it somewhat fluid again, trying to structure it so
that we're not over leveraging the company of bringing it to
(19:28):
its knees and also making it work to, to, to, to marry up
with the reasons why we're getting into the deal, whether
it's growth, buyout, recap, working capital, whatever it
might be. Right, Yeah.
Do you think the pigeonholing that happens inside other PE
firms when they're saying we want to be control investors
like almost prevents them from investing in good deals because
(19:51):
there are a lot of these companies that are in the middle
market that are profitable, they're just solid businesses,
Yes, but I think get overlooked simply because it's structure.
Yeah, it's structured. But again, it's, it's because
they told people they do that. So they have they have to
structure that way. And I think what happens then is
it in, in times when the controlequity people who said they're
(20:12):
gonna do certain deals and it gets, you know, frothy.
So they can't buy and they don't, they, they, they, they
don't, they don't do them. They moved down in size, right?
So, so, you know, they, they, they solve the, they solve the,
the, the, the promise that they made if they were in control
equity. But instead of doing a, you
(20:33):
know, $100 million deal, they doa $50 million deal.
And they probably then over equities it, it's safer.
It's tougher to get the returns,but it's safer.
So, so I don't know if they're pitching on themselves or
they're doing, they're doing theright thing, but they have to
answer to the promises that theymade.
Otherwise they're not gonna get their, their, their money, their
(20:55):
money next. And, and from our standpoint, it
sounds like our funnel is very, very wide and it is.
We hate to see a very, very goodcompany go by because we were,
we were, we were una focused in what we had promised.
Some of the best deals that we've had are finding phenomenal
(21:16):
entrepreneurs who would never going to give up control.
We can't, we couldn't walk and say, Oh my God, it's your lucky
day. You've done all this great work
to put this thing here, will nowbe in charge.
So we've invested in some of some, some of America's greatest
entrepreneurs had outsized returns because we were able to
(21:37):
make our flexible structure workwith what they wanted and we
were happy to be along with the ride.
The only issue in that is at times if we want to get out and
nobody else wants to get out because we don't have control
and we've proven in many different strategies that you
have to go out. They'll get me wrong.
The best way of getting out is we all hold hands at the same
(21:57):
time and jump off the Cliff and we land in the water perfectly
nice with a nice splash. That's the best, but doesn't
always happen that way. And in, in the, in the, in the
trick then is to make sure that we have the the right
contractual rights and really the right reach into the market
to be able to get out alone if we if we if we want to or need
(22:18):
to. Yeah.
Do you, do you see that with thetypes of companies that you're
investing in and these differentstructures?
Like do you find that you've been able to take advantage of
macroeconomic trends like like that was much easier to come by
five years ago or four years ago, Now it's harder.
And about a year ago, the interest rates were much higher
(22:38):
than they are even now, right. So how have you capitalized on
that? Yes.
And I think the, I think the best, I think the best example
is 29/29/2010. You know when the Great
Recession was, it was happening.So when that happened, probably
(23:00):
the, the, the biggest change wasthat the debt markets seized up.
So the, so the, the traditional senior lenders instead of
extending, you know, the multiples of credit that they
were pulling in their hearts. And that either that created an
opportunity for flexible investors like us to be just
(23:20):
below them. So, so either they wanted to get
refinanced out of their holdingsto a degree or they weren't
extending the credit to the new deals that allowed us the
opportunity to fill the void. I think that was a a big impetus
for the private credit markets to come in.
We had already been doing that, but we would find some senior
(23:42):
lenders that said, boy, you know, the EBIT does down.
We're getting a lot of pressure from the regulators.
If we could get down to, you know, two turns of capital would
be great. So we would say, fine, we'll pay
you down, you know. And so we were we were now
taking what was the day before senior debt risk.
We were able to price like mezzanine and equity because the
(24:03):
macro environment got the got the the commercial bankers to
have to pull in their horns a little bit.
Have you seen more deal flow in today's market with, I know LP's
are trying to find liquidity, companies are harder to exit,
Yeah. Are you seeing opportunities
come up there because you have more flexible structure within
(24:25):
your firm? I, I'll parse that real quickly,
but there are a lot of opportunities, There's not a lot
of Closings. And, and so yes, there's,
there's, there's always need forcapital.
That's why, you know, broadly speaking, I think a lot of
capital's been raised, but buyers and sellers aren't
necessarily seeing eye to eye given all of other macro things
(24:47):
are going on. How do you underwrite a
companies that are going to be affected by tariffs until you
know how they're affected by tariffs?
How do you underwrite companies that may be in the face of some
of the dodge things are going on?
I do believe that there are there's a widening gap between
pro forma or hoped for EBITDA than real EBITDA and that and
(25:12):
and and and as EBITDA falls thenyou know buyers expectations
move immediately. Sellers expectations look a
little slowly. So someone can go out and start
looking for refinancing or selling at one let you know in
one hope for structure only to find that the buying market
tells them slightly different. Yeah, that makes total sense.
(25:34):
Let's shift focus a little bit. How do you support your
companies as you're coming into investments?
And does that vary based on the structure that you've deployed,
whether it's more debt, whether you're minority investor or
control? That's one of the bands around
here. Tell you the truth is, is, is we
really should be doing a little less work if we're more debt
(25:55):
heavy than we are equity heavy. But you know, again, our
backgrounds is really one of thethings we're trying to to sell
and bring to the to the management teams is we're going
to be an augmentation of what they do.
There's some things that they'll, they will always do and
always do better than us. Some things that we do
day-to-day, you know, dealing with the banks, financings,
(26:18):
sometimes dealing with the auditors, there are times that,
you know, some of these companies are still graduating
into more sophisticated areas. We try to Polish the jam by, you
know, moving that move, moving them into those areas.
So we're happy to to work fairlyclosely with them.
Yes, the ones that we control, that is for sure the the buck
(26:38):
stops with us our job. But even ones that were minority
holders, it's our tendency to get in, roll up our sleeves and
help them, you know, in small businesses, in small middle
market businesses, you don't, you know, we'd like to say we're
back a management team, you know, but usually there's a
really strong, you know, two people in the C-Suite.
(27:00):
We help them with recruitment ofmore upgrade and if it's going
to be, and that's a big part of it.
So, you know, one of the things that we really primary care
about people. So hiring and firing, if that
needs to be upgrading capital expenditures, which is a little
bit of an outflow of, of, you know, a better but or you know,
(27:21):
more intense budgeting and then what are you gonna spend capital
on? Financings too.
That's what we, that's, you know, how we started.
That's what we do. And that ultimately
acquisitions, dispositions, liquidity, those are the big
things that we spend our time on.
We're not where we can help and suggest some, you know, systems
(27:42):
changeovers, but we're going to hire somebody to go do that.
And and then, and then there's just sort of like being outside
of the forest in the trees, right?
You know, sometimes they they have been doing their phenomenal
sales people, but they may be, you know, overlooking some other
things that we help to help see them and you know, identify that
(28:03):
and Polish them. Is it practical to be putting in
so much time when you're more debt heavy on an investment
because it's like the returns you're putting in a lot of
operational resources when you're getting that involved,
aren't you? Yeah, that's again the part that
that's that's the bane. So you know, you know, it's, you
know, it's hard to say. You know, we've only a handful
(28:24):
of times, a handful of times we have been only, only debt or
without the upside. So we are not underwriting our
debt investments as just as necessarily an interest rate
concern. We're looking, we're looking for
our total investments to be multiples of the money.
So somehow we have the aspirations that they're all
going to to you know turn into equity.
(28:46):
The difference in time though admittedly is somewhat
correlated to the size of the company, the development stage
it's at as well as you know how developed is the entire C-Suite.
So usually the ones that are larger have had the capital and
the time to have more of the C-Suite filled out.
(29:10):
We could spend less time at the time at that time and and even
in companies that we control. So really, and we and we talk
about it, you know, how much howmuch time is this quote project
gonna be? But other times we'll find just,
you know, the the best business and it needs some help and if it
(29:31):
can break through, it's phenomenal.
So so we've had success in in with with, you know, people that
we knew didn't have a fully developed business and all the
disciplines around. We came in, we didn't, you know,
we didn't have control. We came in and we made a market
difference and the returns are as if you had control.
(29:52):
Do you ever have situations where you've invested with debt,
you've put a debt facility on orthat's the main source of
investment? And then because you've built a
relationship and gotten in with a high quality business, it's
translated into a future round where you're investing more with
equity and get to get to be a bigger part of that business
where maybe you would have been harder otherwise.
(30:14):
All the. Time, all the time, yes.
And part of it, part of it is again, getting back to the needs
that the wants of the partner, some people to us and say, you
know, we want only that. And, and, and we'll say, well,
you know, you probably don't want to leverage it that much,
take some of it in equity. And then as you go forward,
we've got dry powder and then wefigure out what it is.
(30:35):
They kind of see that if we worktogether, that, you know, we're
not just the lender, but we're avalue added player.
And then they say, OK, well, youknow, we need more equity.
They they come in and and it happens it you know, happens all
the time. It's not everything, you know it
we don't come in everything withcompletely pre proscribes.
What's gonna be, you know, you know, part of this is you don't
(30:56):
know what acquisitions may come down and on acquisitions may
come down the Pike or or where you may fall short and you need
to shore up the balance sheet with more equity.
What I find interesting about that is a lot of private equity
firms are often talking about finding deal flow and more
places to invest capital. But in a way you're flexibility
(31:17):
on structure and having different facilities to deploy
enables you to find more deals and more deal flow.
Whereas if a firm is more rigid,yeah, it's harder to find the
exact deal than meets the profile of what you're looking
for and so you kind of self selected into lesser deal flow.
There's a flip. There's a flip side of that too,
(31:37):
though. You know, if you, if you, if you
out there and telling everybody that we'll do, you know, we'll
invest in every quadrant. Do you lose the do you know, do
you imbue in the mind of the bankers the deal sources what
you are? So if you'll do anything, then
you're in, then you're lost. So what we really try to what we
really try to say is, you know, we've got the capability to it,
(32:00):
but really think about think, think about, you know, that
company, you know, that company that needs to know it can have
that fat middle that I keep referring to to close the senior
debt. We can always go get usually
always go get senior debt. But if you're looking for the
junior capital on down, you know, sort of a one stop shop if
(32:22):
you need it, that's that's wherewe shine.
Right. Yeah, I think, I think that's
that's fair as well because on the flip side, if you just say
this is exactly what we do, you almost look like a specialist
firm and then you end up winningmore of those deals.
So I think that's a big trade off, yeah.
And if we would just if we were just packaging people, right,
people would know his packaging people and deal fall comes for
(32:45):
that. We're kind of known as we're
we're we're sort of known as the, you know, using that
flexibility to South s s the issue at hand of of closing and
growing. Yeah, yeah.
That's, that's, that's really good advice.
And I think a lot of people firms listening could benefit
from that. And as we're coming up on time
here, Brian, if there are firms listening or founders listening,
(33:06):
what is the best way that they can get a hold of you?
You know, we have the website where you go to our website
offices, you know, you know, W granitecreek.com, you know what,
you know my, you know my, my, you know, my e-mail is
brian@granitecreek.com. And, and again, you, you never
know what's going to come acrossthe transom.
So we look at everything. So anyone who's out there who
(33:28):
has an equity need, a debt need a lift, the growth need and
you're a middle market business,you know where we've been around
for a long time. So obviously we have to, we have
to do as we say track record. Our returns have been very
strong. So we're we're good at helping,
you know, founders and owner operators take their love, take
(33:50):
their business to the next level.
We do, we do try very hard and work with them so that we're
building for perpetuity. We want, we want to be able to
go and sell to the next person. We want the next person to make
money because that way if, if wehave that track record, then
(34:10):
everybody knows that for doing that and that it's, it's
reasonable for them to come and pay us for what we've done cause
they can make money too. Got it.
Yeah, that's awesome. And we sure to include the
website and your e-mail and the show notes and what that said.
Brian, thanks for coming on and sharing your wisdom.
I think really interesting to learn about how you're
leveraging structure as almost like a competitive advantage in
(34:32):
this marketplace and driving value for your LP.
So thanks for doing this and appreciate you coming on.
Thank you for having me, appreciate it.
Too, Thanks for listening to today's episode.
Before you take off, just a few requests from our side #1 if you
haven't done so already, please subscribe to the podcast on
iTunes or Spotify or YouTube or wherever you go to listen to
(34:53):
your podcast #2 if you are in the market for due diligence
services, strategy consulting, or fractional CMO services,
please get in touch with us at www.hassas.com.
And 3rd, please buy a copy of mynew book, Exit Ready Marketing.
It covers a ton of concepts thatwe take our customers through
(35:13):
private equity investors, B2B company CEOs, operating partners
and marketers, and there's a tonof great value in there.
That expands on my previous book, Post Acquisition Marketing
as well. So with that said, I hope you
enjoyed today's content and we'll see you on the next
episode.
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