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Featured GP Q&A: TriSpan

Elan Schultz is a Founding Partner at TriSpan and has over 25 years of private equity experience, with investments spanning start-ups to multi-billion dollar enterprises. In this Q&A, we covered everything from generating great investment returns to rock climbing and everything in between, with an emphasis on choosing the right partners and having fun.

Q: Tell us a bit about TriSpan and your role there?

A: Building on our success at Quilvest, Fady and I created our dream company—TriSpan, a lower-middle-market private equity firm. We have found that the lower-middle-market is a target-rich market with generally less competition than further up the food chain, allowing us to source often proprietary transactions on attractive terms. This allows us to generate great investment returns, especially if you add significant operational improvements to the mix. We have a well-resourced team and are able to drive both our buy-and-build strategy and robust value creation plans in all of our portfolio companies. With this approach, and by doing what we love, we have been able to generate superior returns for our investors.

As a Founding Partner, I have the general responsibilities of any senior private equity professional, including raising capital, interacting with investors, sourcing investments, managing the portfolio, working hand in hand with our operating partners and management teams to create value and grow our portfolio companies. Equally important are Fady and my efforts to create the right culture and environment where our team members can flourish. It may sound trite, but people and culture are the keys to success. We have three pillars to our firm:

  • Make money for our investors, our portfolio company professionals, and ourselves.
  • Run our business with the highest ethics. Everyone says this, but it’s not always done in practice.
  • Have fun! That was a core principle at DLJ (where I started in this business) that resonated with me, and it continues to be an essential part of our company’s culture.

Part of my job is to regularly remind my teammates of these ideals and demonstrate them personally in everything I do.

Q: 2020 changed nearly everything – what pivots did you need to make, and how have you approached things differently since the pandemic?

A: We were incredibly fortunate at TriSpan through the pandemic. I honestly feel a bit guilty that while so many had adverse life-changing events, our people, teams at our platform companies, and our partners were relatively untouched. Part of our financial success in 2020 was the result of sticking to our strategy of focusing on lower-middle-market companies in mainly defensive and resilient sectors and, importantly, using little to no leverage to drive returns. Professionally, we were mostly sheltered from the significant impact of COVID on the economy. Like many others, we enhanced our internal communications and increased the frequency of our interactions with the management teams in our portfolio companies. Our CEOs and Operating Partners shared ideas and best practices with each other continuously, which really helped us navigate this unprecedented crisis. In extreme times communication is vital!

Because of our low leverage mindset, equity cushions, and the help of our great co-investors, we were actually in a position to dramatically increase our M&A activity last year to take advantage of the dislocation in the market. In 2020, we executed two new platform companies and twenty-one add-on acquisitions in our Opportunities Fund platform, which is almost two deals per month! That being said, through the crisis we have learned the importance of choosing the right sectors to pursue our roll-ups. What we knew, but was made even more evident, is the importance of the senior leadership at our companies. Supporting these great individuals so that they can, in turn, support their staff is the key to our success.
Lastly, the old army adage - “Hope for the best, plan for the worst” proved timeless yet again. While we never expected a pandemic like this, we were seriously worried about a recession when we started investing in late 2017. That concern helped us avoid many businesses that were significantly impacted by the pandemic, instead focusing on companies with strong relative market positions in resilient sectors, high free cash generation, and talented teams—also having virtually no issues with our creditors clearly helped us. Having said all that, it is important to stay humble and recognize our good fortune, and we are grateful that things worked out so well for us.

Q: How do you see the industry changing as we move forward?

A: The only thing constant is change. Like any industry really, ours also keeps changing, and we need to adapt to the ever-changing environment. What we all expected from a maturing PE industry has occurred. Capital and information have become a commodity with the result that there is very little “private” left in private equity. The explosion of the number of middle-men and middle-women, bankers, and advisors has also meant that proprietary deal flow is all but extinct in many parts of the market.

In response to these changes, we have had to adapt as well. While we have maintained our rigorous investment evaluation and have stuck to our strategy, we have become more flexible in how we build value. We are not afraid to start our investment journey with smaller companies, which are less intermediated and often proprietary, if we have gained the conviction that we can scale these rapidly. We then deploy significant resources, if needed, to drive value creation plans that seek to both enhance organic growth and operational improvement and accelerate that growth with accretive acquisitions. We do not need financial engineering to drive our returns. We have generally found that this is not an ongoing competitive advantage and often increases risk unnecessarily, limits growth, and diverts management's time from building value.

As the economy becomes more oriented to technology, so do we. Even some of our old-world economy companies employ technology to improve their business. Technology impacts all aspects from digital marketing and customer engagement to business intelligence and team assessment.

Teams and human capital are the biggest drivers to success. We believe in having a deep bench of senior operating partners. The right operating partner will bring deep industry expertise and lessons learned to help us and the senior leadership teams build our businesses successfully. Critically they also help us to avoid mistakes and navigate choppy waters. These partners are invaluable if the right match is found. But finding the right operating partner for the opportunity is more an art than a science, and building trusting and respectful relationships with these individuals is critical.

Having said all that, how we succeed is truly about how we conduct ourselves as individuals and as a firm. We work hard to create and maintain transparent and respectful relationships with all our constituents. Our success must be everyone’s success. We win or fail as a team. This includes all of our internal and external stakeholders from our investors, TriSpan team members, members of our platform companies, their staff, all the way to their customers. At the end of the day, our success is driven by the support our portfolio companies receive from their customers. Their success is our success.

Q: What advice would you give GPs right now?

A: Our market has become crowded. Whether convincing a company to become your partner or convincing a prospective investor to support you, the need to do something different and distinctive is critical. As with any maturing industry, specialization and differentiation are crucial. We are challenging ourselves daily to do things differently and better.

We think the old advice still pertains. Focus on deep value, not financial engineering. Build strong relationships with the senior leadership team of the companies you invest in. Treat them as partners with shared goals and respect. There will be hard times, but these can be overcome with a common vision, strong relationships, and shared values. There are no shortcuts. Work hard, keep conflicts internal and act as one externally to overcome adversity and achieve success. Communicate more with your investors. You really can’t overcommunicate. Listen. Be transparent. Treat them as partners. They are.

Pick your partners carefully. Desperate people will do business with anyone. We do not. How you approach people to resolve issues speaks volumes about your firm's culture and how you conduct your business. I believe this makes a difference and may set us apart.

Lastly, I would add the importance of ESG. We all have to strive to do better and leave our environment and society in a better place than we have found it. So ESG is rightly gaining significant investor attention. At TriSpan, we have brought on board an independent partner who leads this effort and is empowered to institute a robust plan for TriSpan and our platform companies. This will become an increasingly important element of our value creation plans, one that the firm holds the deal team accountable to instituting, and ensures that we improve the companies during our journey together.

Q: Since everyone seems to be embracing the “work from home” trend, if you could work from “home” anywhere in the world, where would you be?

A: I am passionate about what I do for work. I enjoy it. I bring that same passion to my non-work activities. We, as a firm, are recalibrating our office/non-office demands. As a senior part of the team, it requires me to lead by example, come into the office, and spend time with my teammates. Culture and how you do things are better learned as a team than working remotely. This is especially important for our younger colleagues who need mentorship and guidance, which is far better conveyed in person. That being said, the world has clearly changed. We plan, at least for the immediate future, to have shifts of people in our office. I think this will allow me and my team members to split our time between time spent together in the office and working remotely.

As to where I would most want to be… With the onset of Spring, I once again am drawn to some of my passions. I have a house in heaven near the Shawangunk’s in upstate New York. As an aging rock climber, I hope to have the time once again to invest in this pursuit. In many ways, it mirrors what I do as a private equity investor. It requires thought, planning, and risk management. It may seem riskier, but honestly, 30 years without a mishap. I work hard to emulate that at TriSpan.


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