Co-founded in 2007 by former San Francisco 49ers quarterback Steve Younger, HGGC is a Palo Alto, Calif.-based middle-market personal fairness agency with round $7 billion in cumulative commitments throughout about 30 portfolio corporations spanning the patron, enterprise companies, expertise, and monetary companies sectors.
The agency usually prefers to make majority investments in companies alongside administration and different buyers, present the sources to execute on a development plan developed throughout the funding negotiations, whereas leaving day-to-day execution of the plan to the in-house management staff.
However HGGC’s curiosity within the extremely fragmented impartial wealth administration house led the agency down a special path: The agency allotted $300 million from a fund launched final yr to create a holding firm—Aspire Holdings— to make faster, smaller, strategic investments in registered funding advisory corporations.
“There are nonetheless lots of very small companies,” mentioned HGGC President Neil White. “It may be tough to seek out targets which might be giant sufficient to fulfill the funding measurement that we’re seeking to make, so we arrange a holding firm to permit us to be a bit of bit extra versatile and artistic within the kind, measurement and nature of the investments that we make. It additionally permits us to pool some sources throughout the completely different investments and hold continuity throughout our staff that works on these investments.”
Which will ultimately result in pure alternatives to carry incremental companies to their portfolio of RIAs, and even construct out a assist platform for independents, White mentioned, however there aren’t any such plans within the speedy future. For now, the buyers proceed to search for alternatives.
By HGGC’s Fund IV, the agency at present owns items of Advantage Monetary Advisors, Waverly Advisors and Apella Capital—all of that are held in partnership with Wealth Companions Capital Group.
“Their value-add and experience is great, and so they’ve been nice companions to us. We hope and really feel that we’ve reciprocated and would make investments with them once more, however neither of us have any obligation to take a position with one another,” White mentioned. “We’d be delighted to take a position with different monetary sponsors as effectively.”
The principals of the acquired corporations are anticipated to reinvest within the agency alongside HGGC, and work with HGGC’s representatives to realize benchmarked targets.
“The very first thing we do is search for administration groups or founders that both personal or lead these companies,” mentioned White. “The place to begin for us is all the time concerning the folks. And collectively we establish a imaginative and prescient for the long run and the issues that have to occur make that imaginative and prescient a actuality. Working backwards from that, we put collectively a plan to assist them get there, each organically and inorganically—after which we get to work making it occur.”
HGGC funds have 10-year lifespans, however funding timelines are inclined to vary from three to seven years, and predetermined penalties—monetary or in any other case—are sometimes concerned when benchmarks are usually not met.
“We all the time make investments alongside others,” defined White. “So, if we’re not assembly our targets, everyone seems to be collectively sad. And, relying on the character of the miss, you’re taking remedial steps after which construct a plan to repair it.”
In each state of affairs, he mentioned, there are alternatives for enchancment, whether or not that entails modifications the administration staff could make or issues HGGC can do in another way.
“If I had been capable of communicate to each vendor on the market, I might hope they might recognize how a lot we’re keen to hear and the way a lot we’re keen to study and be versatile with them,” mentioned White. “I feel typically there could be a notion that personal fairness may be heavy handed or tough, however actually our strategy is collaborative and primarily based on mutual aim setting. That doesn’t imply we’re not demanding of ourselves and people we’re working with, in fact—all of us have excessive expectations—however we’ve discovered our interactions with sellers to be very, very constructive.”
With billions of {dollars} invested, PE corporations are driving the trade’s speedy consolidation. Listed here are a few of the most lively contributors:
Thomas H. Lee Companions – The Lively Operators
Lightyear Capital – The Area Specialists
Genstar – The Majority Accomplice
