888-983-1617 [email protected]

Private Equity at Work: Tennessee, Georgia Draw More Investment

The Tennessee Valley is known for its gritty factories, soaring dams, Southern hospitality and mountain views. It’s not known for its hopping private equity scene. But perhaps it should be. Investors committed $7.7 billion in private equity through 53 transactions in Tennessee during 2013, putting the Volunteer State among the top 20 states in the nation. And not to be left behind, Georgia cracked the top 10 with $11.5 billion in private equity across 78 transactions, according to the Private Equity Growth Capital Council. The council used data from industry analyst PitchBook to compile the list of states with the most private equity investment in 2013. Texas, California and Pennsylvania took the top three spots — Texas secured $87.4 billion — Georgia ranks 10th and Tennessee ranks 16th. The Southern neighbors’ high ranks are slightly startling, local experts say — and a reflection of both a maturing private equity industry and the states’ abilities to cultivate business-friendly environments. “We’re getting our share,” said Frank Williamson, managing partner at FourBridges Capital Advisors. “I don’t think we’re being left behind. Getting attention takes work, and we’re doing that.” Private equity has gained in popularity across the nation during the last 10 years, especially with investments between $20 million and $100 million dollars, Williamson said. Part of Tennessee’s steady climb up the private equity ladder — the state ranked 24th in 2012 and even lower in 2011 — is driven by the nationwide growth. “Twenty years ago [private equity] was a small thing that was a niche deal, and now it’s a key centerpiece for activities,” said Michael Brakebill, chief investment officer for the Tennessee Consolidated Retirement System. “There has been a huge change.” The Tennessee Consolidated Retirement System started investing in the private realm six years ago, and is authorized to commit as much as 3 percent of its $41 billion portfolio privately. So far, they’ve spent $443 million in private investments, Brakebill said. “We sought to diversify the portfolio, both adding investment returns and diversifying our investment returns and lower the risk by adding private equity,” he said. It’s a move many investors considered when the stock market stagnated. While private investments are volatile, they typically bring higher returns than the stock market and are often considered as a prime way to diversify portfolios, said David Smith, a partner at Lattimore, Black, Morgan & Cain. Federal banking regulations discourage banks from investing in the high-risk world of private equity, Williamson added. The job of banks, regulators clearly say, is to make loans — low risk, low return loans. Which left the door open for private investors. And as they turned to the private world, the industry flourished and grew nationwide. But Tennessee and Georgia’s rise into the top states was never guaranteed. “Private equity is not very conscious of geography,” Williamson said. “It’s a reflection, rather than a cause, of a good environment for people to build businesses. Money is more mobile than the company. And because money is mobile, it’s going to find the best opportunity.” So $19.2 billion in private investment wouldn’t have flowed into Tennessee and Georgia if there weren’t worthy companies and worthy people based in the states, he said. Nashville is a major hub for the health care industry, producing a handful of giant deals. And Chattanooga tends to feed more bread and butter private equity deals into the state, like Quick Cue’s sale to Open Table for $11.5 million, and North River Physical Therapy’s sale to ATI Physical Therapy. “Private equity dollars follow success,” said Mike West, CEO and senior partner at BPV Capital Management, in Knoxville. “If good things are happening, there is momentum. Tennessee is rising up, and I’d expect it to continue to climb.” BPV just launched a new mutual fund on Tuesday by partnering with AJO, an asset manager in Philadelphia that manages almost $24.4 billion. “The fact that a Tennessee firm has been able to partner with a $24 billion firm out of Philadelphia — they could have partnered with anyone — the fact that we landed that partnership says a lot about what is going on in Tennessee,” West said. “At the end of the day, people follow successful endeavors and activities.”

How We Help Investment Bankers Say Yes More Often

In investment banking, credibility is everything. If you’ve developed a reputation for successfully executing deals, having deep industry knowledge and being a trustworthy partner, your investment banking expertise might be highly sought after. While it’s great to...

Oaklyn Consulting Congratulates Ferguson Animal Hospital on Acquisition by VetEvolve

Oaklyn Consulting congratulates Ferguson Animal Hospital on its acquisition by VetEvolve, a multi-location veterinary practice management platform that owns and operates practices in five states. Oaklyn Consulting assisted Ferguson Animal Hospital in negotiating the...

Putting Together a Seamless Transition Plan

Ask Us Anything Dear Oaklyn Consulting, I started a nonprofit 8 years ago after my son passed so that I could create an impact while honoring him. We’ve been able to grow and help thousands of individuals. I am getting to the point of retirement and want to figure out...

Help Me With Options For Obtaining Capital

Ask Us Anything Dear Oaklyn Consulting, I have a business that needs a cash inflow. However, my local bank is not willing to provide more credit. What other options do I have to obtain capital, and what are the pros and cons of each alternative?   From Oaklyn...

Oaklyn Consulting Congratulates Effie On Strategic Transaction with Ascential

Oaklyn Consulting congratulates Effie, a U.S. nonprofit whose annual Effie Awards honor global marketing effectiveness, on its transaction with Ascential.

5 Common Pitfalls When Selling Your Business Without a Broker

See how to sell your business without a broker, what are the advantages and disadvantages, and how to make better capital decisions in such cases.

How a Merger Can Strengthen Nonprofits for the Future

The same way merging for-profit businesses can increase reach and profitability, merging nonprofits can safeguard organizations from economic uncertainties.

Help Me With When to Make an Employee an Owner of my Company

Ask Us Anything Dear Oaklyn Consulting, I’ve been in business for 10 years and have an employee who is a valued member of the business and would be hard to replace. How can I incentivize him/her to stay and become part of the equity in the business, while best...

How Business Sellers Can Navigate the Due Diligence Process

Learn more on how to perform due diligence more efficiently and facilitate business mergers, acquisitions, and more for clients, partners or your own business.

How to Successfully Collaborate With a New Capital Partner

Gaining a new capital partner offers a business not just funds but also expertise and management support. Learn how to collaborate with business partners.