MIDDLE MARKET GROWTH: Does your firm have a playbook for aligning management interests with those of investors?

ELIE AZAR: We are flexible as to how our portfolio companies achieve alignment with investors across management ranks; however, every approach shares the same DNA. First, we ensure that there is a clear strategic plan for value creation based on the investment thesis for the original investment.

In the case of founders (sellers) who wish to stay on and help drive growth post-acquisition, we look for a substantial commitment via “rolled” equity—somewhere in the 20% to 35% range. We want these highly successful entrepreneurs—now our partners—to understand that their “second bite at the apple,” combined with the proceeds from the original transaction, can generate significantly more personal wealth than what they had hoped to achieve from the original sale.

Upon closing, we work with our partners to refine the strategy and translate it into annual plans with specific operating and financial goals. Managers participate in shaping the annual plan and those with equity clearly have a stake in achieving those plans.

 

MIDDLE MARKET GROWTH: How do you decide who receives preference when structuring the ownership positions among various kinds of equity holders, such as investors and key managers?

ELIE AZAR: We don’t! We invest in the same security as management (mostly common equity). The reason is rooted in one of our firm’s bedrock values: partnership. We believe that the best engine for maximizing value creation is a committed core team bound by the principle that every member is a partner and every partner is treated equally regardless of the size of their slice of the pie. Every partner has a voice in shaping a common ownership vision and each is motivated to maximize value. All partners are pari passu—side by side—when it comes to distributing rewards. This is in sharp contrast to preferred equity where some owners are at the front of the line.

 

MIDDLE MARKET GROWTH: How do you determine whether or not a member of the management team of a portfolio company receives equity in the deal?

ELIE AZAR: That’s an easy one—we always welcome any manager or key employee to participate alongside us as investors. Having “skin in the game” is arguably the most potent way to drive alignment, focus, and motivation. We also set aside a pool of equity for key managers awarded either as inducements to join our teams or as recognition and reward for delivering value.

About White Wolf

White Wolf is a private investment firm that began operations in late 2011 and is focused on making direct and indirect investments in leading North American middle market companies.

White Wolf seeks private equity and private credit investment opportunities in companies with $20 million to $200 million in revenues and up to $20 million in EBITDA. Typical situations include management buyouts, leveraged buyouts, recapitalizations, and investments for growth. Preferred industries include manufacturing, business services, government services, information technology, security, aerospace, and defense.

White Wolf also looks to invest with other private fund managers as a limited partner. Targeted investment candidates are North American focused private credit funds looking to raise $50 million to $500 million, with a focus on the lower-middle and middle-market.

White Wolf’s office locations include Miami, Chicago, Montreal, and New York City.

For further information, please visit www.whitewolfcapital.com.

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