It seems like a new private equity shop rears its head in Los Angeles every week, and the banks have noticed.
The private equity shops need bankers to help finance acquisitions, recapitalize portfolio companies and provide lines of credit.
That’s the thesis of Adam Feit, MUFG Union Bank’s L.A. market president, who jumped from Bank of America Corp. in November to help his new employer start a private equity practice group.
“It was a great opportunity for me to become market president in one of the bank’s largest markets,” he said. “It was also an opportunity for me to build out a commercial banking private equity practice.”
Feit said an aging population of business owners – some of them Union Bank business customers – are primed to sell in the coming years as private equity buyers continue to snap up companies at a growing rate. The bank would have missed out on a big chunk of that business, Feit explained, if it hadn’t formalized its private equity group.
“It’s both playing offense and defense,” he said. “Private equity is obviously out there doing deals and we need to be proactive on that side, but from a defensive perspective, our business clients are also looking to sell and we need to provide (private equity) coverage for them as well.”
Union Bank also hired Matthew Dalany as a managing director last month in order to shore up its broad-based private equity support. Dalany, who spent the last two-plus years opening the West Coast office of Chicago-based investment bank Verit Advisors after a long tenure at Bank of America, will help lead the group as it develops a deal pipeline.
Feit said Union Bank currently has about 10 private equity deals through which it is providing various lending services. The bank could be particularly helpful when dealing with companies with lower earnings before interest, tax, depreciation and amortization.
“Roughly 50 percent of our private equity deals involved companies with between $5 million and $20 million of Ebitda,” he said. “Everyone wants the $100 million Ebitda deal, but sponsors really remember when you do a smaller deal like this that other banks aren’t clamoring to do.”
High Bar
Culver City marijuana investment outfit MedMen Opportunity Fund GP – also known as MedMen – failed to reach its $100 million goal for the firm’s inaugural fund, according to documents filed last week with the Securities and Exchange Commission.
The company decided to wind down the fund in April with just over $60 million committed because one of its initial investments was set to undergo a liquidity event, according to MedMen spokesman Daniel Yi. The firm’s $10 million stake in Canadian medical marijuana company MedReleaf Corp. turned into $33 million when MedReleaf went public June 7 on the Toronto Stock Exchange.
Yi said MedMen management felt it unfair to early investors to take in new money after MedReleaf announced its IPO plans April 28 given the large windfall. MedMen officially closed the fund May 31 with committed capital from 87 limited partners.
The firm’s decision to close the fund early before hitting the $100 million mark represents a step back from MedMen Chief Executive Adam Bierman’s predictions in the fall. He said in a September interview with the Business Journal that MedMen expected to raise the full $100 million by the end of last year.
Yi said Bierman’s estimate was speculative and that the fund officially had a one-year capital raise window from the time it was announced last June.
“He might have been a bit ambitious based on how things were going at the time,” Yi said. “But the fund’s range was always up to $100 million with a (one-year) period to close.”
The MedMen fund also has stakes in two pot shops – one in Venice and the other in Santa Ana – and cultivation operations in Nevada and Desert Hot Springs, among other investments.
Macquarie Moves
Macquarie Capital introduced two hires this month in its Century City office. Tom Amster, previously at Morgan Stanley, has joined as a senior managing director heading up the investment bank’s U.S. sponsor-side advisory team. Amster has been joined by Managing Director Hershel Gerson, who came over from Credit Suisse Group.
Staff reporter Henry Meier can be reached at [email protected] or (323) 549-5225, ext. 221.
