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Resilience Capital’s Bassem Mansour

PE firm co-CEO advises clients to leave a little growth for the next owner

January 19, 2018

By: Mark Scott

Entrepreneurs often find it difficult to make pragmatic decisions about their business interests when they have invested so much of themselves in their work, says Bassem Mansour, co-CEO at Resilience Capital Partners.

“We’re less emotional about the business,” Mansour says of his PE colleagues. “Our profession is to create value for our investors and not necessarily grow an individual asset. We’re a little dispassionate in some of these situations and can exit a business more readily than maybe an entrepreneur would.”

Mansour co-founded Resilience in 2001 with Steve Rosen. The firm invests in companies with solid business prospects that may have insufficient management focus or inadequate capital to support growth.

He spoke with us about the shifting entrepreneurial mindset, the value of an unbiased professional opinion and the state of today’s capital market. What follows is a transcript of the above video, edited for readability.

 

 

Terminal value is the goal

In the past, many privately held businesses were what I’ll call lifestyle businesses. They provided meaningful cash flow, they provided a good living for an individual or a family. But they weren’t really operated with an eye toward creating terminal value — exit value for the business when you go to sell it down the road. Today, I think entrepreneurs are much more focused on not only building that business, but selling it at the end of the day and creating value for themselves. The focus on terminal value is much more the mindset we have as a private equity owner or as an institutional investor.

Today, we’re seeing more and more entrepreneurs as the private equity model is becoming much more well-known and understood and I think many people are more comfortable with it — there are individuals who want to replicate that. It is difficult to do for an entrepreneur. But I think that mindset has created a change or a difference, maybe, in the way they not only own, but will operate and eventually sell or monetize their asset.

Don’t try to time the market

One thing I think is important, in particular for entrepreneurs to remember, is that it’s very difficult to time the market. Many individuals who own a business today, it’s successful, they believe they have a good runway in front of them to continue to grow their businesses. It’s an important lesson learned, particularly from the institutional marketplace, to not necessarily try to time the market and sell all the way at the top. None of us have a crystal ball in front of us. We think it’s important to leave growth on the table for the next buyer. That’s the way we think about exiting our businesses and I think it’s a good lesson for entrepreneurs as well.

Gather different opinions

I think one of the differences between an institutional investor — a private equity firm like ourselves — and an entrepreneur is that we’re less emotional about the business. Our profession is to create value for our investors and not necessarily grow an individual asset. Unlike an entrepreneur, where in many cases or most cases, that’s his or her livelihood. That’s the business they grew. It might have been part of their family for multiple generations. They view these opportunities and these businesses differently. We’re a little dispassionate in some of these situations and can exit a business more readily than maybe an entrepreneur would.

Can this recovery be sustained?

Well, I think one of the differences in the capital markets today or this improvement in economic environment versus prior periods is that No. 1, there is a fair bit of pent-up demand, given the prolonged downturn that we faced and the difficult economic environment. In addition to that, there is improvement really across the board. So you’ve got not only a low interest rate environment, the public capital markets are doing exceedingly well, the European market has continued to improve. When you have that sort of synchronicity across a lot of elements, it creates a little bit of a different environment that at the end of the day has more strength associated with it.

The one area that is still yet to be seen is can some of the recovery in the fundamental end markets be sustained? Certain end markets have had strength. But others, there is still ambivalence, particularly in certain areas of the industrial sector.