The interview below is part of a series from McGuireWoods featuring impressive emerging managers, as part of our ongoing commitment to the emerging manager community. To recommend an emerging manager for a future interview, email Jon Finger at firstname.lastname@example.org.
Q: What led to your decision to raise your initial fund?
JP Gutfreund: We saw an opportunity to combine a network of executive relationships, experience investing in our sectors — healthcare and consumer/business services — and best practices in advising companies from having the benefit of working for some of the most talented people in the investment industry. As we moved towards the launch of Halle, we gained the conviction that this was a great opportunity for our limited partners and our team.
Almost three years into this long-term journey, we believe our thesis, that we could do quality and differentiated deals, has proven correct.
Q: What did you consider and prioritize when developing an investment strategy for your initial fund?
JG: At Halle, we are always trying to make investments that stand the test of time. We’re out there trying to find quality deals in the lower middle market where we think we can help a company in its next phase of growth in every situation.
We gravitate toward themes that tend to be less popular discussions at cocktail parties. For example, my friends are probably sick of hearing about the virtues of the pest control industry, where we made an investment last March, but my limited partners are thrilled to hear how well that company is performing.
We have a formal list of criteria we look at when considering any investment, but the core of our investing approach is looking for underappreciated growth areas in sectors we know very well and where we believe we have an advantage versus our peers. The advantage tends to be a mix of qualities such as the management team we bring to the table, the rolodex of industry advisers and a large customer relationship. Whenever we move forward on a deal, we always make sure to have a great reason why we are the right capital partner for the company.
At Halle, we’re not trying to chase fads. We want to stick to subsegments of healthcare and consumer/business services where we have great connections and can identify niche trends not overpicked by the rest of private equity.
We’re in this for the long term. Everyone on our investment team invests in each of our deals. I named the firm Halle after my family — it’s my grandmother’s maiden name and my father’s middle name. Whenever we do a deal, we’re putting my family name on it.
Q: How did you approach assembling your team?
JG: The advice of surrounding yourself with people smarter than you has always resonated with me. At Halle, we set out to hire a team of very smart people who have domain expertise, an excellent work ethic and a collaborative mindset that fits our organizational approach. My partner Jay Abramson, whom I have had the pleasure of knowing for a long time, has been critical in building out the firm’s culture and the investment strategy we employ. Mark McKenna, a principal at Halle, joined us from Clayton, Dubilier and Rice and has helped structure a disciplined and repeatable investment process.
The whole team really excels at supporting our portfolio company partners every day — and at all hours — and sourcing new, differentiated deals within our focus areas for the benefit of our fund investors. Since we all have different experiences, we are constantly learning from one another and working together to make our collective process the best it can be.
Q: What is the best piece of advice you received when raising your first fund?
JG: I’ve been incredibly fortunate to have some great friends in the industry who have been generous with their time. Several fund managers were gracious to sit down with me and share their insights and thoughts on starting a fund. Every single one of them told me how hard the process would be, and I didn’t appreciate this until I had actually done it. The range of decisions is all-encompassing: what administrator to use, what terms to choose for your fund documents, the organizational structure of the firm, what technology your website should use — the list goes on. A consistent piece of advice I received was to build brick by brick, recruit great people to work with and seek advice from people who have done it before and learned from their successes and failures.
About JP Gutfreund
JP Gutfreund is the founder and managing partner of Halle Capital, a middle market private equity firm focused on growth-oriented investments. Prior to founding Halle, Gutfreund was director of research at Glenview Capital Management. In addition to sitting on the boards of several Halle portfolio companies, he is a member of the investment committee and serves on the board of trustees for the Montefiore Health System.