Underperforming, “exit-resistant” investments are a private equity firm’s black hole of time, capital, energy and morale. GEMS provides critical care for “broken” and orphaned investments. We take the actions necessary to restore viability, position the company for exit, manage the sale and deliver returns to investors.
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Outsourcing this function can be a tremendous advantage for fund managers:
I. Maximizing IRR
LPs invest in their GPs not to manage their money per se, but rather to provide the highest possible returns. Under certain circumstances (such as managing a portfolio company in distress) this goal may be best achieved by a firm that specializes in so doing. GEMS takes no carried interest, so GPs retain the upside on successful outcomes.
II. Leveraging Time
Managing and exiting underperformers is immensely time-consuming and emotionally draining. Outsourcing this function can allow GPs to redeploy human capital to focus on new investments and portfolio winners that can have much greater impact on overall return performance.
III. Managing Cost
According to Preqin, the median annual total remuneration for an LBO fund partner exceeds $1 million. Redeploying this talent to the highest value-added portfolio tasks makes good business sense.
IV. Adding Flexibility
Private equity firms tend to staff to peak demand, even though workload can be quite variable. Outsourcing adds flexibility.
V. Accelerating the Path to Liquidity
“Sideways” investments are often relegated to idling status, with GP attention focused elsewhere. These investments nonetheless require dedicated care and deliberate action to maximize value.
VI. Exiting as Mandate
Many an exit has been lost or derailed due to a fund principal’s emotional attachment to a sired investment. GEMS has no such attachment, and as such views its exit mandate with dispassion and cool precision.
VII. Providing Temporary Bandwidth
Managers can often find themselves in need of additional short-term capacity — such as when a complex transaction is underway, a key partner departs, or when partners are focused on fundraising. Portfolio acquisitions also create special bandwidth needs as the assets acquired may require special attention. GEMS can provide senior-level talent without adding fixed cost.
VIII. Rightsizing Portfolio Coverage
Funds navigating through rightsizing will find outsourcing a highly flexible and cost-effective tool to provide seasoned care perfectly matched to portfolio needs.
IX. The Gordian Group Advantage
Affiliated units within Gordian Group offer a comprehensive suite of investment banking services including financial advisory, financial restructuring, M&A, structured finance, capital raising, litigation support and expert opinion.