A small group of private equity veterans has dreams of creating a new Bay Street powerhouse.
After 17 years at Onex Corp. – where he was a managing director who oversaw some key investing platforms – Andrew Sheiner hung out a shingle in 2012 to create Altas Partners. Since then, he has assembled a team that includes former colleagues as well as industry experts from firms such as KKR & Co. and Providence Equity Partners. Together they are searching for large deals, hoping to write equity cheques of between $100-million and $500-million a transaction.
To differentiate themselves in the intensely competitive private equity market, the team at Altas is keen on investing in assets that can be held for longer than usual. Private equity firms typically sell their investments after four to five years, but Mr. Sheiner is looking for opportunities that can deliver bigger profits if they are owned for longer than that.
Not only does that mindset help Altas line up co-investors such as pension funds, who often look for long-term opportunities, but Mr. Sheiner said it helps the firm avoid some of the traditional drawbacks.
Because the private equity industry has matured over the past two decades and now has roughly 400 North American firms with more than $500-million in capital each, the majority of deals today stem from one private equity investor flipping an asset to another. "Sometimes that's done for the right reason," Mr. Sheiner said. "Other times, it's done simply for structural considerations."
Such sales come with transaction costs, and they are also subject to taxes, which can strip out value. More than that, investors can suffer when a private equity fund they have money in sells an asset to a second fund they have also invested in, because the embedded expenses and taxes create costs along the way. "It's not uncommon for large investors to find themselves on both sides of the transaction," Mr. Sheiner said.
To date, Altas has struck two deals. Its first, in late 2013, was the acquisition of Saskatoon-based NSC Minerals, which provides salt for road de-icing and agricultural applications in Western Canada and the northwest U.S.
The second, which closed this week, involves Altas teaming up with a fund advised by Baring Private Equity Asia to acquire an equity investment in St. George's University. The school, based in Grenada, offers medical degrees, and its graduates often become medical residents in the United States. Financial terms were not disclosed, but a source familiar with the transaction said the deal valued St. George's at $750-million (U.S.).
To help shoulder the burden, Altas teamed up with OPSEU Pension Trust (OPTrust), the pension plan for Ontario public sector employees, to share its portion of the transaction. Such partnerships come naturally to the firm because of its team members' long-standing relationships. The deal is OPTrust's 12th direct private investment in the past two years.
In an ideal world, Altas would like to acquire one to two large businesses a year, Mr. Sheiner said, but acknowledged that it is a tough landscape to navigate because it is a "crowded market." And given the recent trend of disruption, where long-standing business models are suddenly shaken to the core by technological innovation, the team is taking their time to find investments whose business models aren't susceptible to such immediate change.