By Claudia Capos

At the 13th annual Private Equity “Bake-off” competition in December, two University of Michigan student teams advanced to the semifinals and took their best shot at winning this year’s Alan Gelband Private Equity Award and a hefty slice of the $10,000 in prize money.

During the heated competition, both teams served up impressive buyout pitches for purchasing a public company in a private equity fund acquisition. But a people’s-choice vote by attendees in the final minutes broke the tie. Only one team emerged as the clear winner and brought home the bacon.

The yearly “battle of the pitches,” held by the Center for Venture Capital and Private Equity Finance, or CVP, at the Ross School of Business, marked the finale for MBA and U-M graduate students enrolled in Professor David J. Brophy’s Private Equity Finance class.

David J. Brophy, University of Michigan Ross Zell Lurie Institute At the beginning of the fall term, Brophy asked 10 student teams to select and screen a public company in the middle-market sector that they thought was well-positioned for a private-equity takeover. The students scoured publicly available financial records to dig up details about their firm’s management, revenue, profits and market position. Then they formulated projections of the estimated return on investment for private equity investors. In preparation for the “bake-off,” each team created a highly detailed buyout proposal to present to a judges’ panel of private equity investors and investment practitioners.

On the final day of class, Dec. 14, the 10 teams made their pitches to two different panels, which in turn selected two semifinalists to compete in the “bake-off,” held in the Ross colloquium. Afterward, the audience of roughly 70 students, alumni and sponsors cast their votes for the team with the best buyout pitch.

This year’s “bake-off” winner proposed a $160.3 million acquisition of MasterFlex Group, a German manufacturer of high-tech hoses and won $7,500. The runner-up team pitched a $518 million buyout of Chef’s Warehouse, a gourmet foods and restaurant supply company, and received $2,500.

Building a Talent Pipeline for Private Equity

“I’d like to think we’ve had 10 winners tonight, and I’m delighted we pulled it off,” Brophy told his students. “I hope you all give the private equity business some consideration. The public markets are shrinking and the private markets are growing, so if you want to be involved in an industry for the rest of your career, private equity is where you must be.”

Alan Gelband, BBA ’65, MBA ’67, the founder and managing director at Gelband & Co. investment banking, and the benefactor for the annual Private Equity Award, also gave his pitch for pursuing a career in the private equity industry, saying: “It’s a phenomenal way to spend your life ─ you just have to make a living.”

Gelband also said he was inspired by the sophistication of the Michigan students competing for this year’s Private Equity Award. “There’s not that much difference between these students and investors in the real world,” he remarked. “This is an important exercise for anyone who wants to get into private equity, which is a leader of business evolution today.”

Gelband further noted that the University of Michigan serves as a valuable talent pipeline for the PE industry. “There’s no big PE firm that doesn’t have a U-M graduate in its organization,” he said. “An MBA degree from Michigan is a very valuable card to have.”

Delving Deeper into Private Equity

Many students credited their classroom and competition experiences for helping to prepare them for future venture investment careers.

Michael Abdella, MBA ’17, Mike Nimkar, MBA ’18, and Hang Fei, MBA ’18, said they plan to enter the private equity industry after graduation. “I wanted to learn more about deal structure and private equity, because I’ll be going into that field,” Abdella explained. “In this class we got to work directly with PE investors and ask more detailed questions.”

Michigan Ross Venture Capital Zell LurieDuring the term, students studied “live” cases led by private equity professionals, including Frank Hayes, co-managing partner at Wynnchurch Capital, Josh Cascade, managing partner at Wellspring Capital Management and Paul Vragel, founder and CEO of 4ABetterBusiness. Three other investors also spearheaded class discussions: Ted Kramer, CEO of Hammond, Kennedy, Whitney; Kevin Prokop, managing partner at Rockbridges Growth Equity; and Jeff Bistrong, senior vice-president at Harris, Williams.

“Previously, I worked in private equity in Singapore, and I want to return to Asia to do cross-border deals,” said Belinda Ong, MBA ’18, who was lead presenter for the Chef’s Warehouse team. “This course exposed me to the private equity model in the U.S. and expanded my network.” Ong’s fellow team members included MBA II students Caitlin Cordell, Jessica Kaplan, Scott Collins, Hang Fei and Xingu Li; and Robert Kraynack, a dual-degree student.

U-M Law School candidate Peter McDaniels, JD ’18, said he enrolled in the Private Equity Finance course to gain a better understanding of how private equity works from the business side. “I will be working as a summer associate at a corporate law firm in Philadelphia that does private equity work,” he explained. “This course provided insights and helped me understand private equity from the perspective of a legal client.”

Satinder Singh, an exchange MBA II student from Germany, noted differences between private equity in the U.S. and his own country. “We have a strong PE culture in Germany, but it is more conservative and less aggressive than in the U.S.,” he stated. Singh presented the winning buyout pitch for the MasterFlex team, which included three other exchange MBA II students: Andreas Heinemann, David Motaabbed and Alexander Smutny.

Laying the Foundation for a PE Career

From the judges’ perspective, the Private Equity Finance course and the annual Gelband competition provide students with the building blocks for successful careers in private equity.

“It’s good for students to pitch to seasoned investors,” commented Lorne Groe, a former investment banker who has leveraged his strategic, financial and operational expertise to build businesses and deliver value. “We try to be tough on them, because that’s what it’s like in the real world.”

Nick Adamy, president and managing director of Adamy Valuation Advisors, said: “This is helping to fill a gap between academia and the real world. It is also a valuable opportunity for students to connect with seasoned professionals.”

John Higgins, a senior partner at Huron Capital and a Michigan Ross alumnus, noted that students learn more about the PE business by working on a real-life case involving an actual company. “They must figure out issues and conduct analysis in real-time transactions,” he said. “This helps them develop critical thinking skills that are far more valuable than financial modeling.”

First-time “bake-off” judge Charles (Chip) McClure, a managing partner of Michigan Capital Advisors, said students who enter the private equity industry after graduation will deepen and broaden the skills they acquired at Michigan. “Students will still have to learn the non-template things and the secret sauce that makes companies succeed,” he explained. “That comes from experience.”

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