By Claudia Capos
The race to the winner’s circle at the 2019 Private Equity Bake-Off went down to the wire, as two semi-finalist teams vied for first place and a shot at the Brophy-Gelband Merit Scholarship and $10,000 in prize money.
The annual “battle of the pitches” serves as a capstone for MBA and U-M graduate students enrolled in Finance Professor David Brophy’s Private Equity Finance course. The 2019 pitch competition, sponsored by the Center for Venture Capital and Private Equity Finance, was held on Dec. 12 at Michigan Ross.
At the beginning of the event, nine different teams presented their pitches for the leveraged buyout of a public company before a judge’s panel composed of private equity investors and investment bankers and advisors. The judges whittled down the field to two semi-finalists, and the winner was selected by a popular vote of the audience, which included U-M students, alumni and other attendees.
The first-place champion of the 2019 Bake-off was a team that proposed a public-to-private buyout deal for Somero Enterprises, a leading manufacturer of laser-guided screed machinery used for leveling concrete in the construction business. The five students split the $7,500 first-prize winnings provided through the Brophy-Gelband Merit Scholarship.
The team members attributed their win to selecting a prime acquisition target, conducting thorough due diligence and creating an attractive financing package and exit strategy.
“We have a lot of internship experience on the investment-banking side, so we brought those values to the forefront,” explained Stephen Liuzza, a second-year MBA student. “Our biggest challenge was trying to understand the industry at a little deeper level.”
The team did a deep-dive into Somero’s financials, conducted extensive industry research and determined the value drivers for the deal in order to present a compelling case that the company would be strong going forward after the buyout.
“Professor Brophy’s private-equity class was very helpful, because it gave us a high-level overview of all the elements, as well as the sequence of events, that go into a PE deal,” observed Greta Meyer, an MBA2.
Andy Clifford, also an MBA2, said the private-equity coursework and Bake-off competition provided valuable insights into what PE investors are looking for in a buyout deal. “After college, I want to go into investment banking where I can assist PE investors in buying companies,” he added.
Other team members included Scott Shelley, MBA2, and Laura Hogikyan, JD/MBA ’20, a dual-degree student who said she may consider switching to private-equity investment after initially pursuing a career in law.
The runner-up team in the 2019 Bake-off proposed a buyout of Nobility Homes, a Florida-based manufacturer of mobile and modular homes. All four team members were exchange students from European countries, and they shared the $2,500 second-place prize money.
“This was the first time I did an LBO model, so I had to learn from scratch,” said Krzysztuf Jan Przybylak, who is from Poland. “The biggest challenge was choosing the right company from among thousands of possibilities. We did a screening based on criteria we learned during the course and looked at size, growth, margins and other factors.” He said his immediate post-college career plan is to work for a venture capital fund in Poland. “But now I’m also considering private equity, because PE funds enter into much bigger deals and generate greater returns,” he added.
Other members of the Nobility Homes team included Rasmus Brock Michelsen, Gustav Lauritzen and Valdemar Andersen, all from Denmark.
PE Investor’s Shoes
Student teams that did not make it to the semi-finals still reaped benefits from going through the process of evaluating a middle-market public company for a “model” private-equity acquisition and then scouring publicly available financial records to assess the company’s suitability for a buyout that would generate attractive returns for investors.
“My focus at Ross is financing and entrepreneurship, so understanding private equity is incredibly important,” stated dual-degree student Evan Leon, MBA/MS ’20. His team pitched a buyout of the Goldfield Corporation, a provider of electrical-transmission construction and maintenance services to the energy-infrastructure industry throughout the Southeast and mid-Atlantic regions.
“This course gave me the chance to put myself in a private-equity investor’s shoes,” explained Brice Harris, an MBA2, who previously worked in investment banking at Piper Jaffray and dealt with middle-market PE firms. “The course’s lecture and debate format provided insights into how you think about private-equity opportunities.” Harris and his team made a pitch for taking 1-800-PetMeds, aka PetMed Express, private through an LBO.
A fellow team member, Sam Kim, MBA ’20, said he had taken a previous course from Professor Brophy and appreciated its intellectual approach. “Professor Brophy has three decades of cultivated wisdom at Ross, and I like his narrative style of teaching, so I decided to take this class,” Kim remarked. “Through his guidance, we were able to look at PetMed Express through multiple lenses and understand it from multiple perspectives.”
Kyeongyeon Jang, MBA ’20, had a personal reason for taking the private-equity course. “Before business school, I was a dentist and owned my own clinic in South Korea,” she explained. “I tried to sell it, but I didn’t know how to price or market it. Working with team members who had previous experience gave me that kind of help.” Jang’s team selected Rosetta Stone, which offers software for learning foreign languages, as their buyout target.
Gelband Family Tradition
Alan Gelband, BBA ’65, MBA’67, originally established an annual student scholarship, which has since become the Brophy-Gelband Merit Scholarship.
“Alan and I have been friends for a long time, and he’s a great fan of Michigan,” Professor Brophy said. “Many students in this class have gone on to careers in private equity. Everybody has learned from it.”
At the 2019 PE Bake-off, Alan’s son, Alex, who is vice president of business development at the family’s investment-banking firm, Gelband & Co., officially announced the winner and runner-up of the competition.
“This is truly a great honor for our family and my father to support the University of Michigan,” the younger Gelband stated.
In a later conversation, he remarked about the quality of the target companies selected as buyout candidates by the student teams and the effectiveness of their pitches.
“Their strong point was the creative way they approached the deal,” Gelband said. “They had a clear understanding of what it takes to get a transaction done and the various forms of financing. Their deals were very close to how real deals get done.”
Gelband also had high words of praise for Professor Brophy and the panel of judges, many of whom were former students. “They asked tough questions that very closely simulated what it would be like to pitch a real deal to a private-equity company,” he remarked. “This is a testament to Dr. Brophy and the incredible respect he’s earned among alumni and former students who volunteer to come back to his class to serve as competition judges.”
Stepping Stone to a Career
The judges at the 2019 PE Bake-off agreed that the pitch competition provided students with a stepping stone to a career.
“I took this course, and now I’m in mergers and acquisitions,” said Eli Slack, MBA ’10, the director of corporate development at Masco Corporation. “It was one of the best classes to prepare me for my current role. We had a compressed timeline, so we had to get through things quickly. We evaluated a business just as you would in the real world when you’re looking at an acquisition target.”
In retrospect, Slack said, he appreciated the value of Professor Brophy’s own experience in private-equity deal making. “Dr. Brophy is very well-connected and has his pulse on this space,” Slack added.
Ryan Deegan, a managing director of debt capital markets at Cowen and Company, said the high quality of the students’ presentations reflected a great deal of hard work. “During my MBA studies at the Stern School of Business (New York University), we did a similar thing, but it was not on the same level as this,” he noted.
Evan Schultz, a vice president at Oakland Standard, stated he was most impressed by the students’ ability to take a large volume of information and boil it down to a comprehensive 10-minute pitch that would excite potential investors. “The teams clearly knew what PE firms are looking for,” he added. “I’d hire any of these students. They met the level of a senior associate.”
Dan Reynolds, the founder and CEO of We Build Databases, remarked: “David Brophy put the students in a position where practice makes perfect. Everyone got a shot on goal.”
Bryan Berent, managing partner and co-founder of Blue River, summed it up, saying, “These presentations just keep getting better every year.”