Grand Rapids private equity firm Auxo Investment Partners completed three acquisitions in the latter months of 2017, the most recent of which came in early December in a deal for M/G Transport Services, a New Orleans-based barge company. The firm previously acquired Atlas Die LLC of Elkhart, Ind. and Bernal LLC of Rochester Hills, Mich. in September. Formed in 2016 by partners Jeff Helminski, Fred Tedori and Jack Kolodny, Auxo Investment Partners looks toward 2018 with what Helminski calls “a tremendous amount of momentum.”
How’s Auxo doing as you head into 2018?
From our perspective, (it’s been) a busy and productive first year. I feel like we’re positioned very well going into 2018 and if we can continue the momentum that we’ve built in our first year of operation, we’ll be in a great spot at the end of the day. When we look back, we can say that we have three companies under management, we have nearly the entire fund raised, we have the team built and the office set up, and the trajectory that we’re on feels really good.
What’s the landscape for private equity investing like right now?
The market I think is mixed in certain ways. It’s a very, very competitive market right now. Pricing is high. I think it’s pulled back a little bit from where it was, probably. A little bit of exuberance and a little bit of rationality has come in, but I think there are still a lot of deals.
We’re looking at one that we think is a very interesting opportunity. It’s local and we have a really interesting sort of team we’ve pulled together on the deal and we can do some pretty unique and really exciting things with the business if we’re ultimately successful at becoming the successor to the current owners. But it’s also a company that’s probably going to get a lot of interest and the price is going to be very, very high. So there are still those deals out there that are getting at the top of market or above-market pricing.
Does that mean all the good deals are really over at this point?
When you find the right situations and you sort of play your hand right, there are still really good opportunities out there from a value perspective. It’s kind of a bifurcated market. There’s a lot of over pricing, but still a lot of opportunity.
What’s your expectation for the economy next year?
Aside from a nervousness that a lot of people feel because of the length of time that we’ve been in a bull market and everyone feels like there should be a pullback, I don’t see any data that suggests that’s actually going to happen. So my crystal ball is a little cloudier than most, but it feels like 2018 is going to continue to be a positive year, other than maybe auto has a little pullback. Broadly in the economy, I think it’s going to continue to grow.
How does that outlook shape what Auxo plans to do in 2018?
What that means for us is making sure our companies that we have right now are prepared for that growth. Our first two companies, Bernal in particular, are probably going to have a record 2018 and the conversations we’re having there are how do we make sure that we have enough machine capacity and the people to produce all the work we’ve booked.
What’s your biggest worry in the new year?
It’s really a macro-level thing that would come to mind for me: The Trump administration, and should something come out of their behavior that causes a problem on an international stage or domestically. I don’t see anything particular in the short run. Rates are going to go up, but I don’t think that’s going to happen dramatically. They’re probably going to continue a little faster-paced climb than what we saw this year, but nothing dramatic. I think the thing that makes me nervous is something coming out of the Trump administration that pours some sand in the gears.
How’s the deal pipeline shaping up?
We’re still seeing a lot of deals and it’s a good mix for us, things that are represented by investment banks and things that are more proprietary in nature. I haven’t seen any drop off in what’s been a very high volume of deal flow in the last 12 to 18 months. The investment bankers that we talk to seem to have a lot in their pipeline and things that are in process and are coming to market. My cloudy crystal ball would be that deal volume — in terms of opportunities, anyway — stays high in 2018.
What’s a prediction your cloudy crystal ball has for next year?
From a financial perspective, we’ll probably see rates up 75 basis points over the course of 2018. Maybe 100 (basis points).