Alex Navab’s new buyout shop has reached well beyond his KKR roots, assembling a team of investment and operations professionals from across the alts marketplace, including Carlyle Group, Warburg Pincus, and even Baupost Group, a hedge fund.
Navab launched New York-based Navab Capital Partners in October after nearly a year of garden leave following his 2017 exit from KKR, where he was private equity co-head and the Americas buyouts division chief. His departure had followed the 2017 elevation of Scott Nuttall and Joe Bae to co-president roles, putting them in line to succeed Henry Kravis and George Roberts, KKR’s founders.
Last week, Navab announced a roster of hires to fill more than a half-dozen top roles, atypical for most private equity shops out of the gate, but perhaps suitable for a shop that the Wall Street Journal reports is targeting $3 billion for its first fund later this year. The slate includes three senior investment partners, a CFO, and top officers for investor relations, human resources, and environmental, social, and governance (ESG) initiatives.
Navab, who joined KKR in 1993 when it had 14 people, says he has enjoyed building his firm up “brick by brick,” while tapping into a private equity support platform from Goldman Sachs’s Petershill unit.
Building the investment team has been a primary effort, with a focus on healthcare, financial technology, financial services, consumer, media, and technology industry sectors. The firm will pursue controlling or minority stakes in upper mid-cap to larger companies with $1 billion to $3 billion in enterprise value, Navab says.
“We chose verticals that offer secular growth, but there are also defensive characteristics across these industries,” he says. “In the investment horizon over the next few years, we know there’s going to be a downturn at some point.”
Navab plucked his top three investment professionals so far from big industry shops. Robert Berlin joined earlier this year as a partner from Baupost, where he was a managing director and had spent a decade investing in consumer, technology, and financial services companies. Annette Rodriguez started as a partner earlier this month at Navab Capital, joining from Warburg, where she had worked since 2008 and was a managing director investing in consumer, healthcare, retail, industrial, and business services companies. And Ram Jagannath came aboard as a partner this month after leaving Carlyle, which he had joined in 2007 and where he was a managing director on its U.S. buyout fund specializing in healthcare investments.
Newly launched private equity firms should demonstrate a range of investment skills to satisfy investment consultants, says Michael Rosen, CIO at Angeles Investment Advisors.
“It’s not just finding the hidden gems and paying the right price for it,” he says. “There are a lot of different skills in private equity, from deals sourcing to legal and operations and oversight capabilities for the [portfolio company] investments. So it does take a certain amount of people to make that happen.”
It helps if a new firm’s team already has worked together, and if not, to show how it will address problems if they arise, Rosen adds.
“It’s an element of risk if they haven’t worked together before, even if they may have done a few deals together or have a common investment philosophy,” he says. “There are questions about how you manage investments, when to put more money into companies, whether to sell it now or sell it later.”
The new firm also has built up operations, having filled more than 80% of its senior posts, Navab says. That includes adding KKR veteran Michael Gaviser as head of capital raising and investor relations in January, after he had spent part of last year at PennantPark Investment Advisers, according to a LinkedIn profile. Gaviser had left KKR in April 2018, having led fundraising, marketing, and product development efforts for registered products, as well as raising capital for private equity, credit, and real assets funds, according to the profile.
Navab also tapped Mark Schroeder as a CFO, hiring him from Uber Technologies, where he was a senior financial advisor since 2017, according to a LinkedIn profile. Bhavna Vashisht Katkar joined Navab Capital last fall as chief administrative officer and head of human capital, after having left KKR earlier in 2018. And Georgia Levenson Keohane came aboard in January as head of ESG efforts and president of Navab Capital’s new philanthropic foundation, after most recently serving as executive director at the Pershing Square Foundation.
Next up are planned hires for general counsel and chief technology officer, adding the “next layer of talent” for the investment and operations teams, and setting up vendor relationships for compliance, legal, accounting, and tax service providers, Navab says.
Newly launched private equity firms may not need every top operations role filled, but at least should have an investor relations pro and a senior person who can describe the target audience and fund structure to attorneys crafting the initial offering documents, says Elizabeth McGinley, partner, attorney, and tax department chair at Bracewell. “Even early on, you’ll have side letters that will have to be negotiated,” she says. “And you need someone who understands the compliance requirements.”
Another area of focus will be employing artificial intelligence and data science within the firm’s operations and investment processes, Navab says. “The use of data analytics and data science not only allows for better decision-making but also improvements in our portfolio companies to ensure value creation,” he says. “In our industry, we’re in the very early days of beginning to use these tools… It’s a big evolutionary opportunity.”