Traffic jams, honking horns and pedestrians scrambling across Woodward Avenue. It’s music to the ears of Brian Demkowicz and clear evidence that Detroit is once again fertile ground for dealmaking.
“More people are raising capital, there are more deals getting done,” says Demkowicz, managing partner and co-founder at Huron Capital. “There is a greater recognition that Detroit is a good place to do business.”
That uptick in activity means a lot more work for Demkowicz and his partners.
“We’ll look at 1,500 opportunities a year and invest in 20 companies,” he says. “Our primary goal is to help the management team and the owner of the business we invest in make their company bigger and better. If we do that, a lot of great things happen as a byproduct of that.”
Demkowicz has played an active role in more than 320 acquisitions in the past three decades — 150 at Heller Equity Capital and another 170 acquisitions at Huron Capital, which has raised more than $1.8 billion of committed capital across six funds since it debuted in 1999.
Smart Business Dealmakers sat down with Demkowicz to explore the method that fuels his dealmaking productivity and the role Midwestern values play in the firm’s success.
Develop a formula for success
We developed a 40-point checklist that we still use today. There are a handful of key things we look for. Is it a commodity, which we don’t like? Is it cyclical? Where does that particular industry fall within the entire supply chain? So how much influence does it have? Is the business itself differentiated from its competitors? Is it sustainable? Can it sustain its margins into the future and why? We look for a product or service that solves a problem in a unique way that its competitors can’t. We do look for a strong management team, although we have a group of about 50 operating partners where we can parachute people in at a moment’s notice and be able to solve for that on an interim or permanent timeframe.
A lot of deals will fall by the wayside. You look at them and you might have thought before you brought it in that it was a fit. But you quickly read through the material and realize it’s not. You have to be very efficient.
The worst thing you can do is go running down a bunch of rabbit holes chasing rainbows and discover you have nothing to show for it. We’re very diligent to make sure upfront we’re doing enough to work to believe that we like the deal.
Don’t stray from your roots
We’re in the Midwest, so our approach is very down to earth. All of us grew up in the Midwest and went to school in the Midwest. We have the ability to develop a good rapport with business owners. We’re very upfront about what we can do and what we can’t do. Even in the initial stages when we’re looking at a company and in that courting phase, we take a very down-to-earth, practical approach and try to connect with them on a personal level. We try to impress upon them that we’re partners first and foremost.
When we lay out our proposal, we have a specific section we call, ‘What it means for you.’ We spell it out. Here is the price and if we’re successful working together, here’s what your second bite at the apple is worth. There is no hidden agenda. If there are things were concerned about, which there always are in due diligence, we address it head on. We don’t get far down the road and then spring it on you. We don’t want to waste our time either.
Make deals, boost the economy
Private equity can have a lot of benefit on the overall economy. Part of our goal when we invest is to make that company bigger and better. There are a lot of ways we do that. On a net basis, we’re hiring lots of people and we’re growing. We’ve been able to grow our companies over our 20-year history on average 13 to 14 percent a year, well in excess of GDP growth.
When I look at some of our competition, there are folks who I’ll reach out to periodically who I’ve developed a good relationship with in the private equity space. While we’re all Type A and very competitive about the business, it’s very collegial. There is a group of guys I’ll get together with at events. We’re all in the private equity space or tangentially related and in a sense, competing on the same deals. We’re all very friendly and we all want each other to succeed.
The Last Word
As the largest and longest-standing private equity firm here, we always felt like we were a destination spot for folks who want to be in private equity in Detroit. Now we have the added advantage of having a thriving business community. More people are raising capital, there are more deals getting done. There is a greater recognition that Detroit is a good place to do business.