We chat with ECI’s North America Growth Specialist, Brett Pentz, about how he works with management teams, his experience and insights into the U.S. PE market and favourite place in New York.
Q: What made you join ECI as a Growth Specialist?
In my consulting journey, I increasingly moved to smaller firms as my career progressed – from Bain, to Teneo, and then becoming independent. For me, that was because I wanted to not just define strategy, but also be a partner in the execution of driving growth.
The opportunity to open ECI’s New York Office, work with management teams on their US growth expansion plans, and become part of the amazing team and culture at ECI really appealed to me.
It’s the perfect role, at the perfect organisation, at the perfect time in my career.
Q: You mentioned culture. Is there anything in particular you were looking for in a private equity firm?
Definitely. What was really important for me was I didn’t want a command and control PE firm. I was looking for a firm focused on partnering with management teams and developing new strategies and ways to grow together. A culture where everyone trusts each other.
This was demonstrated very early on at ECI. The first opportunity I worked on was CPOMS, and the level of trust between our commercial team, investment team and the CPOMS management team was amazing.
Q: How do you work with the ECI management teams?
The short answer is however management teams want to work with me. But typically it includes evaluating how to expand into the U.S., developing entry strategies and supporting execution.
About half of the portfolio I work with are currently looking at the U.S. as a growth opportunity, while the other half are already here. So in the latter instance, it’s all about working with management teams to drive growth strategies and execute even faster.
Q: Are you finding that U.S. expansion is becoming more popular and common for UK mid-market businesses?
Absolutely. Survivorship bias may come into it as those are the ones I speak to, but I do find if you compare my role at ECI in year one to now, there are more opportunities I’m looking at around U.S. expansion. It’s definitely much more common.
I think the dynamics in the U.S. are often more compelling than other geographies. It has experienced less market volatility than the UK and wider Europe, and its GDP results show that the U.S. has got back to growth more quickly. There’s a real opportunity for UK companies to take advantage of that. I’m increasingly seeing that across UK PE; it’s an opportunity to quickly expand your total addressable market, and that has a very positive impact on exit positioning.
Q: So, has the U.S. deal market fared better than the UK over the last 12 months?
At a macro level, U.S. exits are down. If you exclude the pre-Covid period in 2020, I think Q3 volumes were the lowest they’ve been in the last decade, both on a value and volume basis. So, no, the exit market in the U.S. still hasn’t recovered, and exit multiples have also dampened from where they were in 2021 and even the first half of 2022. However, they’re starting to recover a little, as they are in the UK market, and I think it’s important to look at the pockets of deals that are relevant to our market. There are definite glimmers of hope within the mid-market PE space versus say the large-cap PE space, which seems to be struggling.
In the mid-market space we’re still seeing an increasing share of exits to U.S. corporates.
That’s something we’ve seen in our portfolio as well, so I still believe it’s a strong opportunity for management teams who can build a growth strategy in the North American market.
Q: How do you think that having you there as boots on the ground can be transformative for UK-headquartered management teams?
I think there are a couple of points here. Firstly, I have a cross-cultural perspective that can be helpful. For example, at CPOMS and Moneypenny, I could quickly understand how their solutions would apply across the different geographies with their various regulatory frameworks and customer demand drivers.
One of the most useful exercises we do with management teams is an overall analysis of the U.S. market opportunity. Given the U.S. is such a massive end market, it’s always going to look compelling. The challenge becomes how do you start to segment that market in a way that’s meaningful for an entry or expansion strategy. For example, if you’re deciding where to open your first U.S. office, you might need to consider proximity to customers, ease of access from UK head office, your ability to recruit talent, and much more.
Having boots on the ground and a New York office allows us to determine where there are pockets of demand geographically, and understand the regulations that exist given it’s done by state rather than nationally. That might create areas of demand that are going to be the most actionable. Some of those more targeted, focused questions are a real challenge to answer unless you have experience working in the U.S. markets.
Quick Fire with Brett:
What’s your favourite place in New York?
Definitely Central Park. In a city that’s so big and crowded, it works well as a private place to clear your mind, exercise, or even take calls. It also helps that the ECI office is a short walk away.
What movie do you enjoy quoting the most?
I was college-age around the time Anchorman with Will Ferrell came out. So, I find myself, not even intentionally, quoting that movie quite a bit in everyday conversations. It bothers my wife to no end.
Are you an introvert or an extrovert?
I tend to find I’m more naturally an introvert. I do like having the time and space to get away, to build my energy up and to really formulate my thinking.
What is the best ticket you’ve ever bought?
I’m a massive Chicago Cubs fan and while I was at university in Chicago, they won their first division, making it through the postseason for the first time in many, many decades, and I had a ticket to that game.
What’s your most recent hobby?
I do play my fair share of fantasy sports, notably American Football. I spend a lot of my time trying to forecast the future in my job, so fantasy sports are a natural extension of that, but it’s also a great way to stay in touch with a lot of my old friends.