Strategy differentiation matters, particularly for general partners operating in the crowded small to mid-market space. So the approach of US group AUA Private Equity has a lot to be said for it.
The New York-based firm, which launched earlier this month, will use an operations-intensive strategy to target family businesses in the lower to mid-market, with a focus on Hispanic-owned or -oriented companies.
This niche strategy is the brainchild of founder Andy Unanue, the former chief operating officer of Latino food company Goya Foods.
Unanue and his team previously made private equity investments through family office AU & Associates, which manages the assets of the Unanue family, but he left earlier this year to launch AUA Private Equity (which will operate independently from AU & Associates). The team has worked on a number of deals together, including Brighter Dental Care, Two-Twenty Records Management, eSchool Data, TRUFOODS and Opt-Intelligence.
Unanue has also teamed up with several industry veterans. Steven Flyer and David Benyaminy, both founding partners, were previously with CIBC’s leveraged finance and merchant banking group and helped establish Trimaran Capital Partners. Kyce Chihi, another founding partner, used to work in Deutsche Bank’s leveraged finance group.
Through AUA, Unanue plans to apply Goya’s growth model to other family businesses, particularly those facing succession issues as first and second generation owners retire.
“It’s a tremendous opportunity,” Unanue tells Private Equity International. “Most family businesses are extremely insular – they don’t like bank debt or institutions making fees on their hard work, so they tend to shy away from what’s now considered ‘Wall Street’. We think we can provide a full package of understanding as to what they’re going through.”
That package will include operational improvements to help portfolio companies expand or become more efficient. For this reason, AUA has put together an operating advisory board with former executives from companies like Pepsi, American Express, Urban Outfitters and Forbes Media.
But despite these Fortune 500 backgrounds, AUA’s focus will very much be at the smaller end of the mid-market. The firm plans to make investments between $10 million to $30 million in companies in the consumer, media and business services sectors through leveraged buyouts, recapitalisations and growth equity injections.
AUA isn’t the only private equity firm trying to tap into the growing economic clout of the large US Hispanic population; Nexos Capital Partners, Palladium Equity Partners and HCP & Company have all developed similar strategies.
However, Unanue says AUA’s key differentiators are its operational focus – and its target market.
“We feel some of these [Hispanic-focused competitors] are too big to target the market we’re looking at,” he said. “Some of these other groups are writing $75 million equity cheques, and that’s too big to be in the same market we are targeting.”
Unanue also believes his background gives him a competitive advantage. “One of the reasons large US corporations weren’t able to penetrate these markets and compete with Goya is because they marketed to Hispanics, and [at Goya] we were marketing as Hispanics,” he says.
The real test will obviously come as and when AUA tries to raise third-party capital (Unanue declined to discuss its fundraising plans). But if nothing else, the firm should have a good differentiation story to tell.