Investing in transition
KU alumni Paul Maxwell and Ryan Sprott founded Great Range Capital after stints on the East Coast. Mark Robinson joined as an associate after spending time in Minneapolis and Chicago. Their business: facilitating the change of ownership as a generation of entrepreneurs retires.
After more than a decade working in private equity on the East Coast, in 2010 Ryan Sprott and Paul Maxwell decided it was time to open up their own shop back home in Kansas City.
“While we were on the East Coast working, for years we had talked about working together, and eventually we started honing in on the Midwest,” Sprott said. “There are a lot of great businesses in the Midwest but not a lot of private equity players.
Maxwell said that while they were working on the coast they found themselves flying to places like Kansas City or Tulsa to do due diligence and ultimately invest in Midwestern businesses.
“We also had the perspective that a lot of the business owners, management teams and investors in the area would be more comfortable in some cases dealing with a group that is local to the Midwest versus some unknown, unfamiliar group from one of the coasts when it comes to doing a private equity transaction,” Maxwell said.
With friends, family and many connections in the area, Sprott and Maxwell, who are brothers-in-law, moved home to Kansas City in 2010 to start Great Range Capital. Sprott was formerly a partner with DLJ Merchant Banking Partners in New York, and Maxwell was a principal at Monitor Clipper Partners, in Boston.
Once back in the Midwest, they made their first investment in August 2011 and closed their first fund in 2012. At the time they made their first investment, Great Range also brought on another School of Business alumnus, Mark Robinson.
Robinson, who originally met Sprott at a Jayhawks on Wall Street event in New York, had worked in investment banking at Piper Jaffray in Minneapolis and then in private equity at Wind Point Partners in Chicago. When he graduated in 2008 he considered beginning his career in Kansas City, but there weren’t many opportunities that lined up with what he wanted to pursue longer term, he said.
As the private equity industry grows in the Midwest, one of Great Range’s goals is to correct the misconceptions many people have of the industry, Maxwell said. The industry has changed a lot since its earlier days, but some people still view private equity firms as “corporate raiders,” he added.
“We’re much more focused on growing businesses and figuring out ways to build businesses, hire people, find ways to expand geographically, and figure out new products and services, versus the older days of getting in there to cut costs,” Maxwell said. “Private equity can be helpful to the economy we’re in and the economies where we invest. We aim to make the companies we invest in healthier so they can support more economic growth over time.”
As a leveraged buyout firm, Great Range typically makes controlling investments in companies with $10 million to $200 million in annual revenue, which it then prepares for sale in approximately five years. Most of the capital invested doesn’t go into the business, but rather to buy out a shareholder, a common move for family business owners who are ready to move on or retire, Sprott said.
“I think in the Midwest in particular, but all across the country, there are a lot of businesses going through generational transitions,” Sprott said. “We’ve seen a lot of businesses and we’ve bought a couple of businesses in which the owner operator is nearing retirement age and their kids are doing something else, and the right next step for them is to find another owner for the business.”
Great Range focuses on buying businesses in industrial services, healthcare services and devices, retail and consumer services, established media and niche manufacturing. Its portfolio includes Mountain Valley Spring Water in Hot Springs, Arkansas; LLL Transport in Brookfield, Missouri; and Fairbank Equipment in Wichita.
While their careers began on the East Coast, Sprott and Maxwell’s interest in private equity started at the KU School of Business in Kent McCarthy’s applied portfolio management class, Sprott said. The company continues to give back to the school where they got their start. To encourage more Jayhawks into the industry, Great Range started a summer internship program to hire a KU business student each year for hands-on experience. Sprott, Maxwell and Robinson also visit the School of Business regularly to lecture on private equity and cultivate interest in the industry.
Cody Faust graduated in May with a degree in finance and had the opportunity to hear from Sprott and Robinson in his entrepreneurial finance class. Learning from Great Range’s real examples of acquisition deals lent better insight into the challenges of raising funds and private equity, he said.
“It helps to see what other people who have gone through the School of Business have done,” Faust said. “It is motivational to see other Jayhawks that are successful, rather than some speaker with no common background.”
Sprott has also been instrumental in influencing curriculum improvements, such as incorporating Excel, which is an increasingly important skill set, lecturer Dieter Schrader said.
“Ryan (Sprott) has been a great asset to the finance area, and as of lately to the whole school by pushing for the inclusion of Excel in the curriculum,” Schrader said. “He has devoted quite a bit of his time to this initiative, and thanks to him and other members of the Finance Advisory Board, we are moving in the right direction.
For Sprott, Maxwell and Robinson, their love of business and working with management teams drives their passion for private equity. The ability to learn something new and get to know different industries is their favorite part of the job.
“I think it’s interesting and enjoyable to learn about different businesses and to learn about them in a very detailed way as opposed to buying stocks or looking at companies in the public market, where you’re only going off public information,” Maxwell said.
At the core of it, Robinson said, he likes understanding business models and issues, but he also enjoys hearing the story behind the business.
“You get to hear the stories of the former owners and generally that’s one of my favorite parts,” Robinson said. “Meeting people, hearing how they started the business, how they grew it, saw it through the twists and turns. I just think it’s really interesting on a personal level.”
