Source Talks ep. 35

Source Talks is a series where we discuss deal origination with expert PE and M&A pros. In this interview, David Toll of speaks with Stephen Madsen of Monomoy Capital about the significance of an in-person meeting, and the story of how a broken process became a great deal.

Steven, start off telling us a little bit about Monomoy Capital and your role there.

Monomoy Capital is a New York-headquartered private equity firm, currently managing about $2.7 billion in total assets. Today we’re investing out of our fourth fund, which we closed for a little over $1.1 billion in December of 2021. But to really understand us, you have to know that while we’re New York-headquartered, a third of our team sits outside New York, primarily in Lexington, Kentucky, but also spread around the country. And that’s our operating team. We have a suite of peak-of-career subject matter experts in our operating team, whose role is to go into companies and help take them from good to great and help supercharge them.

Tell us a little bit more about the business development machine that you’ve built there and what kind of operation you have.

Our approach is one based on persistence and patience. We use a lot of data in our targeting and thinking through how we’re going to go to market, where we’re going to source, where we’re going to identify opportunities. Of course, we’re very active on the road, on the phone, on Zoom, constantly talking to people, constantly looking for those gems where you’ve got a good business with a great reason to exist, where there’s something we can do operationally to help drive the business to the next level. Once you get to the MP stage, and I’ve actually published these stats, we are roughly five times more likely to get a management presentation on a deal where our first point of contact was an in-office meeting relative to a first point of contact being over the phone or over Zoom.

Take us through a recent deal and how it’s kind of illustrated some of your sourcing practices and how you’ve had success.

So Astro Shapes is an aluminum extruder based in Ohio. It’s a business that we first picked up and added to the watch list all the way back in 2017 as we were doing some of our initial planning. We were looking at some of the SPS data. We identified some cities that we hadn’t spent enough time in recently. We picked this deal up on one of those trips, converted it over to an active process. There was a banker engaged to sell it. It was a carve out of a family-owned holding company. And, ultimately the deal didn’t transact. We stayed in touch with the bankers, we stayed in touch with the owners and over time built up a dialogue that allowed us to get a call back and request to revisit the deal in 2020, when circumstances were very different and the parent company was ready to sell. And that allowed us to do a deal really outside of a process.

Tell us about a hidden talent or passion that you have.

I have sourced a few deals in Italian over the years. Nothing that’s, that’s gotten very far down the funnel. But I have a network of some Italian corporate attorneys and others. Sooner or later we’ll do a deal together.

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