McCombie Group began as a consulting firm, advising High Net Worth Families with their direct private equity investments, although over the years, the collaboration with those Family Offices which they serve has led them, without losing sight of their origins, to focus on club deals in order to provide their clients with added value, as David McCombie, founder and CEO, explained in an interview with Funds Society.
At McCombie, they believe that in addition to contributing with good investment advice to the growth and preservation of their client’s capital, they can also assist it through “good business deals to which the Family can provide their expertise. “Undoubtedly, club deals, especially between high net worth families are other routes which increasingly contribute to define their investment strategies, and which also offer them control and potential value.
To that end and for a while now, McCombie has been organizing bimonthly breakfast meetings to which several families are invited in order to exchange ideas and projects; these are always private and confidential affairs. Attendees bring to the table those businesses or opportunities which they have come to know through their business and contact networks in order to assess their feasibility and interest and add synergies.
“Finding a good business is hard, and on average it may take 18 to 24 months to close a deal, but good opportunities arise from this kind of 'show & tell'... especially through the experience of those people present,” McCombie said.
The proposals are many and varied and the executive knows that it is not just a matter of putting the business or opportunity on the table, but that the project must be matched with the right investor; McCombie also co-invests with the family or families, so that their capital contribution adds greater confidence to the operation. “We do not offer any business deal in which we are not going to contribute money,” he said.
Likewise, he pointed out that finding a good business is difficult, and more so if you are looking for one or more families to add value to the operation. Unless that is the case, they do not push the project because at McCombie they are convinced that in order for the investment to come to fruition, it must be made on the strategic investor’s side.
The executive emphasized that the investment is much more conservative than that of a traditional private equity company, with lower risks but in good companies which guarantee capital preservation. As to which sector they are aimed at, McCombie explained that they focus “on the least exciting industries in the business world, but where there is less competition and more affordable prices.”
For the company, families have much more value to bring to the table in these club deals than in private equity or than in traditional investment arrangements, because, unlike traditional private equity, to be sold over a period of a few years, the project here involves a longer term. “Sometimes, forcing a sale does not make sense... it's much easier to buy than sell... We are thinking of building a platform that lasts decades. It must be done right, built well, and contemplated on a long term basis.”
Since its founding, McCombie Group has worked with over 20 families; most of them are Latin American, although they would like to gradually distribute that weight 50/50 with American families. The company, located in Miami, offers services which span the life cycle of the investment, from its study and analysis of agreements, negotiation strategy, due diligence, and company monitoring, to business development and consulting.