Independently Sponsored: Queens Court Capital

Queens Court is an extension of my life’s work at the intersection of being an investor, an entrepreneur, and an operator. I attended Columbia University in the late 1990s thinking I would go down the path of my father, who was a doctor. My father is the textbook definition of the American dream. He immigrated to this country from humble upbringings in India with $8 in his pocket, and through sheer will and determination, he rose up to be the Head of Radiology at prominent healthcare and hospital systems in the New York metro area. He instilled in our family the values of humility, hard work, and most importantly having the mindset to be able to take the punches life throws at you and keep moving.     

I wanted to do something to make my mark on the planet and found myself unfulfilled with pre-medical studies. I shifted my attention to financial markets and started buying stocks out of my dorm room. One of the first stocks I bought was Berkshire Hathaway, and that’s when I fell in love with all things related to investing. I even took a stab at starting a dot-com company during the heyday which was my first foray into entrepreneurship.

After college, I followed the conventional path of working at various large financial institutions in a number of roles. However, deep down I yearned to unleash my entrepreneurial energies in some capacity. Through this burning desire, Queens Court was born. Queens Court is a nod to the street I grew up on in the suburbs outside of New York City – and a nod to my father, as the house on that street was the first real big asset he purchased to raise our family.  

We’ve been operating now as an independent sponsor for several years and have deployed over $100m of equity across 9 platforms and have seen realizations including full sales, partial sales, and dividend recapitalizations, putting us in a rare category of investors. Unlike other investors in this cycle we have seen actualized DPI to our investors (not just marks).  

We recently announced the formation of a new platform called Pet Resort Hospitality Group in partnership with Trivest, a traditional “buy and build” platform in the pet services space.

What’s your investment thesis and value proposition?

Queens Court is a value investor in private equity, focused on control-oriented transactions and special situations. We approach each investment with an entrepreneur’s heart and an operator’s mindset. We like to say we are old school Graham/Dodd/Buffett value investors that look for businesses that Amazon cannot replace. But moreover, we are operators and entrepreneurs – not only do we provide capital and financial expertise, we provide creativity and deep operating experience to middle market companies so they can maximize their potential.

Our thesis is “the era of easy money is over” and the playbooks that worked in the past decade or so may not work in the next decade. As Howard Marks says, there has been a “Sea Change” — the last 15 years have been a one-way street in terms of a period of low interest rates, low inflation and moderate growth. This has now given way to a period of higher rates, sticky inflation and low growth. 

We like to say we are building “championship winning” businesses that can stand the test of time and have enduring value. This starts with people and culture and having the winner’s mindset. As my mentor Joe Plumeri (former CEO of Wilis, former Vice Chair of First Data) would say great companies have vision, they have purpose, and above all else they have heart.

Any notable differentiators?

We traffic in complex situations. We are not afraid of complexity and special situations including distressed/stressed turnarounds and buying companies through in or out-of-court bankruptcies. Some of our best investments have been in 363 asset purchases through in-court bankruptcies or Article 9 out-of-court restructurings. We often say the best deals are found in situations with some element of the “4-D’s” — Distress, Death, Drama, or Divorce. We specialize in providing creative capital solutions to complex and time of essence transactions.

We operate and get our hands dirty. Queens Court is an “operator-first” investment firm, and we have built companies and organizations at the founder level with entrepreneurial DNA in our heritage. We draw on a 6-point value creation plan in each investment and we have a large operating network of advisors and entrepreneurs. Members of our team, including myself, often take managerial positions in our portfolio companies. It was Buffett who said, “I am a better investor because I am a businessman; and I am a better businessman because I am an investor.”  

We source strategically. You won’t find us participating in auctions. We have built a unique angle around sourcing deals through our operating network and the old-fashioned way: feet on the street and direct outreach. After years of doing this, we have a credible reputation for bringing creative capital solutions to middle market transactions. People know us — and call us first — particularly in difficult/complex or distressed situations.

What are you looking for, and where are you seeing opportunities?

As far as what we are looking for, we’ve not had an issue with deal flow. Finding excellent operators who have the “championship winning” mentality is tough to find. I often spend a significant portion of my week interviewing people for our existing platforms as well as for future platforms.

Right now, we are seeing a lot of opportunities in special situations land — good companies with bad balance sheets or bad cap tables.  It feels like we are just at the beginning of a flood gate of these types of opportunities. 

We are planning to raise Fund 1 and make the transition from being an independent sponsor to being a fund manager. While being an independent sponsor has its advantages, I liken it to going into a fight with “one hand tied behind your back.” We are seeing so many opportunities in today’s market that launching a fund is the next logical evolution of my firm.

What has your experience been like working with Trivest?

We’ve had a great experience working with Trivest. Initially I was skeptical as I didn’t know how Trivest could add value to our platform but they’ve disabused me of that notion. They have helped PRHG across the board from deal structuring, transaction execution, and post-execution portfolio support through PSG. The entire team at Trivest has the right attitude for building category champions.

Bonus Question: can you regale us with an interesting or humorous M&A story?

Ohh, yes. I once traveled to a management meeting to visit a potential target that I was trying to get under LOI. This was early in my journey, so I was a bit nervous. I arrived at the meeting boardroom early and took a seat to get situated.

The management team started to arrive, and I was surprised to see that one of them was accompanied by a pet monkey. The monkey was small and furry, with big brown eyes and a long tail. It was sitting in a cage on the floor next to the Founder. I couldn’t help but stare at the monkey. I had never seen a monkey at a business meeting before. I wondered what the monkey was doing there. Was it just a pet, or did it have some kind of official role? 

The meeting started, and I quickly forgot about the monkey. We discussed the company’s goals for expansion, and I listened carefully to the managers. I was impressed by their knowledge and experience, and I started to feel more confident about the opportunity.

After the meeting, I went up to the Founder and asked him about the monkey. He gestured to the monkey. “This is my pet, Oscar,” he said. “He’s a Member of our Board.”

I raised an eyebrow. “He’s a Board Member?” I asked. “What does that mean?”

“It means that Oscar is a value-added Board Member, he’s here to sit in on our meetings and give us his feedback,” the Founder said. “He’s a very wise monkey, and he always has something insightful to say. If he hisses at you that means he doesn’t like you. You are lucky he didn’t hiss at you.”

I’ve seen a lot in my life, but this was a first. Unfortunately, I didn’t win the deal, but could you imagine the subsequent meetings and Board votes?!