Lincolnshire’s Deal Hunters

Everyone in the private equity industry knows that sustaining deal flow is harder than ever. Some firms rely solely on investment bankers, others cold call, and others a combination of the two.

At Lincolnshire Management, a team of dedicated “sourcing” professionals calls on potential target companies. What’s significant is that it’s not a group slapped together in haste—the group was formed almost 26 years ago.

“Part of the thinking is that you have to source on a geographic basis,” says T. J. Maloney, Lincolnshire’s president. “Deals that you’ll see on the West Coast don’t tend to come to the East Coast. Sometimes you’ll find that businesses in the Midwest are not particularly interested in talking to financial people in New York, but they are comfortable with fellow Midwesterners. The same is true for the Southeast.” To address those regional preferences, Lincolnshire staffs satellite offices in Atlanta, Chicago, and Los Angeles.

“We have a number of Europeans in our New York office that cover different parts of Europe and source deals there as well,” says Maloney.

In Maloney’s view, the structure puts the firm in a position to find strong investment opportunities and a macro-view. “We’re generally looking at somewhere between 700 and 1,000 opportunities a year,” he says. “We know we never see all the opportunities that are out there, but we think calling companies makes us better investors and gives us a leg up in terms of finding a good opportunity in a particular sector. When we see one particular industry suddenly putting 10 or 12 businesses for sale, we might say, ‘Maybe something is going on in that industry that should make us a little skeptical.’”

It’s an approach that appears to be bearing fruit. The firm deployed more capital in 2012 than in its first 15 years of existence, including acquisitions of firms such as PADI, True Temper Sports Inc., and the National Pen Company. “We think it’s a good time to put out capital,” says Maloney. “We see the economy slowly recovering—and with slow recoveries, you don’t want to invest early. You want to invest late. We think that we have gotten the timing right. It’ll be a few years before we’ll know if that assumption is correct, but that’s our belief.”

The firm’s record is strong. In 2012, Oliver Gottschlag, a professor of management strategy at HEC in Paris, teamed with Dow Jones to determine the best-performing private equity firm of the past 10 years. They included firms that had raised at least two funds during the period with aggregate capital exceeding $500 million.

Lincolnshire ranked fifth.