The Spinout Chief: A Conversation with Ridgemont’s COO

Ridgemont Equity Partners’ chief operating officer, Ed Balogh, discusses how he built the operational side of the firm from scratch when the group spun out from Bank of America

Privcap: How did you end up launching Ridgemont out of Bank of America?

Ed Balogh, Ridgemont Equity Partners: Our firm’s genesis within Bank of America and its predecessors, NCNB and NationsBank, dates to 1993. I was a CPA at PriceWaterhouse before joining NationsBank in 1995 to support the firm’s private equity business. I quickly became the controller for several corporate finance and investment banking lines of business, but I really gravitated to the private equity business, Banc of America Capital Investors. I joined BACI in 1998 and later became the CFO. After Bank of America acquired Merrill Lynch, the BACI platform merged with the Merrill Lynch Global Private Equity business. During this time, I became the COO of the combined BAML Capital Partners. That experience served me well, as the former BACI partnership spun out of BAC to form Ridgemont Equity Partners in 2010.

What did that spinout require from you?

Balogh: As the CFO of BACI, my responsibilities were similar to my counterparts at independent private equity firms. As Ridgemont was formed, we felt good about our finance functions, but systems still needed to be implemented. While I managed operational elements during the integration with Merrill Lynch, after the spinout I became a COO in every sense. While I certainly had ideas of my own, I sought advice from our attorneys and my peers at other private equity firms of a similar size. My team and I went about putting into place Ridgemont’s middle and back office. This included the HR department, with a payroll system, a health insurance benefit program, and 401(k) plans. We also implemented online treasury management, travel and entertainment expense reporting, and financial reporting systems.

I wore a general counsel hat as well. While I’m not a lawyer, I am in the weeds with these documents, coordinating with outside counsel. During fundraising, while keeping our senior partners apprised of the negotiations with our LPs, I negotiated all the partnership agreements and side letters. I’m also one of four senior-level members on our valuation committee, which approves all the valuations for our portfolio companies in a certain fund on a quarterly basis.

When we were required to register with the SEC in 2012, I also became our firm’s chief compliance officer. In terms of IT, we use an outsourced service provider that charges by the hour, which by the end of the year adds up to the compensation for a seasoned, if not senior, tech executive. This also eliminates the risk of an in-house CTO not staying abreast of technology changes or leaving the firm.

You don’t outsource your fund administration. How did you build your in-house team?

Balogh: I don’t feel comfortable with a third-party administrator, given the complexity of some of our vehicles. I am also concerned that an outside administrator may have turnover in their staff, which may lead to inconsistent levels of service. We have a great team, and we use an industry-leading financial-reporting-technology platform. Our controller joined us from Bank of America’s tax department when we formed Ridgemont. We later added an assistant controller out of a public accounting firm before we closed our first independent fund in 2012.

In 2013, we continued to institutionalize Ridgemont by hiring a vice president of investor relations. She came to us having had experience at two middle-market firms, and she was instrumental in helping us raise our second fund that we closed at $995M in 2015, up from our debut fund of $735M.