An independent investment firm started by a pair of Western Michigan University professors is making big strides in its first year of operations.
Doug Lepisto and Derrick McIver — associate professors of management and co-directors of the Center for Principled Leadership and Business Strategy at the Haworth College of Business at WMU — are co-managing partners of Sleeping Giant Capital, a private equity firm they co-founded in August that “operates at the intersection of investment management and executive education,” which the Business Journal first reported on in September.
Sleeping Giant Capital is targeting $50 million with the aim of generating economic, social and educational returns in West Michigan through acquisition of small businesses. The fund will take equity positions in companies generating $3 million to $30 million in revenue and transition a new owner-operator into leadership of the company.
The fund will pursue at least two acquisitions per year, with 80% of acquisitions located in West Michigan, and a portion of the profits from acquired companies will be distributed by Sleeping Giant Capital back to the Haworth College of Business to maintain and expand the Center for Principled Leadership and Business Strategy.
The unusual aspect of the firm is that McIver and Lepisto are training many of the aspiring owner-operators they will invest in through Acquire, their new educational program at the center they direct at Western.
The critical issue Lepisto and McIver are seeking to address through their training course is that the transition of business ownership — a burgeoning trend as the baby boomer generation retires — requires a pipeline of talented future owner-operators that is currently underdeveloped. Acquire, which is open to MBA students as well as experienced professionals, is an innovative, digitally enhanced program that will seek to fill the gap by educating aspiring owner-operators on sourcing, analyzing, acquiring and leading small businesses.
“We want to be able to provide a transformational opportunity for experienced professionals to show them a third career path, that they don’t need to climb up a big company or start a company, but that there’s this other path, which is that they can go out and acquire a company and become the CEO,” Lepisto said. “We find that there’s tremendous interest around that, as far as entrepreneurship and to be a CEO of a company, and there are a lot of folks who have the experience, the talent and the motivation to be able to do that. We want to be able to show them that pathway.”
The course consists of personal exploration to find out whether acquisitions are the right fit for each participant, followed by education on the deal process and growing a business post-acquisition. McIver and Lepisto lead the class, and they also bring in bankers, lawyers, accountants and private equity investors to talk about their experiences, tactics and lessons learned.
Graduates of the training program are eligible to apply for a competitive process in which they are personally mentored by executives and backed by capital to source and acquire a company.
McIver and Lepisto ran their first Acquire cohort of 20 participants in the winter/spring semester. A new cohort begins this fall and had about 40 registrants and counting as of mid-June. More information is available at wmich.edu/leadershipcenter/acquire.
The co-founders of Sleeping Giant have been busy since August. After building out the tools and systems needed to operate their firm, they began fundraising and had their first close of $21 million in March. Then, they made their first investment — an undisclosed sum to Michael Abdella, a Flint native, 2011 graduate of WMU and founder of Mauve Capital Partners, to back his acquisition of LineDrive in late April. Abdella became CEO of LineDrive on May 1.
LineDrive is an Itasca, Illinois-based industrial sales company that specializes in PPE and other equipment that aids in facility productivity.
Michael Abdella Courtesy Mark Bugnaski, Western Michigan University
“I looked at a lot of different organizations over the last two years as I was considering acquiring a business,” Abdella said. “There were two main things that I was seeking: personal fit and the culture of the organization. The LineDrive team is incredibly skilled, and this company is essentially a talent organization with success tied directly to how well talent is managed, supported and developed. The company is already a thought leader in the industrial sales space, and that was very attractive to me in terms of the potential to grow the business — the company has distinct competitive advantages.”
Abdella said his eventual goal is to grow the company to two to three times its current size.
Lepisto said Abdella is a “hungry, talented, experienced young leader,” and he and McIver were excited about his ambition, skill set, investment thesis and commitment to grow the company in a principled way, which made him an excellent fit for Sleeping Giant’s first investment.
Several other candidates have now applied for funding from Sleeping Giant, and the managing partners are working to determine which applicants to move forward with.
Sleeping Giant also has secured an accelerator space in downtown Kalamazoo to train owner-operators that likely will open by late August or early September, the partners said.
Lepisto said one of the reasons Sleeping Giant Capital exists is to help future West Michigan-based owner-operators acquire companies that otherwise might be at risk of being purchased by non-local investors and moved overseas, so that capital stays in this region and helps it to flourish.
“There’s not only a tremendous opportunity on the investment side, but it can increase the health of our West Michigan community that’s from Grand Rapids down through Kalamazoo,” he said. “If people mobilize around this concept, it’s creating benefit financially for investors, it’s creating educational returns for Western — we have great educational opportunities that we’re going to be integrating into some of our undergraduate programs, and there’s a really cool virtuous cycle there — (and) then there’s also that community impact piece that we’re hoping to be able to contribute to.”
More information about Sleeping Giant and its investments is available at sleepinggiantcapital.com or by contacting McIver at firstname.lastname@example.org or Lepisto at email@example.com.