Private Equity in Chicago is often overshadowed by its bigger, flashier cousins in New York, but it shouldn’t be. PE continues to be a thriving segment of this region’s economy, according to a recent profile by TheDeal. It’s just a different style of private equity, more reflective of the region.
“People often talk about Midwest values. I think you find that inherent in Chicago-based private equity funds. It’s a different value set,” says Ward McNally, co-founder and managing partner of McNally Capital LLC, quoted in the article. “There’s more willingness [in Chicago private equity] to hold on to something and let it ride, as opposed to taking on an investment in search of a quick win.”
Chicago private equity firms also tend to focus more on the middle market, versus the mega-sized deals favored by New York firms, says University of Chicago Booth School of Business professor Steven Kaplan.
“Midwest private equity funds really focus on operational improvements as opposed to financial improvements,” said Maura O’Hara, who heads the Illinois Venture Capital Association. “There’s a belief that there’s more opportunity for that in the middle market.”
However, there’s a generational shift taking place today as some of the region’s founding veterans are nearing retirement and younger principals with no ties to the region’s original private equity firms are taking up leadership positions. Insiders says the next generation in Chicago will come from existing private equity firms, not financial institutions spawning private equity firms as they did 20 years ago.
“You used to see bankers who covered private equity migrate to [private equity]. You don’t see as many people taking that path,” says Christopher Williams, senior managing director and co-founder of Madison Capital Funding LLC. “Now you see private equity pull the smart kids out of Midwest schools, train them for two years, teach them modeling, boot them out to grad school. Some are going to come back.”
TheDeal traces the history of private equity in Chicago going back over half-a-century. It’s a useful snapshot for anyone pursuing a private equity job in the region. Are you exploring private equity opportunities in regional centers like Chicago? Add your comments below.
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