Written by Parabellum Investments
25 Feb
A management talent shortage risks suffocating growth in the US middle market this year – and may lead to some overconfident mid-market firms going bust as they ramp up spending and hiring without clear commercial plans, warns leading mid-market private equity investor Rami Cassis.
The warning comes fast on the heels of bullish predictions that the US economy – and the mid-market specifically – will experience buoyant growth over the coming 12 months, driven by Trump’s bonfire of regulations and tax-cutting agenda.
Having operated in the mid-market for more than a decade, Cassis is founder and CEO of Parabellum Investments, a privately-owned buy-out house that takes majority positions in global mid-market firms. In recent years, Parabellum has made a number of acquisitions in the pharmaceutical services, fintech, and risk management advisory sectors. Parabellum’s portfolio of companies employs more than 1,000 people globally.
Cassis believes that mid-market companies in the US may not be able to fully capture the expected growth because of their relative lack of management talent. A lack of commercial awareness, proper budgeting know-how, and forward planning experience in the management rungs of mid-market firms could, Cassis argues, lead to them missing opportunities, overcommitting resources to poorly thought through plans, or overhiring as they try to tap into demand.
He adds that many US mid-market firms are currently caught in the throes of “irrational exuberance”, expecting high levels of growth without a concrete, properly budgeted plan to tap this demand. The intervention follows recent research from Catalysis Advisory that private equity investors now attribute two-thirds of investment returns to the quality of the management teams within their portfolio firms.
Rami Cassis, CEO at Parabellum Investments, said: “The near-term US economic picture is strong – but this risks lulling mid-market firms into a false sense of security if they do not have the management talent to execute on their growth ambitions.
“There is a degree of irrational exuberance in the market – with too many mid-market firms believing that they will be able to notch up double-digit growth without proper planning or budgeting. I think there is a real risk that some mid-market firms will overcommit on investment or hiring and find themselves short of cash flow in 12 months.
“This talks directly to the relative lack of management talent in the mid-market. The mid-market in the US is starved of top-quality, experienced management talent, and it is not difficult to find leaders in the mid-market who have never pulled together proper budgets or forecasts. This is something that I have called out repeatedly over recent years, but the risks are much higher in a buoyant economy, where market enthusiasm is infectious and dangerous.
“The lack of management talent is not something that I think most mid-market firms can solve themselves. It is much too difficult, not to say expensive, for mid-cap players to attract top corporate talent. The quickest, surest solution is to onboard an experienced private equity partner that can provide the management team with the hands-on support, guidance, and experience that they cannot tap into internally.”
About Rami Cassis
Rami Cassis is an international growth investor and CEO of Parabellum Investments. In 2012, he founded Parabellum Investments, his family office, which invests his own capital to acquire, build, and grow businesses, with a focus on the technology and life sciences sectors. He usually seeks to take a controlling position in his investments, and he has led complex transactions in every continent except Latin America. Known for his hands-on approach, he usually acts as Executive Chairman, although he sometimes steps in as interim CEO. He has a robust background in business operations, having worked in leadership positions at both Schlumberger and Atos. Further information can be found at www.ramicassis.com.
About Parabellum Investments
Parabellum Investments is a family office, deploying its capital to acquire companies which can be located anywhere in the world. Under the leadership of founder and CEO, Rami Cassis, Parabellum Investments has a strong track record of growing companies operating within various sectors, including enterprise software, business and IT services, and pharmaceuticals and life sciences. Further information can be found at www.parabelluminvestments.com.
