Exploring the “wealth creation” business through the Ziad Abdelnour’s experience and his company Blackhawk Partners Please introduce yourself, your professional career and your company.
I was born in Beirut, Lebanon in the 60s. Spent my early years in Lebanon; my teen age years in France and since 1982 in the US.
Since 1985, I have been involved in over 125 transactions totaling over $30 billion in the investment banking, high yield bond and distressed debt markets and have been widely recognized for playing an integral role in the global capital markets.
Before founding Blackhawk Partners, Inc. in 2004, I held numerous senior positions with a number of Wall Street firms including Drexel Burnham Lambert's High Yield Bond Department where my responsibilities included investing, financing and restructuring over 100 companies spanning the industrial, logistics, consumer and manufacturing industries both in the US as well as in emerging markets.
On a more personal level, I am Founder and President of the US Committee for a Free Lebanon, Former President of the Arab Bankers Association of North America, Member of the Board of Governors of the Middle East Forum and Founding Member of the Financial Policy Forum; a lobbying organization whose prime mandate is to lobby members of Congress on ways and means of bridging the gap between Washington DC and Wall Street.
I enjoy an American and Lebanese dual citizenship and earned an MBA in Financial Engineering from the Wharton School at the University of Pennsylvania and a BS in Economics summa cum laude from the American University of Beirut. I am a regular panelist and speaker on private equity and venture capital topics at industry conferences nationwide and a business angel investor in over a dozen ventures; both in the US and abroad.
Blackhawk Partners, Inc. is one of the world’s most reliable traders and suppliers of a wide range of commodities and financial instruments to industrial and financial consumers globally.
Our role is to be a trustworthy and competitive partner to businesses in the segments of the market which we serve and to support these businesses as they expand and develop.
Our customers around the world rely upon our established global network of operations as a source of Metals and Minerals, Crude Oil and Oil Products and Trading Platform Products.
These products originate either from Blackhawk Partners directly or indirectly owned assets, or are secured by Blackhawk from third parties.
We believe that success in commodities trading comes through genuine long-term commitment to all elements in the production and trading process. This commitment involves the long-term ownership and operation of key physical assets such as mines and storage facilities, and long-term support of the communities in which we operate.
Blackhawk Partners is also a merchant bank that serves as both an advisor to and an investor in its clients.
Our main role is to act as lead equity investor in “cash flow generating” management-led buyouts, strategic equity investments, equity private placements, consolidations and buildups, along with growth capital financings throughout the asset class categories. We are industry agnostic and do invest globally as long as we are dealing with the right “operators”.
Unlike many private family offices, venture groups and other hedge funds, we do not generally back ideas, start-up situations, private equity or other hedge funds, non-profit organizations, or Greenfield opportunities. We do though work aggressively with higher quality senior secured debt, distressed debt and different forms of credit-related investments for corporations wanting to make an acquisition or otherwise can’t access the “Capital Markets” along with the traditional buyouts, recapitalizations and growth and acquisition capital financings.
Since its inception in 2004, Blackhawk Partners, Inc. has advised on deals representing over $1.1 billion in value, made 18 investments totaling approximately $148 million with a realized return of $422 million (unrealized value of $37 million) and traded over $13 billion worth of commodities.
New York City is a major hub for private equity activity. So, as a New York Company, what’s your point of view about the local and international scenario of private equity and venture capital?
I think there’ll definitely be a shakeout in the private equity industry over the next 5-10 years, in large part because there’ll be differential performance. Also, as the size of their portfolios have significantly shrunk, public pension funds and other asset managers will no longer have their alternative asset category growing as rapidly. In some cases it’ll be shrinking, along with all of their total assets, and they’ll have to be much more selective in terms of who they give money to. As individual asset allocators become more risk averse they’ll go with firms with very good performance; not necessarily the best branded ones. Track record is and will be more important than ever. And we’re experiencing that already.
As to returns, they are depressed not because of the supply and demand for money per se. Returns in private equity are basically keyed to a spread over the S&P and most people may well have noticed that since 1997 there has been no return to the S&P. In fact it has been strongly negative. So in a world where the average equity investor has received no return, to not expect a diminished return from private equity would be absurd.
When returns on the S&P were for 5 years compounding around 18%, the return on private equity went up to a huge spread. Most good firms were making 40-50% compounded on a gross basis so that would be more than 2000-3000 basis points over the S&P. If the S&P is flat, to be earning 1000 basis points over would be a 10% return and you’d say that that is gravely diminished. It’s still 1000 points over. If you were 2000 points over, that would be 20% and that would be not dissimilar in terms of its spread to the S&P in the good times. So I think that people who believe that the private equity business is an absolute return business per se are wrong. As much as they would like to be right, they are wrong.
The article continues to International Alternative Investment Review - n.1, 2010