Industry Q&A – Marc Cooper with Sash Rentala – July 2022

Earlier this month I sat down with Sash Rentala, Managing Director and Head of Financial Sponsors at Solomon Partners. Sash and his team work closely with Private Equity firms, which had their most active year in history in 2021. We talked about developing our Financial Sponsors group, expanding relationships with the PE community, his outlook for private equity M&A, and how his experience in the Navy helped prepare him for his current role.

1)     This August marks your 2-year anniversary at Solomon Partners. What drew you to the firm?

Solomon’s collaborative culture and growth mindset attracted me to the firm. I was also looking for an established M&A boutique where the bankers were known for being industry experts and providing trusted advice. I felt that a firm with that mix of attributes would provide a solid base for developing a market-leading private equity platform.

Over the past two years, we have implemented the key infrastructure to successfully target private equity opportunities. Also, the Solomon platform has attracted talented industry bankers, and as a result we’ve added key PE-facing verticals including Healthcare and Business Services. This momentum is continuing and we will be aggressively adding other industry and product teams targeting our private equity client base.

2)     Expanding our services is an important mission for the firm, and having you develop our Financial Sponsors group is a major part of that strategy. How do you view the group’s role in supporting other sectors?

Having best-in-class industry sector knowledge and advisory execution is the minimum admission fee in order to participate in the hyper-competitive private equity market. On top of that, PE firms want to feel that investment banks care about building a long-term relationship and are not just chasing an individual short-term transaction. The industry has evolved significantly over the past 10 years and the use of data analytics and relationship tracking has become de rigueur for evaluating and ranking bankers’ best relationships.

At Solomon, we are also using data analytics tools to help build trust and commitment with our best private equity relationships to help increase our win rate and drive efficiency on the platform. Solomon’s Financial Sponsors team takes a tailored approach with each industry and product banker to help develop their private equity pipelines. It’s not a one-size-fits-all, cookie-cutter process and we strive to tailor our help based on each individual and group’s needs.

3)     Given the recent market volatility, M&A deal volume has slowed relative to 2021. What’s your outlook for the remainder of 2022 and beyond?

Lower interest rates have provided incredible tailwinds for PE for the past decade. The availability of historically low credit has generated very solid returns for alternative, illiquid capital including venture capital, direct lending, structured credit and traditional LBO funds. This has in turn attracted trillions in capital from limited partners.

2021 was a record year and I think everyone believed trying to exceed those results in 2022 was going to be challenging. With the Fed aggressively increasing interest rates, the markets are and will continue to adjust. So, I think we are in a consolidation phase of the market where investors are trying to figure out where this market settles out, and therefore, I think overall transaction volumes will decline. On the flip side, deals that get done over the next couple of years at potentially lower valuations will provide excellent returns for private equity.

Last year was also a record year for fundraising, and there is still significant dry powder available. I think, when we look back, these vintage funds will be some of the best performing relative to other years.

4)     How can private equity firms help position themselves and strengthen their relationship with Solomon?

Unlike other investment banks, our private equity effort is relatively new and we are starting with a clean slate with regard to which firms our best, recurring relationships will be with. I have to say, we have received so much positive receptivity from the PE community. Funds that we had prior relationships with along with funds that we have just begun to develop connectivity with are leaning in and helping us get off the ground.

I personally feel very loyal and committed to strengthening those early relationships. Also, as we continue to add new bankers to the platform and become relevant to other funds, we will look to build out and expand our connectivity. Building out a trusted relationship takes time and our objective is to build connectivity at all levels with our core relationships. Good things happen when you focus on the fundamentals.

5)     You served as a Lieutenant in the US Navy prior to starting your 20+ year tenure as an investment banker. How did that experience help you career-wise?

My dad was a big influence on me and was the first person in our family to come to the US back in the 70s. He had six brothers and sisters raised by a mom who was a widower. He worked hard here and achieved the American dream and sponsored three generations of my family to come to the US. He was very patriotic and always encouraged my sister and me to serve our country in some manner.

I was an engineering and bridge officer on a ship based in Japan and served a three-year deployment with three tours in the Persian Gulf. It was by far the hardest job I ever had working at a very high operational level and being responsible for 25 men in my division at a very young age. I certainly think my military experience provided a great perspective on how to build and manage teams and also deal with stressful situations.