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Lower Midcap European Private Equity Investing

Apr 13, 2023

In this episode of Engaging Alternatives Spotlight, Elana Margulies-Snyderman, Director, Publications, EisnerAmper, speaks with Karen O’Mahony, Managing Partner, PEAL Capital Partners, a female led lower midcap European private equity firm with a focus on diversity and inclusion. Karen shares with us her outlook for investing in lower midcap PE, including the greatest opportunities and challenges, including how the firm integrates ESG. She also shares her experience being a woman investment manager in the industry.


Elana Margulies-Snyderman:Hello, and welcome to the EisnerAmper podcast series. I'm your host, Elana Margulies-Snyderman. And with me today is Karen O'Mahony, managing partner at PEAL Capital Partners, a female led lower mid-cap European private equity firm with a focus on diversity and inclusion. Today, Karen will share with us her outlook for investing in lower midcap PE, including the greatest opportunities and challenges, how the firm integrates ESG and more. Additionally, she will share her experience being a woman manager in the industry. Hi Karen. Thank you so much for being with me today.
Karen O'Mahony:Thanks so much for having me, Elana.

Absolutely. So Karen, to kick off the conversation, tell us a little about the firm and how you got to where you are today.
KOM:Sure. I started my professional life as an associate in Goldman Sachs on the research side, and then I joined a large family office managing their direct and co-investment private equity portfolio. And then I built my way up through there. And then when I became Deputy CIO, I wanted to set up some kind of consulting firm, so the family agreed to back me. They continued to do that today and PEAL was formed, and that was in 2014. So we started as a sort of advisory firm for institutions, family officers on their direct investments.

And then in 2017 we became an outsourced GP. And then finally in 2019, we sort of thought to ourselves, let's move away from being an outsourced GP and let's go for it. Let's raise the fund. It took us about 18 months to get all the approvals that we needed, and we launched very early last year and we've been doing deals since and I've built up a great team.
EMS:Great, Karen. So given your focus on lower mid-cap European private equity, love to hear your general outlook for the space.
KOM:Absolutely. Just to explain, we have a 17 year very strong track record in private equity direct investing. And so our strategy is to reposition companies for growth while creating the management team to reflect the society we live in. So that's crucial to the type of deals that we look at. We target traditional sectors like industrials, business and consumer services, and the challenges that we're seeing in Europe have actually created a very attractive environment for us at deal. So we're able to source deals through our family office network, through our various connections in Europe, and we're getting them at attractive prices.

So leverage has dried up considerably in Europe at the moment, and it's giving us the opportunity to buy companies at reasonable prices. For example, last year we acquired a company called Derma Medical, which is an aesthetic medical training company at 4.2 times EBITDA with no debt and 60% EBITDA margins. So that's a sort of attractive type of acquisitions that we're seeing in Europe, and we're expecting that to continue for the next at least 18 months.
EMS:Very exciting Karen, I know you just mentioned the derma medical example, but I'd love for you to elaborate on some other specific opportunities you see whether in different sectors, industries or whatever else you feel is really intriguing right now.
KOM:I mean, what excites me at the moment on the medical training side is that it's a very lucrative area of the market, and it's also something that can be run on the asset like basis. So as long as you have some form of classroom, which could be a hotel room, you could travel considerably teaching people all around the country or indeed all around the United States.

So I'm going to give you an example. With Derma Medical, we managed to launch it in the US within eight months of acquiring the asset, and we are earning a million dollars I think within a week of launching. So that means we managed to bring in a million dollars worth of cash for courses that we're launching in March of this year, May of this year, et cetera.

So what's great is from a regulatory perspective when you're doing medical training, it's quite easy to move across either states or countries as long as you're adhering to the local regulations. And so this made me think about what other medical training is out there. And so our second deal is related to menopause and hormones because we know that menopause at the moment, both in the United States and across Europe, is something that GPs are dying to learn about that they don't have, I suppose the medical training out there that actually allows them get educated quickly.

So some menopause training programs can last two years and you do three months of solid and research and then another six months of various training, and then you have to do various things in order to achieve a certain accreditation. What we'd like to do is break that mold and offer shorter, lighter courses at the beginning with a view to building up to what's called level seven, which is complete experts in the field. And so hormones and menopause training is what we're doing next, and that requires three acquisitions. And so that's kind of where I think is very exciting for us and there's going to be a core theme in our fund.
EMS:Great, Karen, on the other hand, what are some of the greatest challenges you face and why?
KOM:Greatest challenges and why. I think I started my career after Goldman being a female LP, managing over a billion dollar portfolio and built up a great track record with that. I thought the transition would be easy to running a private equity firm. And what I mean by that, I was always problem solving, always managing efforts, always able to turn assets around, et cetera, and really kind of create assets with manage strong management teams who reflect the society we live in.

So all the themes remain the same. The thing is, as a woman, the industry is made up of long-term capital and long-term relationships. So there are firms aren't fund 5, 6, 7, 8, 9, 10, and it's an emerging knowledge when you're on fund one. The amount of assets available to LPs or to GPs like us are quite small. And then there's North America, GCM Grosvenor for example, is doing an excellent job in the space covering North American GPs, but for European GPs we found that a bit more of a challenge.

So it doesn't mean that funding is dried up, it just means that we're finding it more difficult to raise in this current environment, which is a shame because we're finding very good deals in this current environment. So if I were to give, I don't know, advice to a friend, I mean, it's really sort of bad focusing on the fundraising, sadly before you focus on the strategy and before you focus on building out your team because that's kind of the thing that sort of holds you back as a female led emerging manager, I guess.
EMS:Great. Karen, I know you just briefly touched on this about being a woman investment manager in the industry, and clearly you're such an inspiration for your other peers and other up and coming women, and I'd love for you to share more about this.
KOM:Absolutely. And thank you very much for saying that I'm an inspiration. I feel every day I wake up with a challenge and I jump out of bed because I love 90% of what I do. And this is a small 10% that sometimes it's tricky in a day. But the key is to love what you do and build a great team around you. So my partner Tara Mandal, spent 23 years at JP Morgan, very experienced, started in operations, moved into risk, and people management. And what's interesting is those are skills that in my career as a CIO when as you know investor, I didn't get to have those skills.

So what's great about partnerships and what's great about creating a general partnership is it's exactly that. Find people that have complimentary skills who love to work like you to who get out of bed every morning and love what they do because those are the people that become your friends for life, that also your partners for life.

This is a 10 year game for one fund. You're going to be stuck late nights and everything. So what I would say to you is being a woman in the industry is actually about doing exactly what you love and finding partners that you really want to get out of bed and see every single day. And that's what I love most about this job.
EMS:Karen, we've covered a lot of ground today, so I wanted to see what your future plans are for the firm or if you have any final thoughts you'd like to share with us.
KOM:Our future plans for the firm, it's a really interesting work. We're here for the long term. We have so many ideas, so many disruptives that are ways of managing traditional private equity. I've been very fortunate to have done so many co-investments with phenomenal GPs over the years that I've learned a number of tricks. And what PEAL's job now is to take all of those learnings and create our own specific brands and how we're going to manage things. The operational focus will continue because I think with operational backgrounds, which all of my team have, we can actually excel in turning around businesses, which is something that we really like to do.

So, what I would say is we've got three compelling investment themes at the moment, which is stable business platforms, climate change mitigation and tackling longevity, and those are the areas that we're going to remain in. So I can see us creating a number of funds using those exact themes because we think that's sort of where the future is over a 10, 15 year period.
EMS:Karen, I want to thank you so much for sharing your perspective with our listeners.
KOM:No problem. Thank you so much for having me, Elana. It's been such a pleasure and you're such an inspiration to us all.
EMS:Thank you so much, Karen, and thank you for listening to the EisnerAmper podcast series. Visit for more information on this and host of other topics. And join us for our next I EisnerAmper podcast when we get down to business.

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Elana Margulies-Snyderman

Elana Margulies-Snyderman is an investment industry reporter and writer who develops articles, opinion pieces and original research designed to help illuminate the most challenging issues confronting fund managers and executives.

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