The Bay Street Financial District with the Canadian flag in Toronto on Aug. 5, 2022. While Toronto-based Altas does very few deals, the businesses it backs are often active acquirers.Nathan Denette/The Canadian Press
Last summer, executives at Altas Partners LP held an off-site meeting in Ontario’s cottage country. Their agenda included a debate over whether the private equity fund manager was too conservative in its approach to investing.
Toronto-based Altas was founded 11 years ago, on a strategy of making long-term commitments to companies that are leaders in their fields. By the time of the meeting it had raised $4-billion, but purchased just 10 businesses. Most private equity funds do a deal every few months. At Altas, there were two years – 2016 and 2022 – when the firm didn’t make a single acquisition.
Altas co-founder and chief executive officer Andrew Sheiner said in an interview that he asked colleagues if they believed the fund manager was missing opportunities by being so selective. His partners concluded, unanimously, that patience set their firm apart from rivals, and produced consistently strong performance. The firm decided to stick with its strategy.
On Wednesday, investors endorsed staying the course, as Altas closed a new $4-billion fund, its third. It hit its internal fundraising target at a time when many private equity funds are struggling to bring in money.
The new Altas fund is significantly larger than the firm’s second fund, which raised $3-billion in 2019. The firm’s first fund, in 2012, was $1-billion.
Industry-wide, private equity funds are raising significantly less capital this year than they did in the recent past, when low interest rates and relatively heady valuations in equity markets had investors flocking to alternative assets.
In the first quarter of 2023, private equity funds brought in US$164-billion of new money, down 19 per cent from the same period a year ago, and down 35 per cent from the first quarter of 2021, according to data service Private Equity International.
While Altas does very few deals, the businesses it backs are often active acquirers, drawing on the funds’ cash. Over a little more than a decade, Mr. Sheiner said, companies in the firm’s portfolio have purchased 150 smaller businesses to build scale.
In 2015, Altas and the Caisse de dépôt et placement du Québec invested in optometry chain MyEyeDr when it had 165 outlets. Five years later, the funds’ backing had helped expand the business to 580 clinics, and Altas and the Caisse sold the company to a private equity fund run by Goldman Sachs Group Inc GS-N.
Altas’s most recent acquisition, a $1-billion investment in Denver-based Mercer Advisors, a registered investment adviser, shows where the fund manager spends its time. Mr. Sheiner said the deal was made after Altas spent two years researching the sector and held more than 50 meetings with the company. The transaction is expected to close this fall. Mercer executives and two existing private equity fund backers – Genstar Capital and Oak Hill Capital Partners – will remain investors.
Altas also owns PADI, a global scuba diver training and certification business; Saskatoon-based NSC Minerals, one of North America’s largest road salt suppliers; and insurance broker HUB International.
The three authors of Altas’s go-slow strategy all started their careers at more traditional private equity shops. Mr. Sheiner and co-founder Christopher McElhone both previously worked at Onex Corp. ONEX-T, and the firm’s third founder, Scott Werry, is a veteran of Providence Equity Partners. Altas now has 11 partners and a total head count of 60.
Altas has tried to differentiate itself from rivals by offering managers of the businesses it owns opportunities to work with experienced CEOs on the fund manager’s advisory board. Altas’s chair is Kathleen Taylor, who is also chair of Royal Bank of Canada RY-T and former CEO of Four Seasons and Resorts. Its board also includes former Rogers Communications Inc. RCI-B-T CEO Joe Natale and former McKinsey & Co. global managing partner Dominic Barton, Canada’s former ambassador to China.