When people think about companies with the potential for tremendous growth, start-ups usually come to mind. In fact, some of the most promising opportunities for growth are hidden in companies that have been doing business for years. Identifying that growth potential – and providing the necessary skills, resources and relationships to unlock it – is where CPP Investments’ growth equity team comes in.
Growth equity, like venture capital and buy-out investing, exists within the world of private equity, where investments are made in companies that are not publicly traded. Venture capital focuses on investing modest amounts in promising start-ups, most of which have enormous growth potential but are not yet turning a profit. Buy-outs usually involve a majority transaction to take a control over a company with an eye towards exiting investments within 4-6 years. Growth equity, meanwhile, lies somewhere in between. Put simply, growth equity involves taking minority stakes in businesses that are poised for transformational growth and providing them with the funds and support to make that growth possible.
“At CPP Investments, we’ve been involved in growth equity transactions for years, even without a formal team dedicated to serving that area,” said Suyi Kim, Senior Managing Director and Global Head of Private Equity. “When we looked across the organization, we recognized that our team of highly-sophisticated investment professionals had all the elements required to build a formal growth equity practice that was truly one-of-a-kind, on a global scale.”
Those elements include the deep sector expertise of team members focused on the key investment themes driving the future; the solid network of relationships nurtured by investment professionals who manage partnerships across geographies and asset classes; and the know-how of operations experts who have experience working with management and guiding companies along their journey towards transformational growth.
“That’s where our comparative advantage really makes a difference,” said Leon Pedersen, Managing Director and head of Growth Equity. “Not only can we utilize all these resources across the organization, we can also offer a long enough time horizon to maximize their impact. Companies can work with us even far beyond IPO, bringing the entire weight of the CPP Investments organization to bear across the business cycle.”
A key aspect of CPP Investments’ growth equity approach is our focus on building direct relationships with promising companies before they need growth capital. Our patient approach allows our team to spend time working with management without any pressure to deploy capital right away. Investing the time and effort before a company needs funding means we can diligence investment opportunities faster and close transactions more efficiently.
“We are playing the long game,” Pedersen adds. “Our reputation as high-quality investor and as stable source of patient, long-term capital is an important one that helps us support our mission, which is maximizing returns without undue risk of loss for the more than 21 million contributors and beneficiaries of the Canada Pension Plan.”