Christian goes with the flow

Jeff Christian pores over the details of human beings the way a gambling addict might scrutinize the statistics of racing horses – pick the right one and you could stand to make a handsome gain.

He parlayed his talent at pairing people with companies into the creation of executive search giant Christian & Timbers. Now, Christian has turned his energies to the private equity industry, a market in which he says he has found ?significant inefficiencies in the way firms source deals.

From his long-time base in Cleveland, Ohio, Christian has formed Jeff Christian & Company as an engine for delivering investment opportunities to private equity clients. The firm already has three unnamed clients, although Jeff Christian & Co. has not yet been officially unveiled.

When asked what separates the business model of Jeff Christian & Co. from that of an executive search firm, Christian says,?We leverage information in a similar manner to search firms, but we're not in that business.?

Christian says his new venture researches industry sectors favored by clients and identifies ?backable CEOs and investment opportunities within those sectors. He says that traditional search firms find people to work at companies already identified by private equity firms. Jeff Christian & Co. claims to provide a stream of ready-to-invest opportunities, with the concept and CEO (and often the company) pre-identified.

?Our average is three to seven deals and three to seven backable CEOs per week in a specific market segment, says Christian of his firm's deal flow generation for clients, adding,?very few firms have the infrastructure to respond to this number.?

Christian's background shows enthusiasm for investing, company creation and CEO seduction -three skills that seem well suited for his new venture. While CEO of Christian & Timbers in the late 1980s, he founded Technology Ventures, a merchant bank that counts among its successes Thermoscan, an instant thermometer, and Interplaq, an innovative toothbrush

Four years ago, he also raised a $44 million venture fund of funds called C&T Access Ventures that invested in client deals.

?I've long been fascinated by the art and science of deal making, says Christian.

As he stepped back from his responsibilities at Christian & Timbers, Christian began studying the way that private equity firms source deals. He says he built 100 case studies that included data on how each deal was found and how they turned out. Christian says he determined ?most deals are made by happenstance. Private equity firms tend to find people through networking and good ol' boy channels, few of which have specific processes around them.?

Private equity firms typically work through networks of deal intermediaries, including investment banks, business brokers and sometimes head-hunters to source opportunities. Of course, the most sought-after type of deal is the proprietary deal, which means a firm has found its way to a good investment opportunity on an exclusive basis and without price-inflating competition from other investors. In recent years private equity firms have taken great pains to demonstrate to LPs that their deal networks are ?differentiated and therefore more likely to yield above-average investment results. Christian claims few firms have the resources to consistently isolate proprietary investment situations.

Of the handful of private equity firms that employ cold-calling programs to locate willing and successful companies, Christian says this approach ?doesn't necessarily yield the best results, but more often the people who respond the quickest.?

Naturally, Christian does not want to go into great detail about his ?proprietary processes for feeding deals to clients. It involves his team's ?auto-mated, ?bottom-up? analysis of a high percentage of the companies and people in a given sector, followed by an initial phone call from Christian himself, a walking-and-talking brand thanks to the high profile of Christian & Timbers, a company in which Christian retains a minority stake.

Jeff Christian & Company will focus on deals in the $100 million to $2 billion range. The end results supplied to clients typically come in the form of a public company (often with a talented CEO) that has various reasons for going private, says Christ-ian. Often an end result is ?a CEO sitting on a beach somewhere or a division head who wants to build his or her own company.

Christian likes deal making, but he isn't pursuing this new venture purely for fun. Clients must first pay a retainer fee of between $50,000 and $500,000 per month, an amount that is then deducted from a success fee, which, as with investment banks, is a percentage of the enterprise value of a completed deal. Christian plans to invest alongside clients in every deal.

Based on the initial reactions of his three private equity clients, Christian is confident that future customers will not shy from his pricing model. ?Usually within 30 days a client wants to expand our services into other industry segments, he says.

As a related business, Jeff Christian & Company is building an infrastructure whereby professional services firms – law firms accounting firms, executive search firms – can flow opportunities through Christian's shop and be certain of getting paid in the event of a successful outcome.

If Christian has his way the private equity firms that once bragged about proprietary deal flow will have to settle for putting the phrase ?Cleveland deal flow in their PPMs.