IVCA Profile Q&A: Mark Kromkowski, Partner at McGuireWoods LLP

IVCA Profile Q&A: Mark Kromkowski, Partner at McGuireWoods LLP

February 3, 2010

CHICAGO - “  The IVCA got a chance to interview Mark Kromkowski on the issues facing his area of expertise, fund consultation, which involves a full range of economic factors.
 
IVCA: Describe your area of expertise at McGuireWoods. What sub category of that knowledge will most likely get you a call from a potential client?
 
Mark Kromkowski: First, thank you for the opportunity to talk with you today and to tell you about McGuireWoods and specifically our recent growth here in Chicago. Additionally, as a firm, we appreciate the work of the IVCA in expanding the network and reach of its members throughout Illinois.
 
The venture capital and private equity transactional group of McGuireWoods has experienced significant growth over the past few years through the merger with the Gordon & Glickson law firm, the acquisition of three private equity partners from Wildman Harrold, and additional of various other lateral partners in Chicago and nationally. We are excited about the expanded corporate capabilities here in Chicago. Craig Culbertson, a long time staple in the Chicago lending community, now serves as our managing partner in Chicago. With respect to what types of services, we handle nearly every type of private equity transaction from buy and sell side acquisitions and divestitures, fund formation and regulatory issues, to technology related issues such as outsourcing agreements. In today's environment, we are getting a variety of calls from investment fund managers, investment bankers and family-owned business looking for sale opportunities.
 
IVCA: As an expert in fund consultation, what issue is most likely at the forefront for Illinois fund activity in 2010?
 
MK: On the fund formation side, we are still seeing an uptick in first time funds, funds exploring the SBIC Program and hybrid funds. We are one of a handful of firms that work with SBIC Funds on a national basis. The critical issue for all funds is whether the institutional investors and family offices will return to the sub-$500M private equity funds class. Early indications for 2010 are positive but funds are still struggling to make their initial closing minimums. Some recent fund closings and anchor investor commitments are hopefully a bell weather for good things to come in 2010 and 2011.
 
IVCA: How much activity are you experiencing in the marketplace for deals? Are there signs that economic factors are creating a willingness to deal again?
 
MK: We have seen deal activity in certain industry sectors remain steady including healthcare, infrastructure and energy. We also have seen some positive developments in the food, farm and select distribution business models. The senior lending market has started to slowly reopen. Finally the divide between seller and purchaser expectations is getting closer and private equity funds are getting more creative in their financing structures.
 
IVCA: One of your upcoming events is 'Healthcare and Life Sciences Investing: The Road to Recovery"".  Who should be attending this event and why would you recommend it?
 
MK: In spite of the politics of Washington and the overall market turmoil, the healthcare industry remained steady in 2009 and transactions will continue to be closed in 2010. Our Healthcare Private Equity Conference has more than 215 registrants and has been a great source of deal flow for our clients, prospects and industry friends. The conference brings together a wide range of companies, strategic purchasers, private equity players and industry experts and because of its format - “ three simultaneous tracts which range from the detailed minutiae of regulatory compliance to the macro-economic analysis of healthcare, there is something for everyone.
 
Please click here for a copy of the agenda and registration form.
 
IVCA: What upcoming economic factors or new rules in 2010 should fund clients prepare for today?
 
MK: You will be regulated by the U.S. Federal Government- ”prepare now.
 
Healthcare regulations are coming whether via Congressional action (massive, large or piecemeal) or via modifications to policies and rules within certain regulatory agencies. Financial service companies (banks, investment funds, hedge funds, broker-dealers, and placement agents) will begin to operate under a new regulatory scheme in 2010.
 
What will it look like? No one knows but we do know that regulated entities need professionals (attorneys, accountants, bankers, consultants, etc) who can operate within a regulatory environment, who have advisors on the ground in Washington, DC and who understand the framework and history of the proposals enacted as well as those rejected or still pending. For example, McGuireWoods Consulting has been active in tracking the so-called Volker Rule which would prevent certain types of financial service companies from investing in investment funds and utilizing propriety investment strategies. In addition, I am member of the ABA's Institutional Investor Committee and of NASBIC, the trade association of SBIC Funds.
 
On a more local front, McGuireWoods was pleased to announce the addition of John Dunn to the firm. John served eight years in Chicago Mayor Richard M. Daley's office, most recently as the Director of Intergovernmental Affairs. Prior to that, he served as the director of the Mayor's Springfield legislative team. As Director of Intergovernmental Affairs, he counseled Mayor Daley as a policy advisor on all legislative and political matters, and served as the liaison between the Mayor and federal, state and local elected officials. He also worked on legislation enabling the O'Hare Airport expansion and public/private partnerships, including the Skyway, Midway Airport and parking meters.
 
IVCA: What are the advantages and disadvantages of being a Midwest based firm?
 
MK: Although we have more than 150 attorneys in Chicago, we have 950 attorneys worldwide including offices in Atlanta, Charlottes, Richmond, Los Angeles, New York and Washington, DC, among others. The primary advantage is the depth and breadth of experience of our attorneys- ”which allow us to better serve our clients. The disadvantage is being on the road and subject to the vagaries of weather delays in Nashville, Minneapolis and LaGuardia to name a recent few from the last two weeks.
 
IVCA: According to your bio page, your educational background includes the study of the ""Great Books Program"". How does the study of literature provide a basis or guide for your what you do today?
 
MK: The Great Books Program at Notre Dame is a mix of the classics, philosophy, Catholic theology and literature. In spite of new technology, self-help books, new financing structures and complex regulatory oversight, human nature has not changed. Humans, although subject to missteps, poor decisions and other frailties, remain intrinsically good and reflect the order of beauty and truth that they are surrounded by, in addition to reflecting both internally and externally that order, beauty and truth. For those wishing to be more pragmatic, you should learn from mistakes - “ but not all of them have to be your mistakes. For those wanting it boiled down to simple rule, ora et labora. I am just answering your question, the readers can look it up!
 
IVCA: There has been a slow and steady uptick from the economic bottom that was felt in 2008 and the first part of 2009. From your perspective, how do you see the economic forecast for 2010?
 
MK: Ora et Labora? I expect a mid-year recovery in most industries and sectors. A handful of high quality and/or niche transactions will be completed before June 30 but many other deals will be delayed because of a combination of issues including delays because of the need for additional due diligence, incomplete pieces of the financing/capital structure and/or gaps on pricing or projections between buyers and sellers. I am optimistic that most industries will have worked through these issues early in 2010 which will facilitate transactions closing in the 3rd and 4th quarters of 2010.