Private equity firms have a pretty straightforward business model: They buy a company, work with the management team to make changes in their operations to maximize efficiencies, which, they hope, leads to increased profits for the company, which can then lead to returns for the private equity firm or a sale to another company that brings in more money than the original firm spent. Like the “holy trinity of capitalism”, private equity can be a tool to help companies create a product or service that brings value for to the lives of their customers and employs workers to create that value in exchange for a wage that offers a quality standard of living.
Not all private equity firms operate using the principles of the holy trinity of capitalism concept, but I know at least one that does, Jacmel Growth Partners. Jacmel is a growth private equity firm that focuses on acquiring and growing mid-sized companies grossing around $5‒$50 million each year. They specialize in family run businesses, specifically those that offer business services to other companies. To date, Jacmel has deployed $45 million into five companies across two platforms.
Jacmel’s founder, Nick Jean-Baptiste, had a long career on Wall Street, where he oversaw over $10 billion in financing private equity transactions. He decided to start his own firm, which he named after the small village in Haiti where his father was born, because he wanted to focus on investing in communities in addition to companies. Jacmel is “anchored to the values of reciprocity and care common in Jacmel village. The firm aims to treat all its partners, investors, and portfolio company employees as members of its community.”
Jacmel has redefined what it means to create a private equity partnership with a company, and takes a different approach with all the stakeholders involved.
Critical to Jacmel’s success is its “Office of Impact,” which supports Jacmel to invest in employees to improve job quality, a company’s bottom line and its overall goodwill in the community when it acquires or invests in a company. The Office of Impact is managed in partnership with my firm, and deploys investment strategies in three areas:
- Wealth Creation: Through the creation of an Option Pool companies put aside a certain percentage of stock in the company for non-executive staff to share. This gives employees greater incentive to perform as well as giving them wealth building opportunities.
- Economic Mobility: To do this companies strive to provide:
– Workforce development: Hiring military service members and returning citizens who worked as civilian support staff
– Education: Providing college classes and professional training to employees
–Career opportunity: Creating advancement opportunities for all employees.
- Equity: companies actively promote:
–Diversity: Recruiting and developing BIPOC (Black, Indigenous, and people of color) executives
–Fair Pay: Addressing institutional bias in pay
–Benefits: Providing equitable benefit solutions for all employees. Offering these benefits to employees of acquired companies has not impacted their bottom line — — it actually has improved it because it facilitated employee retention and growth\ as well as through reimbursements and incentives they receive from workforce development programs.
Despite taking this nontraditional approach to private equity, Jacmel has experienced the same performance level as similar private equity firms. Through its investments, it has created over $90 million in value, with their invested capital growing more than two and a half times within a few years. In addition to these financial metrics, they also track the number of families they have supported through their investments, which currently total over 800 and counting.
Jacmel shows what is possible when we think innovatively — outside standard convention — within an industry. Often what we consider normal or a best practice is just an assumed way of doing things, and doing things differently can help unlock different business models and different ways to generate value. You may not be a private equity investor, but undoubtedly there are standard practices in your industry that can be re-examined to help you do well by doing good.
What are those practices and how can you shift them to find new ways to make money and have an equitable impact in your industry?
Want to explore what you are already doing to create equitable impact and how you can leverage those things to unlock the full potential of your business? Check out The Social Impact Advantage and read on!