Building a $5.5B Mid-Market Private Equity Firm: Brent Belzberg, Founder of Torquest Partners

My Guest

My guest today is Brent Belzberg, Founder and Senior Managing Partner of TorQuest, a middle market private equity firm that he founded in 2002 that has since grown to ~$5.5B in assets under management.

Outside of TorQuest, Brent serves as a Director of The Sinai Health System, having previously acted as Chair. He is also a member of the Investment Advisory Committee of the University of Toronto. Brent’s previous outside directorships include CIBC, O&Y REIT and Four Seasons Hotels.

In 2018, Brent was appointed as a Member of the Order of Canada, Canada’s highest civilian honour, for his work as a business leader and philanthropist. He also received Queen Elizabeth II’s Platinum Jubilee Medal in 2023 for his significant contribution to Canada and the province of Alberta.

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Building a $5.5B Mid-Market Private Equity Firm: Brent Belzberg, Founder of Torquest Partners In The Trenches

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Questions Asked

  • Please tell us about the first Torquest fund that you raised in 2002

  • Why is it that most GPs tend to invest their funds faster than the 5 years that they are typically allotted?

  • Was raising a second fund always a given? Or was it contingent upon what ended up happening with Fund I?

  • For Fund II, why did you decide to raise less money than was actually offered to you by LPs?

  • What were some of your most memorable mistakes from Fund I & II?

  • Please describe the tension between raising larger and larger funds over time, while still remaining within your area of focus in the middle-market. How can one do both simultaneously?

  • Have you ever considered simply raising the same amount of capital from fund to fund as opposed to always getting bigger? Why don’t any GPs seem to pursue this strategy?

  • To what extent did you ever struggle with sharing carried interest (that used to be exclusively yours) with your team members as your firm grew?

  • As PE firms grow, decision making authority gets dispersed well beyond the founder who presumably made all of the investment decisions in the early days. To what extent did you ever struggle with relinquishing this type of control?

  • If one of your team members advocates strongly for making an investment, buy you don’t personally think that the firm should invest, what do you do?

  • As a firm grows, do all of the steps and committees and people increase the quality of the decisions being made relative to when it was just you making them in Fund I?

  • If I were to randomly select 100 middle-market PE funds raised over the past 30 years, what portion of their returns do you think might be attributable to the skills and abilities of the GP? And what portion might be attributable simply to the vintage of the fund?

  • How do you think about timing the market, if at all, with respect to raising a new fund?

  • If 40-year old Brent Belzberg was magically transported into September of 2023, would he still start a middle-market private equity firm? Why or why not?

  • What have you learned about selecting, managing, and communicating with your LPs? How much should an emerging fund manager care about where their money is coming from?

  • If you were raising a hypothetical $100 fund, would you rather have 5 LPs at $20 each, or 20 LPs at $5 each?

  • Have you developed any like generalizable rules or heuristics about investing that you now lean on when making investment decisions?

  • When making investment decisions over the years, what has been the greater source of mistakes for you: Over-thinking, or under-thinking? Why?

  • What have you learned over the years related to experienced CEOs running your portfolio companies versus first-time CEOs doing the same? Are there businesses or industries that naturally lend themselves towards one type of leader but not the other?

  • Does TorQuest have a “playbook”, formal or informal, that you tend to execute on post-close? What are some other more common changes or additions within that that playbook?

  • What is your experience with post-close 100-Day plans? How often do you actually execute on them versus not?

  • On average, what role does pricing tend to play in your 100 Day plans?

  • What do margins tend to do most often in the 1-2 years after acquiring a company? Why?

  • What are some lessons that you’ve learned over the years about both the merits and the risks of pursuing an M&A-based growth strategy?

  • Torquest’s portfolio doesn’t contain many software or technology investments. Is this a deliberate decision, or has it just kind of worked out that way? Is it becoming harder given that software and technology companies are representing a greater percentage of North American GDP?

  • What role does valuation play, if any, in your decision making process to be lighter-touch on software and technology investments?

  • Though all of the following terms describe you in some way, which one do you think best describes you?: Founder, entrepreneur, investor, operator, or business builder

  • What is the primary source of the personal connection that you make with the founders of the companies that you acquire?

  • We’re all going to exit from our business in one way, shape, or form one day. What does Brent Belzberg look and feel like when he is no longer with TorQuest?

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