Jerry Pence recently founded Adlocis Partners, a private equity firm focused on special situations, after leaving the Pivotal Group, where he had been a managing director responsible for all key aspects of the investment transaction process. Before joining Pivotal Group in 2009, Pence was a partner at Najafi Companies in Phoenix, which he joined after stints with Lehman Brothers, Merrill Lynch, and The Boston Consulting Group.
Pence was born in Mexico City and grew up in Tucson, Arizona. He holds a bachelor’s degree from Yale University and an MBA from Stanford Graduate School of Business. He and his family live in Scottsdale, Arizona.
Q: You’re starting your own firm. Are you working by yourself, or do you have some people with you?
Pence: I’m in the process of recruiting a team. I wanted to depart my previous firm first to finalize the vision and the strategy for my new firm Adlocis Partners. Once I did that, I then put a team together. I hope to have the core team in place within a couple of months.
Q: That’s pretty exciting.
Pence: It’s very, very exciting. It’s just something that has been a long time in the making and dear to me, if you will, because I’ve had an entrepreneurial bug since I was young. I just finally got to the place in my life where I had the experience and where I believe my vision and my strategy are going to differentiate us. I think timing is also opportune, because the likelihood that the supply of special situations—which is going to be my acquisition focus—will pick up over the next year or two is just much higher, I think, than it has been. So it was the combination of the right time for me personally as an entrepreneur, the right time in the cycle of the markets where special situations are likely to pick up, and the right time from the formulation of my vision and my strategy.
Q: Have you always done special situations investing, or did you gravitate into that from something else?
Pence: At the two family offices I’ve been at for the past 13 years, it’s always been opportunistic, which in many ways is synonymous with special situations, whether it was pure value and distressed acquisition all the way up to a traditional special situation like a carve-out or an acquisition of a family-owned business, it’s been a part of my life for 13 years.
Q: What appeals to you about that type of investing as opposed to more mainstream investing?
Pence: What appeals to me is that I can use the skill set that I have, which is much more around leadership development, developing winning cultures, strategy development, and strategy deployment, in the context of a special situation and find hidden value, hidden attributes by which to pick the business and develop the team such that we can create something that wasn’t readily apparent and create it into a unique and superior business. So it’s identifying diamonds in the rough, but ultimately it’s backing teams to create unique businesses rather than just being a traditional restructuring buyer or a growth equity buyer when something already looks good and is performing well.
Q: What have been some of your most gratifying or favorite investments along the way?
Pence: My favorite investments are probably twofold. The original one is the carve-out of Network Solutions from Verisign. That was a deal that we sold in 2007. And then the other favorite deal I have is called Global Capacity, which we acquired out of bankruptcy in 2011 and where I sit on the board of directors. Global Capacity is on the verge of doing great things.
Q: What made those stand out over other deals in which you’ve been involved?
Pence: Network Solutions, for me, was the quintessential example of buying something at a great price, a business with unique assets that wasn’t necessarily the focus of buyers, and creating a great business out of it. The top line went up 2x, 90 percent organically, in a period of 36 months, creating a fantastic exit.
What made Global Capacity stand out is that we bought a business out of bankruptcy, again with a unique future, and we’re creating a disruptive marketplace business model in the data connectivity sector that doesn’t exist today.
Q: Lots of upside there, huh?
Pence: It’s not ready to be sold, but it is a very, very interesting business, for sure.
Q: Can you tell me a little about your background?
Pence: I was born in Mexico City; hence, Spanish as my first language. We moved to Tucson, Arizona, when I was 6, and that’s where I finished high school. I graduated from Yale University. After Yale, I worked on Wall Street, first for Lehman Brothers and then for Merrill Lynch, although at Merrill Lynch I went back to Mexico City to its office there. I was doing Latin American M&A, both with Lehman in New York and Merrill in Mexico City.
After my time with Merrill in Mexico City, I went to get my MBA at Stanford. When I finished Stanford—that was 2001—I went to Los Angeles and worked for the Boston Consulting Group. That’s where my love of strategy was first born. In 2003, I moved back to Arizona, and that’s when I started working for a family office by the name of Najafi Companies. Then in November 2009, I moved to Pivotal Group, which is another family office, where I was for the last 6½ years before I left three weeks ago to form Adlocis Partners.
Q: What brought you back to Arizona? Was it something you wanted to do? Was it just because of opportunity? How did that work?
Pence: It was an opportunity to join a family office getting into the private equity space, but it was also a way to get back to the desert, which is just something that is within me. I love living in the desert.
Q: If you could start your career over, would you do anything differently?
Pence: The answer is no, because I’m a big believer that things happen at the right time with the right people for the right reasons, and therefore it isn’t happenstance what your experience is as you’re ready to experience it. So, I don’t have any regrets in hindsight. I just enjoy how my career is evolving, rather than worrying about what could have been or should have been. I think that I’ve been extremely fortunate how it’s rolled out to date, and I’m more excited about where I am now and am looking forward to the future as well.
Q: What advice do you have for somebody who is either new to the industry or is thinking about getting into the industry?
Pence: My advice is to find the niche in the industry that you’re committed to because it aligns with your personal passion. If you’re able to do that, you’ll generate great results rather than just focusing on the nuts and bolts of the industry itself, either from the financial engineering component to the operational component or to the buy and sell components. It needs to have a deeper meaning than that. You need to have a calling.
I’m a firm believer in the alignment of your core values in life, whether you’re at work or at home, and it shouldn’t be any different.
Q: Who inspires you professionally and personally?
Pence: I think the person who came to mind inspires me both professionally and personally because it touches on the focus of my firm. It’s John Wooten, the former UCLA men’s basketball coach. The reason it’s personal is because of my passion for sports. The reason it’s professional is because of the leader and mentor and coach that he was.
The vision of my firm is to develop world-class leaders. Yes, we’re a private equity firm, and yes, we buy special situations at a fair price. However, we believe 99 percent of the value we create comes post-closing, focusing on leadership development, creating healthy organization, rolling out differentiated strategies, and deploying strategies. John Wooten, as a coach and a mentor and a leader, is the epitome of how you should approach coaching and developing a team with a healthy culture in any sort of context.
Q: What role has your TMA membership played in your career?
Pence: To me, it is the quintessential place to develop the relationships that lead to the kind of acquisition opportunities that I am seeking in terms of special situations. That’s the obvious answer. But it’s also a great place to attain a network that allows me to gauge the pulse of the market, whether it’s at the Distressed Investing Conference or at local events, and more and more as the years go by, simply having the relationships that allow me to pick up the phone to have these kinds of dialogues for invaluable information and invaluable deal flow and invaluable feedback and diligence. It’s a very robust set of benefits that I get from participating in TMA.
Q: How about away from the office? What are you passionate about outside of work?
Pence: First and foremost, family. I have my wife and two kids, a 9-year-old boy and an 8-year-old girl, so I’m increasingly ever busy with all of our family activities in terms of vacations, which are my favorite for spending time together, but also the time I get to spend doing things here in Scottsdale around the kids’ schools and sports and things like that.
It’s rare these days, but when I get a little bit of time, I love playing golf. I used to play a lot more, but I still love it when I get to go out and spend some time with quality people, because to me golf is the means by which to spend time with friends and people you want to get to know versus getting frustrated by something that I don’t practice much.
Q: It’s a tough game to be really good at if you don’t get to practice much, so you just have to resign yourself to the fact that a PGA card is not in your future.
Pence: No, I’m much more focused on the PGA card equivalent in private equity than I am for golf.
Q: What have been some of your favorite spots to go on vacation?
Pence: Our absolute favorite place is the northwest coast of Costa Rica. We go back every year. This will be our sixth year in a row. We spend a couple of weeks down there in a house right on the beach. As my wife says, it’s her happy place. It’s just an amazing, slightly off the beaten path place that is just very outdoor-oriented with activities and relaxing and just a lot of fun. That’s why we keep going back.
But in general, I like traveling to experience new places and cultures and meet new people, whether it’s Europe, Latin America, or wherever.
Q: What might people who only know you in your professional capacity be most surprised to learn about you?
Pence: That I speak three languages. Spanish is my first language, English is my second language, and then Portuguese is my third language.
Q: What items are on your bucket list?
Pence: I have not been able to travel to Asia, so I want to travel and spend time there. I want to play Augusta National. I want to see my kids find their passions, just like I’ve been able to find mine.
Q: Are they already showing some signs?
Pence: Yes, but if they’re like me, that’ll ebb and flow for a long time before they settle in.
Q: Hopefully that’s the case, since they’re just 8 and 9 right now.
Pence: Exactly. I remember when I was 8 and 9, I was going to be either a chef or a firefighter.