Jeff Tannenbaum Bets on Kinder Capitalism, Even for LBOs

Embedding social duty into a company’s arranging documents has in some cases been seen as dangerous, but private equity leader and hedge fund founder Jeff Tannenbaum is wagering it is the future.

Tannenbaum’s firm, Titan Grove Holdings, which focuses on sustainable business, said Tuesday that it offered wise city telecoms business Modus to Denver-based private equity firm Bow River Holdings.

While regards to the offer weren’t disclosed, Bow River prepares to maintain Modus’s B Corp classification as part of the acquisition– a sign that public advantage corporations can keep that organizing structure as they grow.

B Corps permit companies to lawfully pursue social outcomes at the cost of profit– essentially the embodiment of stakeholder capitalism in Delaware law. A business that arranges as a B Corp can be sued by shareholders if it does not uphold the interests of broad stakeholders, however, investors can’t sue if a company picks a social or ecological objective that comes at the expense of revenues. To get accredited as a B Corp, businesses are audited regularly to show that they are thinking about social and environmental outcomes.

For the 57-year-old Tannenbaum, who dealt with KKR & & Co.’s Jerry Kohlberg as the personal equity market was beginning and after that originated the hybrid hedge fund-private equity company model at Fir Tree Inc., B Corps represent the next big thing.

“I believe the B Corp movement is the ideal course forward for industrialism,” Tannenbaum said in an interview. The business “tends to be much better run, bring in much better staff members and, in our case, have margins that are greater than their rivals,” he stated.

Tannenbaum said public investors are broadly not familiar with what the designation even suggests. When they are thinking about B Corps, they frequently think about Unilever NV’s Ben & & Jerry’s and Seventh Generation systems, and Etsy, which was a B Corp when it went public before dropping the designation.

Now there are some proof points that show advantage corporations are becoming an appropriate possession class, Tannenbaum stated. Lemonade Inc., the socially-conscious online house insurance service provider, skyrocketed about 86% in its market launching while maintaining its B Corp status. Worldwide food conglomerate Danone SA has been turning itself into the world’s most significant B Corp one country at a time.

Today, there are more than 3,500 B Corps worldwide, including 14 that are publicly traded, according to B Laboratory, which licenses the business’ status.

“To me, it’s not unlike where ESG investing was five years earlier,” Tannenbaum stated. As bigger quantities of capital are managed by financiers that have social or sustainability required, B Corps are most likely to end up being much more appealing, he said.

“I could see half of the personal equity and venture capital-backed services over the next five years be B Corps,” Tannenbaum stated. “B Corps are quickly becoming the location where the next generation of workers wishes to work.”

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