Ken Hanau of 3i U.S. Growth Capital

by Vyvyan Tenorio

Perhaps the most interesting part of Ken Hanau’s role as a partner at 3i Group plc’s U.S. Growth Capital arm, based in New York, is, for him, also the most difficult one: maintaining a delicate balance between the entrepreneur and the equity investor in him. It’s an ideological tightrope that he often finds himself walking on the job.

Hanau, 42, joined 3i about 18 months ago to help build the Londonbased firm’s growth capital operations in North America. Given his background, it seemed like a perfect fit. Hanau grew up in Franklin Lakes, N.J., a “Jersey boy,” as he calls himself. His father worked with a corrugated box supplier in the New York area until he struck out on his own in 1956 with $500 in savings. His company, K&H Corrugated Case Corp., based in Walden, N.Y., grew into three plants in the Northeast. The younger Hanau spent summers working on different machines and selling boxes from one industrial park to another.

After he graduated from Amherst College in 1988, Hanau became a CPA with Coopers & Lybrand. When his father developed prostate cancer, Hanau immersed himself in the family business and its myriad issues. “It was a classic situation. My father had all his eggs in one basket, so we had to get him some liquidity via a leveraged recapitalization,” he recalls.

At his father’s encouragement, Hanau went for an M.B.A. at Harvard Business School and was a summer associate at Morgan Stanley. In his second year, as his father’s health worsened, he opted for an independent study program. After finishing in 1993, Hanau returned to Morgan Stanley and stayed for nearly a year. At that point, it became clear that his father had to sell the business. That led to Hanau’s baptism by fire.

His parents and siblings had agonized over a sale for a long time. “It was emotionally challenging. One day my father was gung-ho to sell, then changed his mind another day. That went on for four years,” says Hanau. He understood the wavering. “Entrepreneurs are very protective of their babies. They’re focused not so much on the price but on the right investment partner who can take care of family members and employees.” They sold the business in 1994 to a strategic buyer for a modest sum, but hung on to the real estate—a move that turned out to be shrewd and profitable. His father died six months later.

For Hanau, the experience was invaluable. During the sale process, he got to know one of the potential buyers, private equity firm Weiss, Peck & Greer. He ended up spending eight years there, working in different sectors and focusing on family businesses. He later shifted to Halyard Capital, where he invested in midsize media deals, until moving to 3i.

Tall and lean, Hanau works with partners Robin Marshall and Whitney Bower, seeking out new prospects, particularly those with global aspirations. Married, with three children, he’s on the road a lot, recently flying to Vietnam, with a pit stop in Madrid for a day’s worth of due diligence on a new deal with a Spanish radio group, UR Medios C.A., best known as Union Radio, before flying to Malaga for a  onference.

Among the four deals his team has completed in the past 12 months was a $135 million investment in Mold-Masters Ltd., a Georgetown, Ontario, manufacturer of hot runner systems used in plastic injection molding. The Gellert family, which started the business 44 years ago, has had health issues. CEO Jonathon Fischer is married to a secondgeneration Gellert. He, along with the company, whose roughly $200 million in revenue comes from outside the U.S., wanted to expand. So 3i marshaled their staff in Shanghai and in Germany, where Mold-Masters had large facilities, to help expand there.

Fischer found a reassuring presence in Hanau. “He has unique insights into the psyche of entrepreneurs through his personal experience and can put people at ease in very stressful circumstances,” says Fischer.

Hanau and his team try to make sure that they keep an even keel in their dual role as business partners as well as financial partners. “Part of the real art—and I haven’t always done it well—is balancing the cup-half-full aspects of the entrepreneur’s visions with the cup-half-empty skepticism of the investor,” he says. “It’s the yin and yang of aligning with the founder’s dream, convincing him that you’ll help him realize it, but at the same time making sure we have the right people to execute.”

What if management isn’t right? Hanau admits to “a few mistakes” in the past when he waited too long to make a change. “I’ve had my share, and I’ve learned from them” by spending more time with managers, he adds.

Being on the buy side of the equation requires a different skill set. When it comes to coaxing family owners into partnerships, however, Hanau can always rely on his instincts. What always seems to work, he suggests, is “a good, fair price.”