Accessing the Pipeline, a brand new podcast from McGuireWoods, features the voices of Black professionals in private equity and finance. Hosted by Rubin Pusha III, each episode welcomes special guests to offer insight into the world of capital and deal making, while also striving to develop relationships among Black professionals in the private equity industry. 

Rubin kicks off this series with guest Chelsea Celistan, vice president at Providence Equity Partners, to talk about how she sets herself apart as one of few Black women on a private equity investment team and get her perspective on investing more broadly and the value of sector specialization. Chelsea shares with listeners what she believes have been the crucial ingredients to her success: her grit, internal motivation, and a strong network of people with whom she surrounds herself.

Tune in to this episode to hear Chelsea’s perspective on the private equity space: market dynamics going into the second quarter of 2023, what Providence looks for in their investments, and general challenges and opportunities for minorities in the private equity space.

Meet Your Host

Name: Rubin Pusha III 

Title: Partner at McGuireWoods 

Specialty: Rubin’s practice focuses on healthcare transactional and regulatory matters for a variety of healthcare companies, investors and providers. He takes pride in getting to know his clients and utilizes savvy business strategies in order to help them achieve their goals.

Connect: LinkedIn 

Featured Guest

Name: Chelsea Celistan

What she does: Chelsea is a vice president based in the New York office of Providence Equity Partners, where she focuses on making investments in tech, media, telecom, and education companies. Prior to joining Providence, she worked in software and healthcare private equity at Vista Equity Partners and The Vistria Group. Chelsea holds a Bachelor of Arts with honors from Harvard College and a Master of Business Administration from Harvard Business School.

Company: Providence Equity Partners

Where to find Chelsea: LinkedIn

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This podcast was recorded and is being made available by McGuireWoods for informational purposes only. By accessing this podcast, you acknowledge that McGuireWoods makes no warranty, guarantee or representation as to the accuracy or sufficiency of the information featured in the podcast. The views, information or opinions expressed during this podcast series are solely those of the individuals involved and do not necessarily reflect those of McGuireWoods. This podcast should not be used as a substitute for competent legal advice from a licensed professional attorney in your state and should not be construed as an offer to make or consider any investment or course of action.

This is Accessing the Pipeline, a podcast for black professionals in private equity and finance, brought to you by McGuire Woods. Join host Rubin Pusha III as he welcomes special guests offering insights into access and capital deal making, accelerating portfolio optimization, and developing relationships among black professionals in the private equity industry. Tune in to access the possibilities.

Hey everyone, thank you for tuning in to accessing the pipeline we have with us today, and I'm just thrilled to introduce to everyone, Chelsea Celistan who's a vice president on the investment team at Providence Equity Partners based in New York City. Chelsea, welcome to Accessing the Pipeline.

Thanks so much.

We're thrilled to have you here with us. But before we dive into the substance of what we're going to talk about here today, I wanted to get a little bit about your background. So if you wouldn't mind just telling us a little bit about where you went to school and some of the places you've worked and how you ended up working in private equity.

Sure, happy to, and thanks so much for having me. I'm really excited to share a little bit more about my stories and more about my views on private equity in general, so really appreciate the platform. Excited to see where this podcast goes.

So a little bit more about me. Moved around quite a bit growing up. Ended up settling in the suburbs of Chicago and then went to Harvard both for undergrad and for business school, because I couldn't get enough. Very fortunate to have had that opportunity. And then I grew up knowing that I was very interested in numbers and business generally. So kind of got in my head really early on from a little bit of pushing from my parents to think about something in finance. No one in my family had worked in finance, but for whatever reason I really glommed onto the idea and did a lot of Googling. And then by the time I got to college, started figuring out what investment banking was, did some internships, and then was able to figure out through those what private equity was. So I started my career at Citigroup in investment banking, focused on leverage finance, and then decided to make the move into an investing in private equity. So I've been very fortunate to spend my time in healthcare and software investing over the years. And now at Providence where our firm focuses on tech, media, telecom, and education investments.

Great segue into adherence, just a little bit more about Providence, and I know you mentioned that you guys are focused on tech, telecom. Could you drill down a bit more and talk through what types of companies really are on your radar in terms of investment and what types of investments are you most inclined to make in those types of businesses?

Sure. So we are a late stage buyout fund. We're solidly in the middle market, so that's an exciting space to be in, I assume because you're bigger than a company that's just getting off the ground, finding their product market fit, but still small enough to where you're working very closely with founders and management teams and really getting a very close and in-depth sense of how an operator thinks of running their business.

Providence has been around for well over 30 years at this point, actually headquartered and started originally in Providence, Rhode Island, and has expanded across the globe. So we have offices in Boston, New York, and London.

And so I would say when we're thinking about investments, typically we're taking control, so a majority stake in businesses, but also there are many examples where we're working alongside other companies or looking at minority positions as well, thinking about all types of creative ways to deploy capital. So as I think through the business model and some of the underlying things we're thinking about, we certainly are thinking about value and profitability, but also we're really investing behind growth and part of underwriting technology-based companies, so whether it's tech enabled services, digital advertising, e-commerce, it really can run the gamut of what the business itself and its particular end market looks like, but these fundamentals of really solid businesses where we have a very clear view on where we can provide value, that's where we're trying to focus.

You mentioned that you guys are focused on the middle market. You hear people say that all the time.

Yeah.

What does that really mean for you at Providence Equity Partners? What's the true range of EBITDA that you're looking for when you're outsourcing a potential investment?

And I'm going to throw it back at you and say it depends.

Are you the lawyer, or am I?

Yeah. So it's interesting. We look at businesses that could be, typically they're profitable businesses, but whether it's 10 million business, a hundred million dollar EBITDA business, I can really run the gamut. And it's dependent on the broader deal context in terms of the valuation we're going to be looking at and the more specific segment that it's sitting in to determine what exactly that investment's going to look like.

So I don't know, the short answer is that it really depends, but it gives us a lot of flexibility and we can be really creative in how we are thinking about deploying our fund and the types of businesses. I would say we do have a sector-focused approach, and that's something that's been very significant from the time our firm was founded, but we do give ourselves a lot of leeway to think about different types of deals that we can be part of.

Circling back to your comment about being really interested and focused on growth, it'd be helpful, I think, for some of our listeners just to hear how your firm as a traditional private equity firm sort of differs from what venture's doing, what family offices might be doing and what independent sponsors might be doing, and how important it is to have someone from the ownership team kind of carry on with the business after you've taken a controlled position. That whole scenario can be interesting and add some complexities to the deal, but would love to hear thoughts on how that plays into your investment strategy.

Sure. So I think one thing that's unique about us as compared to some of those other stages, venture or family offices, is we view our relationship with management as purely partners. So we're working hand in hand typically from a board level, but also getting involved as we need to in the businesses to think about how we drive value together.

And another way we think about differentiating ourself from some of these other stages is in just the infrastructure. So we have a full group that's focused on portfolio operations that we can bring in. We have relationships with a number of different third party firms that we can bring in. So when we're thinking about partnering with a founder or a CEO of a business, it's bringing more than just our investor expertise. It's bringing kind of this whole army that we have, whether it's through operating partners or other partnerships we have, or just the depth within our own team to think through how do we best work together and help drive value. And some of that is organic, so thinking about things like there's a marketing, or hiring and people, technology, or it can be also inorganic. So we tend to do a lot of work with our companies focused on M&A and how do we think about tuck-ins and really trying to take a multifaceted approach to growing these businesses that we're partnering with.

In the telecom tech education industries. You've done a big platform deal. Do you deploy a robust add-on strategy or is that as varied as the way that you look at your partnerships?

Well, certainly everything is bespoke, so no two deals look the same, but certainly driving add-ons, that's right in our wheelhouse. And that is something that we found. Just think about going back to this idea of partnership. There's certain things that our CEOs and founders are going to know about their business and they know at such an intricate level as operators that we on the investment team just we're not going to know it as well as they do, certainly not going in. But where we can drive real expertise that many of them have the vision to see but don't know how to execute is within M&A. And so I think it creates a really great opportunity for us to be able to say, Hey, here's our skillset. Here's an area where we have real expertise. Let's think about how we work together. So that big picture that you always wanted to get to this end goal that's going to create great outcomes for you and us, how can we help on that end too? And so again, it's really a hand in hand partnership working together and kind of coming up with that plan as a unit.

Pivoting just a little bit, private equity has just been going gangbusters over the last couple of years with 2021 being a record year for many of the funds playing in various industries across the space, including tech, healthcare, and anything that really could benefit from digitalization. And then we'd come into 2022 where people were not as high on what the deal outlook was going to be for 2022. Now that we're a month past 2022, what would you say, as a sort of year-end review, how was 2022 from a deal perspective?

Yeah, it's funny, I graduated from business school into the pandemic, and so what things were like before and after was a pretty stark difference. And I certainly think that all of us who are working will remember the time 50 years from now when you were in your home office with a nice top on, in pajama bottoms, trying to do very important Zoom meetings. Certainly a weird time, but a time where, like you said, saw incredible volumes, especially in tech, median telecom, and education. Volumes in terms of dollars getting deployed, assets, change in hand yields getting done. So I mean it's been honestly very exciting.

I think 2022 was an interesting year. You come off the highs of 2021 thinking, okay, is this going to continue? Is there a bubble on these prices, because everything just seems to be going up and you know, get further and further into the year. And then some of the obviously broader market fundamentals start shifting.

And so I think what it has required from private equity firms is an increased level of scrutiny and precision as you think about what you're showing to the investment committee, what you're thinking about underwriting, and also there's the creativity with which you're going to approach deals. We saw the debt markets change quite dramatically, especially towards the end of last year. And the same deal getting done in '21 was not the exact same deal getting done in '22. So you have to think about what's in your proprietary pipeline? What's happening outside of these auction processes?

So really a number of different ways you had to think about playing the market. And I think that's where the level of rigor and the team that you're on starts to really differentiate itself as you think about deploying capital, realizing capital, and making sure you're doing things in a way where you're really critically evaluating opportunities as opposed to some of the gangbusters, as you were saying, deals that were getting done before. And I think that we've done a good job of staying disciplined.

And the discipline piece I think is key for a lot of funds as they sort of work to maybe not reimagine how they source and fund deals, but as they look to add to their strategies going into 2023. And as we all know, you alluded to some of the headwinds in 2022, but now we're a month into the first quarter of 2023. What are some of the headwinds that you think we're either currently seeing or will see as we creep in the rest of quarter one and then move quickly into quarter two? Will we start to see some of those deal upticks that maybe we've seen in years past?

Yeah, I think the biggest question is what's the bottom? And no one really knows, but the economy is just so... It's interesting and fascinating. I was an econ minor in college, so I guess I spent time thinking about it. But it's interesting because there's such a dislocation in how things get done. The market is doing one thing with equities and public companies, but private companies certainly have seen some multiples come down, but it's not this compression in the same way. And so I think as a result of that, there's been more of a view of staying the course, turning internally, thinking about your portfolio, driving value there and just being smart about value creation with what you have as well.

I think in terms of headwinds, the broader market has an effect on the debt markets and private equity is obviously run off of that. And so that's going to be something that's interesting. But even as you think about, similar to other strategies as that you talked about earlier, but VC and some growth things, we all are seeing what's happening in the news, and obviously since IPO is not our only option, it gives us a certainly more optionality to think about a longer hold period, more we can do with businesses. How do we think about executing on different strategies? Just thinking through how we can pivot and maneuver. So your debt markets are going down, how do you think about investment? Maybe you're not IPOing right now, maybe there's an opportunity for add-on tuck-ins. Just being more creative about how we think about creating value.

Are you seeing an uptick in sort of competition in the space? I think not all private equity firms are created equal, but I think the trend heading into the pandemic was that PE had a lot of dry powder and even though the cost of debt is going up, we've got folks were really successful in raising funds and have capital that's ready to deploy. But is that making it harder to source deals? And if so, what are some of the spaces that maybe some creative spaces that you have experienced in the last year or so for the source deals that maybe you weren't looking at before the pandemic?

So in terms of competition, private equity is always competitive. And you're right that there is a good amount of dry capital and firms are trying to put money to work. But I think the other piece of that is you don't really get into this if you're not interested and willing to compete and trying to win. And so I think that's not necessarily too dissimilar from the past, but certainly a focus. And then I think that's why we are sector specialists and it can go really deep in the areas we know have significant relationships and can think about the themes that we're really engaged in and focused on are not ones that have just been the last couple of months type of thing. It's really being able to establish your own pipeline and expertise in these areas over the course of a number of years. And that focus has allowed us to help do that. And so as we think about ways where we're able to have an edge, it is in the arts special sauce of all of the different things that we've been able to create as a firm through these different methods of insights, relationships, deals we've done, themes we've been monitoring over a number of years. And so it allows you to really be able to come into processes and play to win.

Thank you for that. And sort of switching gears just a little bit, and when we spoke before I mentioned this to you. One of the driving factors behind this podcast and this blacks in private equity initiative is to one, sort of create this ecosystem of color that work in this space so that we can do business together, be resources for one another. And so I want to spend a little bit of time talking about DE&I as it pertains to the private equity space. And you talked earlier a little bit about what interest initially interested you in finance and how you got into private equity, but what's been your staying power? How have you sustained yourself in a space that just traditionally does not have a lot of people that look like you, even more so working in on an investment team, let alone just being an analyst in the space?

Yeah, I think it takes a lot of grit and a lot of internal motivation and being fortunate to have people who you can turn to and ask questions. And I think that's really the power of your network. And so I think it's great that you guys are really starting this initiative to be able to connect folks with others, because you think about private equity as an apprenticeship business. And so the need to have people who are above you teaching you the ins and outs and some of the unspoken things that you can't read in a book and the giving you a chance on the day-to-day, you need that. And that relationship and that apprenticeship model is driven oftentimes by people feeling comfortable with someone. And that comfort is oftentimes driven off of similarities. And so when you're the only one of you in space, then you have to figure out how you're going to internally navigate that, and how you're going to navigate that with the people who you can call on.

And so there's certainly, I feel very fortunate to have the family and friends and colleagues who've done that for me, because it's [inaudible 00:19:54] in an easy career period. But definitely there are times when it can be increasingly challenging and that's why you just don't see too many people who look like me doing this. And so I think there is a real need to have more of the community and more of the network in order to start to see changes. And I'm excited that it's becoming more of a topic. LPs are certainly thinking about it and discussing it further, which drives GP activity, but there are certain groups that have been able to make strides. And I think the overall landscape is different than it was 10 years ago, but specifically within the black community, I think there's a long way to go. And I think that the need to change and the impetus to change is going to come from people just continuing to come into organizations and figure out how to stay. So I think that's just critically important and certainly something that drives me in part as well.

You talk about the importance of having a network to be successful in space. What other networks are you a part of, either sort of locally or nationally, that allow you opportunities to connect with either other black people or black women in the private equity space?

Yeah, I think I've been lucky in that I've been able to find groups of women, and then I've also been able to find groups of black women, both of which have been helpful but different. So I was one of the co-presidents when I was at Harvard Business School of Women Investing. And in that club it's just trying to get more women into the space of investing broadly, whether it's private or public investing. And the alumni base is just really incredible and have been able to through that, just have a real sense of community.

And then when I graduated from HBS, I remember talking to a friend about, who was in this space and saying, "Hey, are there any groups of black women that I can join or think about?" And he's like, "No, no, but I really wanted to do something." And so together and then bringing on a smaller group to think about more of a founding team started thinking through an idea to bring black women who are in capital deploying roles together, whether it's across the GP and LP landscape to really have a space to talk about things we're going through.

Because it goes back to what you were saying, the unique identity of not just being a woman, but being a black woman, and not just being a black person, but also a black woman in the totem pole of people, we tend to be at or near the bottom by every metric that, whether it's McKenzie measuring it or whomever else, hard business review, all types of things. And so a lot of the things we face are different than what other groups of people face. And so I've found that through having that group, I've been able to make a number of friends as well as just people where... It going through something, you need to see another viewpoint, you need to get perspective on something. And it's been really invaluable through those relationships. And I think having groups like that where we can find common spaces to get together and have discussions is going to be the type of thing that creates staying power so people can get to the point where they're able to make more significant changes.

And thank you for that. And I think you said something that's super important, which is there's this group of black women out there who are in capital deploying roles at some of the biggest and baddest PE firms in the country. How does the interplay between ESG becoming a bigger issue for LPs and GPS and diversity, equity, and inclusion, what's that intersection with you as a person who can deploy capital? Is that sort of translating into an increase in opportunities to invest in minority and in women-owned businesses in the PE space, or not so much?

I think private equity as a whole is probably a little bit slower to that. I think as you think, just in terms of the maturity of black-owned businesses, at least that I've seen more recently, many of them are more in the earlier stages of their founding. And so I think that's why you see a number of, especially VCs, who are really focused on investing in black-owned and women-owned businesses, which I think can be more of a focus. You have a greater landscape of companies.

That said, I think I'm very excited to think through how we continue to deploy capital and make sure those businesses are getting to the levels of being able to have increased scale and become things that large private equity firms are investing behind. And I think there are a number of black investment professionals at PE firms who know each other, are thinking about these things, and are trying to get in positions where, you can be in a place to do well and do good by doing that.

And so it doesn't need to be an impact play. It doesn't need to be an ESG function. It can just be, hey, these are great businesses. Let's invest behind these people. All the studies show that diversity is increasingly important and drives results. Let's get behind that. And I look forward to the day when that is, when the conversation is less of how is this, why are we doing this from a diversity and equity perspective and more of just, hey, this is the best business. Let's invest in it and make a great return.

Because at the end of the day, black, brown, yellow, pink, we're trying to put dollars in the ground and extract significant value on the back end. And so that orientation shouldn't depend on what that person looks like, and we should be putting the best people in places to be able to succeed. And I think there just needs to be an increase of exposure and opportunity, and at the top of the funnel and then at the middle of the funnel retaining those folks. That I think it should be thing. I think that concept should be something that every firm is thinking about.

Yeah. No, I totally agree. I think that generally you don't do a lot of add-on yields and see a lot of different owners come through the ranks and very rarely see us. And do think that there is opportunity for professionals like myself and you to help some of those businesses get to growth stage where they've seen enough growth that they're ripe for PE type of investment. And that's a huge area of opportunity for us. And yeah. One last question and then we're going to ask a couple of fun questions, and out of here.

And again, this sort of goes to the whole theme of our BPE movement is what are some other ways that we can expound upon collaborations with each other? We've got networks, we're having discussions, we now have our own podcast. How do we take it to the next level so that we're seeing black lawyers working with black investment professionals, working with black lenders and other capital providers in this space?

I think it goes back to the power of the network. I think it's going to be really relationships, and I'm glad this is, like I mentioned, this is a forcing mechanism to get people talking. The thing is, the world is small. And oftentimes you just need a forcing mechanism of organization to get folks together in an informal way when you have a relationship with folks, and then you can figure out how to do deals together. But you need people from all of these seats really talking and giving each other ideas, talking about deals. And I think that, you put people in the room together, and I think this sort of thing will naturally start to occur more and more just as that continues to happen. I think it is something that is done in a lot of communities, and I think it's really more of, not that there's a huge number, but there's certainly a critical mass of folks who are in different areas of the investing realm. And I think it's really just getting folks in front of each other and saying, hey, how can we find something interesting to do here? And people will be very receptive.

Yeah. All right. Well, folks, you hear heard it here first, we need to be more intentional about getting in rooms together and having these types of conversations so that we can find some opportunities to work together. And so I appreciate this time that I've been able to spend with you having some discussions about your expertise and private equity. We do have black men, black women who are experts in these spaces, and we just need to do a little bit better job of getting together and highlighting that and talking through some ways we can work together. So before you get out of here, I've got a couple of rapid fire questions. They're a bit random, but-

Great.

-go for it.

Love it.

I'm curious to hear your answers.

Yes.

First question, what cocktail best describes your personality?

Old fashioned, it's a family favorite.

Why?

Because it is classic and typically very good.

All right. What's the last book you read?

I'm actually in the process of reading a book called The Dope, which is about the history of the Mexican drug trade.

All right. If given the chance to have dinner with any person living or deceased, who would it be and why?

Huh. So hard.

I know that's tough.

I'll go with Oprah.

All right. Why Oprah?

Maybe cliche, but I just think she's great, and I think that she's just met so many people and is just really incredible in how she's built her own company and her own brand, started from nothing. And really also, I just grew up watching it every afternoon after school, because that's what my mom was watching, so I'll go with Oprah.

Fair enough. All right. Last question. Single best piece of advice you've ever received from a mentor?

When I was thinking about applying to business school, I remember seeking advice from a number of people, and one piece that I thought that really stuck with me and I've told other people as they've asked me about that process is think about what you're looking to get out of something and how that's going to work for you. I think in life and even in something like private equity, we're so constantly focused on what everyone else is doing and what's going on and all the possible outcomes and things you could be doing that you sometimes lose sight of, who are you, where do you fit in, where do you work best, and how do you optimize any situation for yourself?

And so really taking the time to be more introspective and think through what is it that you're looking to gain and give to others, and what's the sort of experience you want? I think it's really shaped both how I approach decision making, and also how I approach business today of making sure you're putting yourself in the right situations where you're going to be able to meet your goals at the end of the road. I thought that was something that it's so easy to lose sight of, but so critically important to actually being able to find success.

Awesome. Ladies and gentlemen, Chelsea Celistan, VP on the investment team of Providence Equity Partners based in New York. Thank you so much for your time, for your brilliance, and look forward to working with you and having you involved in the VPE Accessing the Pipeline podcast further down the road.

Thank you for joining us on this episode of Accessing the Pipeline. To learn more about today's discussion, please email host Rubin Pusha III. R-P-U-S-H-A@McGuirewoods.com. We'll look forward to hearing from you.

This series was recorded and is being made available by McGuire Woods for informational purposes only. By accessing this series, you acknowledge that McGuire Woods makes no warranty, guarantee, or representation as to the accuracy or sufficiency of the information featured in this installment. The views, information, or opinions expressed are solely those of the individuals involved and do not necessarily reflect those of McGuire Woods. This series should not be used as a substitute for competent legal advice from a licensed professional attorney in your state and should not be construed as an offer to make or consider any investment or course of action.