Former Goldman Sachs Group Inc. partners Michael Esposito and Scott Romanoff are teaming up...

Source Bloomberg, Melissa Karsch

Former Goldman Sachs Group Inc. partners Michael Esposito and Scott Romanoff are teaming up with credit manager HPS Investment Partners to back U.S. franchise

businesses and their owners.

The duo, who left Goldman last year after almost three decades, are starting Franchise Equity Partners to take minority equity stakes in companies where owners buy into established brands in businesses including restaurants and automotive dealerships.

“Over the last 30 years franchisees have just gotten larger and larger,” Esposito, 57, said in an interview. “But what hasn’t kept pace is their ability to source financing. There’s very little institutional equity capital provided to that whole space, so we’re going to do that.”

New York-based Franchise Equity is seeking to deploy $1 billion over the next 18-to-36 months into as many as 20 businesses, according to Romanoff. Most of the capital will come from HPS, the $75 billion firm that focuses on credit and longer-dated, less liquid strategies.

Investments will range from $50 million to $100 million with autos and restaurants comprising about two-thirds of the deals. “Part of the reason why we like these businesses is that they are incredibly bond-like, recession resistant businesses,” Esposito said. “Covid definitely impacted some worse than others -- for instance, you may not want to be a gym or a sit-down restaurant owner -- but if you’re a beer distributor your business hummed along.”

At Goldman, Esposito was chairman of the global financial institutions group. Romanoff, 51, held various roles within the investment banking unit and executive office, including head of corporate development.

They are former colleagues of HPS Chief Executive Officer Scott Kapnick, who is also a Goldman alum.

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