Scott Gold, Bobby Barrett and Jake Sussman have teamed up to launch Z2, a new alternative investment manager focused on debt and equity investments in non-sponsored lower middle market businesses in North America.
Managing Partner Gold had been a managing director and head of corporate private investments at Arena Investors LP, where he built an investment team and portfolio of debt and equity investments. Barrett is a partner at Z2 and had been a managing director at Angelo, Gordon & Co., previously handling deal sourcing, diligence and portfolio management in the industrial, infrastructure and renewable energy sector. Sussman, meanwhile, worked alongside Gold in sourcing, conducting, overseeing due diligence and portfolio at Arena, where he led underwriting on most transactions in building and training the firm’s corporate origination and investment teams.
Z2’s name refers to heart rate zones used by endurance athletes. Zone 2, or Z2, is the optimal heart rate zone for those athletes to generate long-term and sustained endurance gains. Z2 execs say they are not focused on quick returns, in the understanding that long-term value is created by operating efficiently, putting in a steady effort day-in and day-out goals.
“We saw a void in the direct lending sector serving lower middle market private companies’ needs for growth capital while maintaining their independence,” said Gold in a statement. “We believe that non-sponsored, directly originated financings can yield compelling investment risk-adjusted returns while simultaneously supporting this critical and underserved sector of the U.S. economy.”
Gold added that the segment Z2 is focused on is generally overlooked by regulated banks and direct lending investment funds. “Our research and direct connections to these businesses allows us to source unique, attractive opportunities for our investors,” Gold said in a statement.
Z2 expects to make direct investments in mostly private companies with a targeted investment size between $10 million and $100 million per company. Financing options for these companies is often limited, forcing owners to choose between not pursuing the next phase of growth or turning over control of their companies to institutional equity capital, according to the firm officials.
Z2 is based in Stamford, Conn., and plans to originate privately negotiated direct loans and opportunistic equity investments using its large, proprietary sourcing channels.