GIP has developed a world class reputation as a firm that is able to work successfully with large industrial partners.
Thus, we are often able to access transactions that are not typically available to purely financial investors or investors unable to commit substantial equity to individual opportunities. We believe competition for the types of transactions GIP targets is often limited for several key reasons, including: (i) these transactions are usually complicated; (ii) they typically require very substantial equity commitments; and (iii) given the importance of the asset to the industrial partner, it is critical to have a partner with a strong track record who is able to deliver value to the asset and form a productive value-added partnership.
Moreover, we believe GIP’s in-depth knowledge of, and extensive relationships in, the industry sectors we focus on are critical to our ability to originate proprietary transactions. This knowledge provides insights into the trends and developments that often create investment opportunities and can motivate potential sellers and joint venture partners. In addition, our relationships with significant industry participants, together with our track record of adding value to our portfolio companies and our ability to deploy significant amounts of capital, have often made GIP a preferred partner or owner of strategic infrastructure assets. Almost all of our investments to date have been proprietary to GIP or where the GIP Funds had a compelling advantage.
In addition, focusing on larger transactions allows us to concentrate the efforts of our Operating Team on a smaller number of Portfolio Companies, thereby realizing scale benefits from any resulting performance improvements.
Case Study: Hess
As is typical in much of GIP’s proprietary origination, GIP identified the potential to partner with Hess in a strategic joint venture around its midstream infrastructure and proactively approached Hess, leveraging our deep relationships in the sector. Over a series of months, GIP conveyed our track record of successful value-added partnerships and worked with Hess to discuss and address opportunities and optimal outcomes of a potential infrastructure strategic joint venture. Hess was ultimately comfortable working with GIP on a bilateral basis given our deep understanding of the business and midstream sector, our flexibility in structuring a bespoke joint venture, including governance, our ability to provide significant capital in a sole partner and our proven ability to create value for the benefit of both joint venture partners.
Given Hess’ desire to retain day-to-day operating control of the midstream assets that are important to its upstream execution, GIP’s ability to negotiate a flexible joint venture structure which met the objectives of both parties was vital to consummating the complex transaction. Further, GIP’s experience with managing and growing similar midstream assets and strong track record of successfully working with strategic joint venture partners differentiated our position as a value added partner for Hess. GIP was well positioned to work with Hess on several elements of the strategic joint venture that drove significant valuefor the benefit of both GIP and its Global Infrastructure Partners II (“GIP II”) investors and Hess and its stakeholders. GIP has worked with Hess to enhance the joint venture’s leading midstream business model, grow its business with third party customers and successfully expand organically and via bolt-on acquisition, among other areas of collaboration to create significant value.