Interview With Elroy Gust, CEO, Newlook Capital
Ben Sinclair
Joining me is Elroy Gust, President and CEO of Newlook Capital. Elroy founded Newlook in 2013, and under his leadership, the firm has grown into one of Canada's leading private equity companies, with a particular focus on the industrial services sector. In 2019, Newlook expanded its reach by launching a specialized investment strategy for dental practices.
Elroy, thank you very much for joining me.
Elroy Gust
Yeah, thank you for having me, Ben. Happy to be here.
Ben Sinclair
Well, can you take me back to the years prior to founding Newlook, prior to 2013? What led you to starting a new private equity firm?
Elroy Gust
Great question. And that's interesting. You're making me think a long way back already. Initially, it was my family's money that I was investing. We started to do bigger and bigger deals. We needed more partners. So we formalized how we were dealing with partners. And through that process, had some experience raising money through private capital markets in Canada, which led to the launch of Newlook and subsequently our first official fund in 2016.
Ben Sinclair
And you decided to focus primarily on the industrial services sector. What attracted you in particular to those types of companies?
Elroy Gust
Yeah, that's a good question. I actually enjoy telling this story because it came from two experiences that I had as an entrepreneur. So my family was involved in the nursing home business in Ontario. And part of that experience was that there was a lot of inspections that took place during the regular audit season on a monthly basis or a quarterly basis just around the operation of the homes.
Through that experience, I thought about how I could be on the other side of those inspections. And it led me to think about what businesses perform those inspections and how we could be partnering in those businesses. So subsequently, my family exited the nursing home businesses. And that led me to look specifically for essential service businesses that performed those audit required or code required, code mandated services.
It led us to a very interesting company based in Edmonton. It was a gas detection business. So part of the code regulation around that is that the fire code in Alberta stipulates that there needs to be gas detection equipment specifically installed in enclosed spaces to ensure that there's no gas buildup, harmful gas buildup. A lot of it is around parking garages and I found a business, I was introduced to the owner of a business that performed that inspection, installed new equipment and then subsequently maintain that equipment on a quarterly basis. And it was enforced by the fire inspections that happened on a regular basis.
I really thought a lot about why I liked that business, what made it attractive to me as an investor, and then looked around for other businesses that fit within that pattern. So we determined that the elevator maintenance business was a similar type of business and in 2015, we purchased an elevator maintenance business in Toronto, and it grew to one of the largest independent elevator maintenance businesses in Toronto. We enjoyed that business. It was a great investment for us. And with those two, a focus on those two businesses, and we had some other acquisitions lined up, I approached a couple of players in the capital markets industry in Canada.
They liked the idea. They liked the thesis of the idea. We showed them the performance of the underlying businesses, and we launched our first fund specifically around that mandate in 2016. And at that point, we really decided that there were some great compelling reasons that investors would appreciate what we saw in those businesses. So not only is the revenue mandated to happen on a regular interval throughout the year. But these businesses are for the most part strong cash flowing businesses. We don't require a lot of inventory in most cases and it really lends itself well to a yield fund, a yield generating fund. And through several iterations we come now to 2025 and our third offering of our Industrial and Infrastructure Services Fund.
And I can say some of the best investments that we made are still in the fund. And we continue to see great opportunities both in Canada and the US around that offering.
Ben Sinclair
Are either of your first two investments still in the fund?
