Here is a Case Study of a transaction that one of our Private Equity Investors completed. Periodically, I will send you an interesting case study -- not more than every couple of weeks. If you don't want to receive them, you can "unsubscribe" at the bottom of this message.
As a bonus, I am highlighting one of the Strategic Equity Investors we represent. They will do a transaction similar to this one.
If you have any questions or comments, please send them to me.
Sometimes doing a transaction is about more than just money. In fact, in my experience, money is key, but not at the top of the list. Here's an owner that had a "once in a lifetime" opportunity, but didn't have the capital necessary to take advantage of it. Read about how he got the capital he needed and knowledgeable partners to help grow the business.
Enjoy
Two brothers in their late 30's owned ten franchise fast food restaurants. They were one of the top franchises in the seven thousand restaurant chain. The Franchiser had a number of company owned units in the state that were not as well managed. The brothers had a once in a lifetime opportunity to buy the units on a favorable basis from the parent and get the total development rights for the state. But, where could they get the money to buy it?
... started with ten fast food restaurants. Managing a fast food franchise takes more skill than one might think. That's why entrepreneurs many times run better operations than the corporate parent. When the opportunity presented itself to buy seventy-five more units from the parent, the brothers were very interested. They knew where the problems were in the corporate chain and knew how to fix them. The only thing they didn't have was the money. If they took on a partner to supply the money, then their long term objectives of owning all the stores themselves would be compromised.
A Private Equity Group (PEG) that knew franchise operations got involved. They put together a transaction that would work for the brothers. Simply put, the brothers would contribute their current company, the PEG would supply the additional equity and arrange for the debt to buy the company. A $33 Million dollar transaction was completed.
From the outset, the brothers and the PEG agreed to a plan that would allow the PEG to triple its equity value in about 5 years. And, the exit for the PEG was to arrange another re capitalization so the brothers would own 100 percent again.
In three years, the brothers increased the sales of the combined operation by 40% and increased the profitability by 70%. They paid off the acquisition debt early and were able to re capitalize the firm a second time at the end of three years. The PEG received 3 1/2 times their original investment in a liquidity transaction valued at $58 Million. Now the brothers have branched into other brands from the same franchiser.
When presented with a once in a lifetime opportunity, all they really needed was money and a sponsor who believed in their abilities. In many ways Peg's are Sugar Daddies. They need to fall in love with a management team, and they need to be rewarded in return for supplying equity and strategic advice. As an entrepreneur, it's not always necessary to sell out to accomplish your objectives.
Private Equity groups have been pigeon-holed as financial buyers and low ball buyers for a long time. Some of their reputation is deserved. But, there are a select few Private Equity Investors that belong in a whole different investment league. To find out why most Investment Bankers think Private Equity Investors are Second Class Citizens and why they are wrong,
get a white paper here ...
Long Point Capital has been a Strategic Equity Investor since inception. The firm provides equity capital to high-quality, growth-oriented companies with outstanding management teams. We invest in companies with smart management teams and strong growth prospects. We are not interested in micro-managing the day-to-day operations of well-managed companies. We add value by providing assistance in acquisitions, strategic planning and financing.
Long Point Capital has formed a strategic partnership with Masco Corporation, a diversified, entrepreneurial Fortune 500 company. Masco Corporation will, where appropriate, provide Long Point Capital and its portfolio companies access to certain of its manufacturing, purchasing, information, marketing and human resources services.
Gretchen Perkins said recently "We believe a partnership with a strong management team is the single most critical element to success of an investment. All our transactions are structured for key managers to share in the improved profitability of the acquired company. While we don't fill operating positions in portfolio companies, we do actively participate in strategic planning with the board and through on-site work with management."
And she followed up with "Built on Common Sense and Integrity, we base our partnerships with management on trust and treat challenges with the common sense and integrity we've learned through years of working with entrepreneurial companies. "
Would you like an introduction to Long Point Capital? I will be happy to provide it. Just send us an e-mail ...
For more information on Long Point Capital, visit their website...
We are specialists. We match privately held companies with the right equity source. We never charge a seller a fee. Working with Strategic Equity Buyers is our specialty.
To discuss which Private Equity Group will meet your current needs, let us know here ...
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Business CPR specializes in Manufacturing or Service companies that have revenue between $10 Million and $100 Million.
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