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 always at the top of the list. Here are two owners who had different lifestyle objectives because of their ages. Read about how they both got what they wanted.
Enjoy
The founder and two thirds owner was in his late sixties. He and his family were interested in moving on to the next stage in their life. At the same time, they wanted to be rewarded for the years of building a successful company and have less financial risk. The younger one third partner wanted to maintain his ownership and aggressively grow the company to the next level. The two ownership objectives appeared incompatible.
... operates a chain of 28 retail stores selling deeply discounted and closeout brand-name merchandise. It handles a broad selection of product categories, including books, carpet, domestics and housewares. By buying overproduced, overstocked and discontinued goods from manufacturers, the chain sells its products typically 40% to 50% below manufacturers' suggested prices. The Company is regional and has grown to $100 million in revenue with EBITDA of more than $12 Million.
For this Strategic Equity Investor, solving the incompatible objectives was easy. The investor bought out the older partner at full enterprise value and allowed the younger partner to take some money off the table but reinvest the majority of his ownership position to maintain his ownership stake.
But what about growth? Taking a company from $100 million to $250 million needs more than financial resources. What more could this equity investor bring to the table?
It happens that for many years the investor had a significant relationship with a public company that specializes in close outs of items that sell for a dollar. They invested in the company ten years ago before it was public and have a great relationship today. The price points of merchandise for the two companies are different enough that they are not competitive.
At the Strategic Equity Investors urging, the public company invested a small amount along side the other equity investors. But, their contribution is immense. They do joint purchases -- buying power for both firms is increased. Even more important, the public company is helping develop "best practices". All practices are involved -- from systems to sourcing to expansion to staffing. This keeps the younger owner from reinventing the wheel as he expands.
Not only was the operating partner able to increase his equity ownership, he obtained a financial partner and a strategic partner at the same time. His objective of substantially increasing the value of the company is now more than just a pipe dream. And, the founder, is happily lowering his handicap.
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 ...
Saunders Karp and Megrue (SKM) has been a Strategic Equity Investor since 1990. The firm aligns itself with exceptional management teams, in stable, profitable companies, and emphasizes growth and value creation, not financial engineering.
SKM's proven strategy is to invest in a small number of well-managed companies which can achieve superior rates of return over a five to seven year period. Its investments may take a variety of forms, including private company recapitalizations, traditional buyouts and growth financings. This firm is an ideal partner for management in executing a long-term business strategy.
Buddy Gumina, a partner of SKM, said recently "SKM has developed an in-depth knowledge of numerous industries, including specialty retail, consumer products, healthcare services, manufacturing, restaurants, and financial services. This industry specific knowledge enhances our investment judgment with respect to new opportunities enabling SKM to add value post-closing."
And he followed up with "SKM's leadership in Private Company Recapitalizations distinguishes us from other private equity or buyout firms. Although SKM's investments may take forms other than Private Company Recapitalizations, such as Growth Capital and Traditional Buy-Outs, the philosophy of being a partner with management governs all of our transactions and is the cornerstone of our investment approach. Many firms claim to "partner" with management, entrepreneurs or families, but none have the demonstrated track record of SKM."
Would you like an introduction to Saunders Karp and Megrue? I will be happy to provide it. Just send us an e-mail ...
For more information on SKM, 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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