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28 Jan An Interview with Bennett Capital Partners

This is another showcase in our private equity group interview series. This interview is with Bennett Capital Partners. The views expressed here represent those of Bennett and not InvestmentBank.com or its affiliates.

Can you please provide a brief history of your firm? Its founders?

Our firm was founded with the goal of providing business owners a unique exit or recapitalization option compared to what could be offered by traditional private equity and strategic buyers.  Our firm was created by former family business owners and we look to leverage our operational, strategic, entrepreneurial, and financial expertise and partner with management teams who share a similar vision and philosophy.

Adam Bennett serves as the managing partner and Tim and Jane Bennett serve as operating partners.  Ian Shields joined at the firm’s inception and Matt Lindberg joined three years later.

Tell us about your typical deal? Size? Industry? Geographic locale? Can you please provide an example?

We are typically more situation driven than industry driven.  An ideal situation would be a family or founder led business that does not have a clear transition plan in place.  We are most interested in manufacturing/industrial, distribution, and business services type companies located in the continental United States.  Most businesses we evaluate are between $2 million and $10 million of EBITDA but we have the capability to invest in businesses that are $20+ million in EBITDA.  We generally do not look at businesses that are currently owned by private equity.

How are your deals typically structured? Are you most often a majority investor or a minority investor? Do you prefer to keep existing management in place or do you simply take over the existing business with your own management?

We typically focus on control investments but will consider minority investments in limited situations (if it’s a perfect fit from a geographic, size, industry, and situational standpoint).   We prefer to partner with existing management but have the capability and resources to bring in additional management expertise if required.  It is especially appealing when the sellers and/or existing management team reinvest a portion of their proceeds back into the business.  We see this as a sign of confidence in the go-forward business and helps ensure full alignment between us and management teams.

What makes you different than other private equity firms? How does your differentiation make you a better buyer in a crowded market?

We differentiate ourselves from other private equity firms through our operational expertise and through the advisors and investors we bring along with us in each transaction.  Our partners, advisors, and investors do not simply just sit on the sidelines.

We are former family business owners ourselves and have been in the exact situation as the selling business owner.  We’ve walked the shop floor every day for 20+ years, have managed a P&L, and have been responsible for employees.  In addition to being able to provide capital, as former business owners and operators, we can leverage our operational expertise and experience to improve companies we partner with and focus on long term value creation.  Our family’s door manufacturing business had the most technologically advanced facility in the Western Hemisphere for wood door production and we were named “Innovator of the Year” by a leading industry association.  Our investors are also current and former business owners that can provide further operational and strategic support.

For each transaction, we purposefully target specific people and groups within our network that can add strategic and operational value as advisory board members and/or investors.  For example, after acquiring Albert Tire, a leading distributor of Goodyear branded tires in the Mid-Atlantic region, we brought on 3 outside directors with substantial industry experience.  One director previously served as the CEO of a $300 million tire distribution company, one previously served as a senior executive at two major tire manufacturers, and one owned and operated nine other businesses in a variety of industries.

What do you look for when you are courting target companies? What separates a good company from a great company? What are mistakes you have seen from targets that, if remedied, could make the process smoother for all involved?

The first thing we look for when partnering with a company is a strong management team, which is what we believe separates a good company and a great company.  From a business standpoint, we look for companies with consistent cash flow, strong growth potential, and a product or service that can be differentiated from competitors.  We look for situations where the existing owner or management team has developed a strong business but may not have the capability or resources to take it to the next level.

As it relates to the seller making the process smoother, the best thing a seller can do is making sure they have all of the key information available in advance so that if there is mutual interest, both parties can move quickly.  This would include having information such as financial statements, marketing materials, and employee information readily available, as well as copies of contracts, vendor agreements, customer agreements, insurance policies, etc.

What added value do you bring to the process? How can you further assist sellers in preparing them to be ready for exit?

As former family business owners ourselves, we’ve been on the other side of the table.  We know what the seller is going through and understand all of the emotions that go along with selling your business.  We are operators at heart and bring a true value-added partner that can take a business to the next level.  This could include helping the management team launch new products, opening up new locations, acquiring other competitors, and targeting new customers.

What is your typical investment horizon? How does your mission and goals for the fund impact your investment decisions and how you treat sellers’ businesses both short and long term?

Unlike traditional private equity buyers, we do not have a defined hold period.  Since our investors are primarily current or former business owners, we truly understand what long-term value creation means.  We realize certain things take time and opportunities present themselves at different points of an investment, so we are always looking at ways to create value over the long run and as a result are not fixed on any defined investment horizon.  Our flexible family and investor capital allow us to be unique in this way.

Tell us about your buy-side process including the time it typically takes from initial engagement, through indication of interest, due diligence and through final close.

Each process is unique and the time frame is largely driven by the quality of information the seller makes available.  If the company has clean financial statements and provides access to commonly requested diligence materials and other members of the management team, we have the ability to move quickly.  If this information is not available, we will spend the requisite time with management that is needed to help piece together the necessary information.

Tell us something interesting about your fund, its founders or managers that is typically not widespread knowledge.

Having owned our own family business and the fact that most of our investors have as well, we understand that numbers do not just appear on a page and that people are what create value.  We greatly appreciate the people that worked for us in the past and do so today.  During our ownership of the Maiman Company, a manufacturer of wood doors, we took great pride in our superior safety record, highlighted by having 12 years with no loss work days due to injury.  We believe in giving our employees the tools necessary to succeed and then supporting them as we develop our companies over time.  We enjoy growing great businesses with great people and look forward to continuing this for many years.