14 Jan Bow River Capital Partners: #PrivateEquity Group Interview
The following is an interview with private equity group Bow River Capital Partners. The views expressed here are those of the interviewee and do not represent InvestmentBank.com or its affiliates.
Can you please provide a brief history of your firm? Its founders?
Bow River was founded in 2003 by Blair Richardson, Eric Wolf and Bruno Darre. The three founders have diverse backgrounds in finance, accounting and corporate management that all contribute to the unique manner in which Bow River assists in the growth of operating companies in our portfolio.
Tell us about your typical deal? Size? Industry? Geographic locale? Can you please provide an example?
Our firm is focused on lower middle market transactions, which we define loosely as $2-10m of EBITDA and $10-50m of revenue. We tend to focus our investments in what we refer to as the “Rodeo Region”, which is essentially the Midwest, Mountain Region, Pacific Northwest and Western Canada, although we have interest in companies all across the US and Canada. While we are relatively industry agnostic, our main focus is on industrial services, professional services, business services, healthcare services and niche/light manufacturing companies.
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 focus on majority investments and prefer to keep existing management in place with them retaining a meaningful percentage ownership in the firm on a go forward basis. The key for us is to act as true partners with current owners given they remain involved in business. We structure our equity on the same terms and conditions as them and truly consider ourselves partners. If the business is owned by a more passive party and existing management does not have any current equity or would like to increase their stake we are always open to that and can work to facilitate those investments.
What makes you different than other private equity firms? How does your differentiation make you a better buyer in a crowded market?
Rather than a better buyer, we like to think of ourselves as a better Partner. We approach each potential buyout deal as a true partnership, with the leading thought of “where can we help?” We will of course have ideas of our own garnered from our prior experience, but we realize that each business is unique, different and requires varying degrees of assistance in each department. We spend most of our due diligence period learning about the Company and how we can work together to grow the business, not trying to find reasons to walk away from the opportunity.
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 differentiation in our mind really lies with the people at the firm. The most fruitful and engaging processes provide great access to a variety of levels of employees at the firm so we can really learn more about the business and get some on the ground feedback about areas to focus on to facilitate growth.
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?
Our typical horizon is 3-7 years and while we are quick to work on ways to grow the business, we realize these investments take time to bear fruit. We always spend time ahead of closing to ensure that the sellers’ understand our process and that our goals are aligned at the outset.
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.
While each process is unique, we are able to move very quickly given the size of our team and how well we communicate as a group. While there is a certain amount of perfunctory, confirmatory diligence that is always mandatory, as mentioned earlier, we consider our due diligence process to be mainly focused on the optimal way to work with management to facilitate the future growth of the firm. This includes engaging industry experts and spending time with the employees at the company. Generally speaking 60-90 days is a fair estimate of the timing.
Tell us something interesting about your fund, its founders or managers that is typically not widespread knowledge.
One of the most unique and valuable pieces of Bow River is our deep research capability. We have an individual focused solely on research who comes from a Wall Street background and dives in on the industries we focus on, as well as the specific investments the team is working on. One of the many ways this research focus manifests itself is our monthly book club, where the team reads and debates a variety of books on topics ranging from famous investors to what makes successful management teams to trends shaping the global economy. This research adds a lot of value not only during diligence, but especially once a transaction is closed and we are working with our new partners on strategic initiatives at the Company.