25 Dec Private Equity Group Interview: LV2 Equity Partners
Can you please provide a brief history of your firm? Its founders?
We were founded in 2006 under the guise of acquiring small manufacturing businesses in the Midwest that had fundamentally sound products, services, technologies, or brand offerings; but were in need of fundamental business disciplines / systems and capital to move to the next level. Our three partners have an array of backgrounds steeped in lean manufacturing, engineering expertise, senior management leadership experience, and finance.
Tell us about your typical deal? Size? Industry? Geographic locale? Can you please provide an example?
Our typical deal is a company generating revenue of $30MM or less located in the Midwest. We are industry agnostic and rather focus on either corporate divestiture opportunities or partnering with an owner / entrepreneur in taking their business to the next level.
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 always make control interest investments and will not take a minority position. We prefer to partner with existing management, but will bring in appropriate management talent if necessary.
What makes you different than other private equity firms? How does your differentiation make you a better buyer in a crowded market?
We focus on the lower end of the middle market, where most funded private equity groups don’t participate because of the relatively small check they would be writing. As an independent sponsor we do not have a clock ticking over our head to deploy funds or harvest our investments. We can hold long term and look to sell only when it makes sense.
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?
We look for strong product offerings, services, technologies, or brands. We also seek situations where certain business disciplines, processes, or capital may be lacking. Filling that gap is how we create “value” in our investments.
What added value do you bring to the process? How can you further assist sellers in preparing them to be ready for exit?
In the lower end of the middle market, a robust sales & marketing effort is often lacking. Additionally, customer concentration is often high. We seek to cure these problems. Accurate and efficient costing, quoting and manufacturing efficiencies are also typical areas on which we focus our efforts.
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 investment horizon is 5-7 years, but we have no defined hold period. We feel this is a differentiator and allows us to focus on the company’s long term prospects for growth and value creation.
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.
Our time to close a deal is 120 days from the execution of a letter of intent.