07 Jan Scott Capital Partners, LLC: A #PrivateEquity Group Interview
The following is a brief interview outlining the strategy and differentiating factors of Scott Capital Partners, LLC–a private equity group. This interview does not represent the view of InvestmentBank.com or its affiliates.
Can you please provide a brief history of your firm? Its founders?
Scott Capital Partners, LLC is a family office making direct private equity investments. We only invest the capital of one family. We have no outside LPs. Although other like minded family offices sometimes invest in our deals. This allows us to focus on our portfolio companies and finding the next great investment opportunities, as opposed to continually raising capital.
Tell us about your typical deal? Size? Industry? Geographic locale? Can you please provide an example?
We tend to focus on deals in the $20 to $50 range. Our typical equity check is in the $10 to $20 million range. We can do less and we are willing to do up to $40. We view this incremental amount as capital for growth via acquisitions for some other means. Our industries of focus tend to be manufacturing, value-added distributors, consumer driven healthcare and business service companies. We are industry agnostic. We are looking for steadily growing businesses in large fragmented markets run by quality managers.
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?
Our deals are typically structured with senior, mezzanine and equity. We only invest in the equity and prefer control. Control means economic control. We are not interested in running a company. Accordingly, we keep existing management in place and empower them to grow the company. Additionally we will never overleverage a company to generate high IRRs. We want management focused on growing the company and create long-term sustainable value, as opposed to focusing on the balance sheet and reducing debt.
What makes you different than other private equity firms? How does your differentiation make you a better buyer in a crowded market?
We differentiate our by our investment approach. We are patient long-term investors with buy and build strategy. We can and have held investments for over 10 years. Our belief is that if you invest in a great company (on that continually creates value) and is run by a great management team, why would you ever want to sell?
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 tend to focus on those sellers who are interested in equity recaps. They can take money out, continue to run the business, retain a significant equity interest and use our capital to grow via acquisitions or some other way. We see and pass on a lot of good companies. Great companies understand their markets, competitive position and risks. They have a desire to constantly improve operations and a plan for increasing sales and profitability, and treat every employee, vendor and customer with respect.
A well organized financial reporting system would create a smoother process.
What added value do you bring to the process? How can you further assist sellers in preparing them to be ready for exit?
We focus on several items that add value over the long term. First and foremost is to support management and assist in strategic guidance. We usually bring the banking relationship. In addition, we have additional capital available to grow the business organically or via acquisitions. Lastly, we will increase corporate governance and professional such as forming a value-added board.
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?
As a family office, we do not have a set investment horizon. Our goal is to create value over the long term.
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.
This can vary depending on how much due diligence is needed.
Tell us something interesting about your fund, its founders or managers that is typically not widespread knowledge.
We do not have a formal exit strategy. Our exits have typically been dictated by our management teams. This gives them a huge control over the timing, value maximization and who the ultimate buyer might be.