We often get the question, "what types of companies are you investing in?" Our team is adamant about learning more about other companies in the area and building our network, so we normally want to sit down with any business owner. Although we want to meet you, we do have a general set of parameters we follow when looking to acquire or invest in a business. We have broken it down into five areas that we look at: Size, Type of business, Market, Team, and Synergistic Value.
Size
There are many shapes and sizes to businesses and the firms that are "trading" these businesses in the market. Many private equity and family office funds only focus on businesses that meet their internal threshold, to even consider discussions. We have seen this range from three million to tens of millions in EBITDA per year, depending on the organization. We also have found there aren't many funds out there that are investing in businesses under the $1mm in EBITDA range. The ideal size is somewhere within the $300 - $500k EBITDA per year, regarding ideal size of the business we are investing in.
Type of Business
As mentioned in our Valuation Blog, the type of business determines the multiple that the company will bring. The type of business will also determine what funds or groups out there may invest in your business. Many companies try to stick to their operational efficiencies and only invest in certain industries. For instance, there are large private equity funds that focus on national restaurant franchises, and only invest in those businesses. GRVC has targeted three main types of business that fits in their background and operational alignment. We are looking to invest in wholesale distribution, technology and manufacturing companies. Although we have had extensive experience in franchising, corporate retail, restaurants and other markets, we have found it doesn't best suit our current team.
Market Conditions
After operating some of our own companies for several years, understanding the market future is just as, if not more important as the past history of the business. When looking to invest into a company, GRVC analyzing and tries to get a thorough understanding of the market projections and current conditions. We want to target companies that are in a market that is growing year-over-year and/or one that has lagged behind in keeping up with modern technology and sales / marketing strategies. This allows our experience and strengths to help growing the investment immediately.
Team
The most important factor in selecting a business to invest in is the leadership team that will be growing it for the foreseeable future. Many companies in the size range we are looking at, are successful because of the person or people operating it. If we do not have an aligned vision for the business or do not feel comfortable with the leadership moving forward, we will not invest in a company. People make business.
Strategic Value
The last question we ask ourselves when investing in a company is "can we bring this value" or is it just a financial decision? We are in the business of investing, growing and celebrating the victories within the business rather than just providing it with some capital. We must identify businesses that we can bring immediate value through our past experiences and infrastructure that we have built over the years. This is important to cast an accurate vision for the team involved while hitting the ground running to grow the business and achieve our goals.
