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F.A.Q.
We believe that there are several factors that distinguish us from other equity sponsors: 2) We invest in smaller-sized companies. Many private equity firms are not willing to invest in smaller transactions because they need to deploy capital in larger increments. We enjoy smaller-sized transactions because we believe this is the sector of the market where our firm can have the greatest impact on a company. 3) We proactively support our companies. While we expect our management teams to manage the day-to-day tasks and to execute upon the strategic plan, we also take an active role to provide the assistance to the teams’ to fulfill our common objectives. Our role is beyond asking for the financial results on a monthly or quarterly basis. Rather, we are focused on assisting in the development of the operational and strategic plans to support growth strategies. Our management focus is aimed at balancing growth, cash flow and predictability. Please review our phased approach to management once an acquisition is completed. What types of companies do you want to acquire? We are seeking acquisitions in four primary markets: 2) Manufacturing: light and industrial manufacturing. 3) Food: producers and suppliers serving the food supply and distribution chain. 4) Distribution and Logistics: 3rd party value-added distribution (i.e., cold storage), warehousing and distribution What types of companies do you not want to acquire? We are not seeking investments in real estate based companies, highly-regulated industries such as utilities or medical companies, retail companies, restaurant chains, internet or other technology-driven companies. Do you prefer to acquire companies in a certain geographic region? Our preference is to acquire companies located in the
What types of companies do you look for? We like companies in protected or niche markets that are not subject to foreign competition. We do not pursue companies that are R&D-intensive or require significant and frequent investments in technology - we like stable and reasonably predictable business models. What size acquisition do you prefer? We typically seek acquisitions of companies with enterprise values (debt and equity) of up to $35 million. Many factors are considered when determining the valuation of a company. While each company is evaluated separately, valuation is influenced by the company’s financial performance, the market it operates in, competitive landscape, strength of the management team, customer concentration risks, capital expenditure requirements and working capital requirements. How do you finance and structure a transaction? Every acquisition is different and may include different components to finance the transaction. In addition to the equity, most transactions will include bank debt (working capital, secured term note and unsecured term note). There are instances where ownership participates in the financing through an equity investment, seller-note or earn-out. Generally, we capitalize a company in a conservative manner to ensure that the business has sufficient liquidity to operate in a variety of economic conditions. Are the management teams allowed to invest in the acquisition? Yes, in fact we encourage it. We are interested in partnering with management teams to financially align our interests. What happens to management in a sale? We believe management continuity is important. In fact, we would rarely consider a transaction where the ownership team immediately leaves the company once the transaction is closed. We are seeking to partner with management teams and our preference is to have at least some of the members of the management team enter into employment agreements for at least 2-3 years to ensure that the business is successfully transitioned. Do you need controlling interest in a transaction? Yes. We are typically involved in traditional management buyouts or recapitalizations where The Freedom Group is investing the majority of the capital. What are some of the things that a seller should consider when choosing a partner? Besides achieving a reasonable purchase price based upon the historical performance of the business, we believe that one of the most important factors for owners to consider is the future state of the organization. Some questions the seller should consider are: How does The Freedom Group like to conduct business? We believe in direct and candid discussions in all of our dealings. The heart of our business approach centers on consistent communication with thorough business planning. How long does it take to close a transaction? This will vary from transaction to transaction. Generally, a transaction can be closed in under 90 days. The greatest influence on the timeline is the availability of information to complete due diligence. If a management team and company are organized and prepared to discuss its business model with us the process is typically smooth. Would you consider an underperforming company? Yes.
Given our professional backgrounds and
experience we welcome the opportunity to evaluate transactions involving
underperforming or distressed companies. |
