Our objective, in partnership with company management, is to build enterprise and shareholder value organically and through selective mergers and acquisitions.
Our focus is primarily on companies in the professional technical services, application technology and environmental services and solutions industry fields. These industry fields represent large, significant markets. However, most of the companies in these industry fields are small with under $50 million in annual revenues. We believe there is a strong rationale for consolidation within these areas, and there are additional synergies among them.
There is usually a significant difference in the enterprise and M&A transaction values of small companies (under $50 million in annual revenues) and larger companies (over $50 million in annual revenues) because large companies have numerous advantages and can operate more effectively and profitably. Almost universally, the greater the difference in size, the larger the gap in company valuations and valuation metric multiples with, for example, smaller company valuations typically in the range of 3x to 5x times cash flow or EBITDA versus larger company valuations in the range of 8x to 10x cash flow or EBITDA.
Our investment strategy is based on the belief that smaller companies can be attractive investment opportunities if their managements share our vision and are willing and capable of accelerating growth, profitability and enterprise value organically and via selective consolidation with our support and backing. Value-added benefits of this strategy include:
In addition to the benefits of significantly increased shareholder and equity value for company owners and/or management teams, other benefits and opportunities for them are set forth under “Partnering”.