The start of a new year always brings with it fresh perspective and clarity of purpose. However, the exercise of looking forward cannot be completed effectively without taking stock of the past year’s wins and losses.
Overall, our experience in deal activity in 2016 has been somewhat contrary to broad middle-market sluggishness: Our year-over-year deal flow improved over 90%, with greater relevancy and quality. We’re very proud of this accomplishment and we have you – our friends and colleagues – to thank. It is clear the HBM story is gaining momentum, and we’re incredibly appreciative of the relationships that are making that possible.
We would like to provide a quick overview of the refinements we have made to our investment considerations, as well as share some of the strides we’ve made in 2016:
INCREASE IN INVESTMENT SIZE
Early in the year, we took a step back and decided to modify our investment criteria. The most noteworthy change relates to our decision to seek larger companies as platform investments. We’re now targeting companies with an EBITDA range of $10 – $25 million, while remaining flexible for add-on acquisition to our existing portfolio. Please click here to view our latest Investment Criteria Factsheet.
We know this shift means we’ll have greater competition at every stage of the deal process. It will mean increased focus on certainty-to-close, speed, and deal terms – all of which we are prepared to address in a meaningful way.
We consider our biggest advantage to be our patient, disciplined approach. As you may remember, our model combines the financial strength and long-term insight of a strategic acquirer with the transactional capabilities of private equity. We’re operators, not financial engineers. Our platform companies have the advantage of focusing on long-term strategies to fully realize the goals and aspirations of their management teams. Long-term for us means decades, not 4 – 6 year hold periods typical of private equity. We believe that the longer horizon leads to better decisions that enhance opportunities for significant growth and value creation. We believe that management teams who run great companies will see and understand that value.
REFINEMENT TO INDUSTRY CHARACTERISTICS
We’ve also clarified and simplified our target industry characteristics. When evaluating new platform opportunities, we target specialty manufacturers with a focus on:
- Industrial equipment & components
- Energy equipment
- Transportation equipment (excluding automotive)
- Chemicals & minerals
Despite these adjustments, our target characteristics have not changed: We seek control positions in North American companies that have long-term growth potential through unique end-market fundamentals, or specific actionable opportunities. We’re looking for companies that hold a top-three position in their respective markets, with market sizes ranging from $500 million to $2 billion. Typically, these companies will possess a sustainable competitive advantage driven by a proprietary product or differentiated business model.
KEY HIRES, AWARDS AND OTHER 2016 MILESTONES
We recently announced two key management-level placements, both of which will help drive HBM’s core mission of patient capital as well as long-term planning and implementation on behalf of our portfolio companies:
- Daniel Wright, Vice President of Corporate Development: Daniel will lead HBM in three primary strategic areas: Oversight and coordination of acquisitions, management of internal consulting delivered by HBM to the operating companies, and leadership and development of the Corporate Development team of Associates.
- Michael Chill, Vice President of Information Technology: The creation of this position, and the appointment of Mike to lead our enterprise-wide IT efforts, underscores our unique platform that provides strategic-level support for our portfolio companies. This differentiated approach provides our management teams with increased freedom to focus on growth initiatives within their businesses. Mike is a senior technology executive who has deep experience capitalizing on opportunities through IT strategy and solutions.
Our offices have moved to Clayton (our new address is below). If you are in the St. Louis area, please pay us a visit.
We celebrated the EY Entrepreneur of the Year award by winning the Central Midwest. Mike DeCola, HBM’s CEO, was the proud recipient of this prestigious award.
With 100% employee engagement, we raised $100,000 for a cause we’re all very passionate about: The United Way of Greater St. Louis.
We are officially active on social media and are posting blogs regularly. We’d love to stay in touch on LinkedIn and Twitter – so please follow us for news, insights and interesting middle market whitepapers.
2017 AND BEYOND
We fully intend to achieve the same level of growth and middle market engagement in 2017 and beyond. As we recognize the importance of relationships in our business, please let us know if we can assist you in any way as you seek similar success in 2017.
We hope to see you in the New Year, and on behalf of everyone here at HBM, we wish you the most prosperous, healthy and happy 2017!