M&A Strategy Discussion for Family Owned Investment Companies

Mike DeCola, HBM’s CEO, along with two other leaders from St. Louis-based family owned investment companies discuss the unique nature of competing for investment opportunities in the middle market.

Mike DeCola recently participated in the Second Annual Olin Family Business Symposium.  Mike was joined on the panel by Kyle Chapman of Forsyth Capital and Michael Amann of Oakland Capital Partners. Covering topics focused on M&A and diversification strategies for family offices, the talk highlighted three key topics: (1) competing against traditional private equity firms for quality acquisition opportunities, (2) why investing in people and team development is critical and (3) how employing a long-term investment and diversification strategy leads to success.

The business development strategies of the panelists center on developing strong relationships with the investment banking firms focused on the middle market.  Given the growth of family offices participating in direct investments, most intermediaries are becoming increasingly comfortable with the long-term family office strategy.  However, the panelists noted that they still encounter challenges when competing for a highly contested acquisition opportunity.  Mike DeCola commented that it has taken HBM a long time to convince the intermediary community that HBM is just as nimble as a private equity firm.  He added that HBM has established a robust process to ensure that they are diligent, yet swift in making informed investment decisions. “There is a perception among intermediaries that we are not going to be aggressive or act quickly.  We are forced to continually challenge that assumption,” said DeCola.

Discussions also highlighted the emphasis that each family office places on cultivating a team environment that values employees and breeds success.  It is clear that these firms consistently invest in human resources both at the portfolio company and holding company level.  By comparison, most private equity firms limit their human resources focus to senior management team incentives covering a short-term investment horizon. Mike DeCola described HBM’s robust talent acquisition program which focuses on recruiting young professionals into HBM’s two-year Associates Program.  The Program provides in-depth leadership training across the HBM portfolio with the goal of establishing a long-term career path within one of HBM’s portfolio companies.

Finally, the symposium discussed the merits of a long-term investment and diversification strategy.  Not having the short-term liquidity requirements of a private equity firm, family offices have freedom to capture the true potential of the businesses they acquire.  Michael Amann of Oakland Capital Partners noted, “If we are going to hold a business for the long-haul, let us enjoy it.  Let us go to work every day with vigor and do great things. This is a big piece of the puzzle for us as an open capital source, and also for the people at the businesses we work with. Returns are important, but this quality of life factor is a big part of how we measure our success.”  All firms agree that applying the intellectual capital of the holding company leadership teams, along with the shared resources of IT, human resources and business development, portfolio companies have the freedom to pursue broad-reaching and aggressive strategies to build companies of significant value.

We have provided a link to the panel discussion which explains how all three firms involved in the symposium set themselves apart from the typical private equity model and defines the value their long-term investment strategies bring to their portfolio companies.