Texas is the twelfth largest economy in the world, with the second largest population and the second largest civilian labor force in the nation. The state has three of the 10 largest U.S. cities, including seven of the 10 U.S. cities with the highest projected job growth. Texas is an international transportation hub, the top exporting state in the U.S. and the second largest manufacturing state in the nation. A recent survey of CEOs ranked Texas as the number one state in which to do business for the fifth year in a row.
The Texas economy has fared better through the current recession than other parts of the country, and we believe it should emerge faster and more strongly than other regions. At the same time, multiples for small company acquisitions have contracted nationwide and valuations remain low. Therefore, investors in Texas‐based businesses have the opportunity to acquire companies at depressed valuations that have relatively stronger prospects than companies in other parts of the country.
SigmaBleyzer has established its strong track record by finding and capitalizing on opportunities in which we’re able to add significant operational value. We see opportunities in Texas today very similar to those in which we have historically invested in other regions, including:
- Attractive valuations for distressed companies in need of turnaround
- A highly constrained credit environment, causing distress for many companies that had been poorly managed historically
- A market underserved by local, institutional‐quality private equity firms with turnaround expertise, particularly in the consumer sector
- Strong deal flow of transactions perceived as “difficult” by many traditional buyout firms, but considered relatively “straight forward” when compared to distressed emerging market deals
As a result, we see many deals in Texas today that are strong candidates for our particular private equity turnaround experience, with little or no leverage.
We are particularly interested in deploying capital in situations with the following attributes:
- Texas based or majority of operations based in Texas
- Small to mid‐market distressed and turnaround investment opportunities, primarily in the consumer sector
- Capital need of approximately $5 million to $20 million for a control equity position
- Historically profitable companies that have scalable business models, with a need for restructuring
- Companies in stable or growing industry sectors
- An appreciation for “hands‐on, operational‐level value creation” (rather than “financial sponsor investing”) and for stable, long‐term capital focused on growing future value
- Investment proceeds used to fund working capital, capital expansion, moderate liquidity for existing shareholders, debt restructuring or moderate debt reduction
- Potential for additional acquisitions to employ a roll-up strategy from a platform company
- Owner management teams with a desire to participate in the upside potential of expanding the business and improving its efficiency
We are not currently looking to deploy capital in oil and gas, real estate, or early stage venture opportunities.