WARNING: IF BUSINESS JARGON AND TERMS OF A FINANCIAL NATURE BORE YOU TO TEARS, READ NO FURTHER!
For the rest of you, thought you might find this interesting. Sorenson Capital bought two aerospace parts manufacuters in Oct/Nov of 2005 (I was on the deal team for one of the transactions). We bought one for ~$27M and the other for ~$22M, so a total of $49M, about 4.0x EBITDA. To buy these companies, SCP wrote a check for ~$13M cash and covered the rest with debt (hence the term "leveraged buy out"). In the 16 months we've owned the companies, combined EBITDA went from ~$13M to ~$21M. Yesterday, we closed a deal to sell both companies for $190M (or about 9.5x EBITDA)-- after paying off debt and deal fees, SCP's share of the proceeds comes out to ~$100M-- about 7.7x our initial investment, and an IRR of ~360%.
Anyway, promise to blog something a little more general interest next time. Hope everyone traveled back from Nevada OK. T
6 comments:
My my my.... that is the only way to do business. Good work! What would it be like to write up 13 million dollar checks like you are buying the groceries? 100 Million Dollars!!! 360% IRR!!! Sure beats flipping Real Estate.
When Sorenson purchases companies like these, how do they increase the value? Is it just a matter of providing capital, or is it more hands on?
Gee!!!!!!!!! that is absolutely insane. I too am interested in the answer to Zach's question. Thanks for enlightening me, Trav.
Excellent question Z. Company value is a function of many things, but the primary drivers are cash generation characteristics (profitability, low capex or working capital requirements) and ability to grow both the top (revenue) and bottom line (EBITDA or Profit). We start out by buying companies that already have these characteristics and then take advantage of overall industry growth trends (a rising tide raises all ships), make operational improvements to increase profitability, help improve cash management policies, and provide additional growth capital (if required, for new projects, acquisitions, etc.). In the case of these aerospace companies, we mostly benefited from a strong aerospace industry over the last couple of years that helped the company grow like mad. In a lot of ways, in the right place at the right time.
Holy cow! Sounds like you really love what you are doing!! What an exciting job where you really see that you are making a difference for these companies. Way to go!
There was an article in the Oregonian the other day about solar power component manufacturers that are moving here to the Silicon Forest. Have you heard anything about a rising trend there? (kindof a random question i guess, but seemed related as you talk about a rising tide raising all ships) It seems that the governor and senators here are set on Oregon being on the forefront of the sustainable living movement. I wonder if the rest of the world, or the country for that matter, is as excited about the prospects of sustainable business practices as we are up here in the northwest.
That is pretty impressive. It's interesting to hear more and understand better how your career and company work.
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