Rotunda is a lower middle market investment firm targeting investments in companies with $4 to $15 million in EBITDA in the distribution, logistics, specialty finance and business services sectors.
Rotunda has focused on distributors since the beginning of the millennium and are actively looking for new opportunities to invest in distributors of all types. Distribution represents a large portion of the United States economy, some estimates put it at 10% of the economy, playing a vital role of getting the right products to the end customer in a timely manner. We view distribution as one of the most attractive sectors for private equity investment with multiple avenues for value creation and limited risk. Distributors typically present multiple options to drive growth. Growth strategies may include product expansion, channel expansion, geographic expansion and/or acquisition. Many distribution subsectors remain highly fragmented with many privately held family run businesses. We believe most distribution sectors will consolidate as the benefits to scale become more important. These scale benefits are driven by the increased importance of technology and the meaningful investments required as well as the ongoing consolidation of vendors and customers. Yet, we find that as the largest distributors become industry giants, they are no longer able to provide an appropriate level of service and attention to smaller customers and/or specialized products. We believe this creates a meaningful opportunity for smaller regional or niche distributors to win in the marketplace against their larger peers by differentiating in areas such as service, product expertise and/or depth of product offering in a specialty category. Rotunda is looking for family run distributors that are seeking an investment partner who understands distribution and can help them diversify their financial holding or transfer the company to the next generation while helping management expand and grow the business and realize the full potential of the opportunity ahead.
Rotunda’s Targeted Characteristics for Distribution Investments
Rotunda is interested in investing all different types of distributors. We have experience with the full array of operating models including centralized distribution centers, branch based distributors, route based delivery networks, and small parcel delivery; sales channels including multi-channel, direct sales (catalog and ecommerce), telesales and field sales as well as a wide variety of industries including industrial, food and beverage, education and building products among many. Characteristics of distributors that we find particularly attractive for investment typically have one or more of the following characteristics (i) differentiated by service or product offering or technical expertise; (ii) act as an intermediary between highly fragmented customers and suppliers; (iii) distribute items that are consumable in nature; (iv) offer a more direct route to market for core products by taking a step out of the supply chain.
Our ideal situation is to invest in a business with an attractive opportunity for growth that has not been fully realized by the current owners due to any number of reasons including the investment required, risk involved or personal time investment necessary from the current ownership group. Rotunda works hand in hand with management to give them the resources they need to reach our collective goals. We have an extensive network of operating executives with a wide variety of functional expertise who we make available to the companies we invest in. These executives have expertise in M&A integration, marketing, salesforce management, IT, supply chain, inventory management, finance and accounting, strategic pricing and cost to serve to name a few. This approach as rewarded Rotunda with numerous successful investments in distributors, including two active investments as well as many previous investments.