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.
Many distributors are on their 2nd or 3rd generation of family ownership, some even more generations. Passing the company down through the generations can become increasingly challenging, more generations create more non-business demands on the company and can complicate decision making. Successive generations may have personal goals that do not involve running the family business. This is on top of the liquidity challenges that passing a business from one generation to the next can create. At the same time, opportunities abound for distributors that are able to be proactive, particularly acquisitions, while standing still can slowly erode the company’s competitive position. Many investments are required to take the business to the next level including people, IT, digital strategy, marketing, creating replicable, scalable processes etc. the list goes on and these are in addition to traditional investments in physical infrastructure and acquisitions. In these situations, it may be the right time to bring in an outside partner who understands your vision for the business while bringing investment capital and resources to the table that enable the family to diversify their holdings while maintaining a significant interest in the upside.
The question is, who is that partner? It is someone who understands distributors, who understands your vision for the company, who appreciates the intricacies of the company’s value proposition and has a track record of growing distributors while at the same time understands the unique dynamics of a family business. Family businesses are about more than just money. Distribution is a relationship and execution business where people are critical. Successful well run family held distributors win as a result of their employees, who often become something akin to extended family. A well run distributor invests in its people.
Rotunda’s approach is to spend time with family and management, really learn the business, the unique culture and what makes the business special. We work with the stakeholders to figure out the vision, the opportunities, the challenges and where investment is needed to achieve the vision. Rotunda focuses on businesses we believe can grow organically and/or through acquisition. We approach it as a true partnership with the selling family and management. Prior to an LOI, we will present the family with a plan outlining the opportunities and challenges we see, the strategy we would pursue and the resources we would bring to the table. This approach allows the family to ensure that our vision aligns with the family’s vision for the company and that their employees will be paired up with good stewards of the business.
Rotunda’s Targeted Characteristics for Distribution Investments
Rotunda is interested in investing in 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 has rewarded Rotunda with numerous successful investments in distributors, including two active investments as well as many previous investments.