March 2020
Access to some materials included in this newsletter may be limited to Red Forest Capital funds.
UPDATES
The Red Forest Capital (RFC) Knowledge-base includes Tools, Research, Training, and Templates to support your search. Following is a list of newly available materials. Please let us know if you need help or if there are additional topics we should consider.
Industry Prioritization. In an effort to offer guidance in your search, RFC has prioritized Industries and Sectors based upon the "Priority Attributes"; Concentration, Gross Margin, Growth, Capital Intensity, and Cost of Capital. Other available attributes include; Ratio / Sales (EBITDA, COGS, R&D, SG&A); Price to Earnings (Trailing, Current, Forward PE); Beta; Cost of Capital (Equity, Debt), etc. Location: RFC Search Funds / 1 Research
Comparable Transactions Database. Over 72,000 comparable transactions sourced from 2005 – 2008, target companies with < $100 MM, from USA, Canada, Asia, Europe. Priority placed upon the Top 10 Industries identified in the January 2020 RFC Search Fund. Survey. Location: RFC Search Funds / 5 Valuation
SBA Lenders Ranked by Volume. The US Small Business Administration (SBA) 7(a) program can be used in an acquisition or at minimum, cover the expenses of an acquisition - and at below-market rates. The SBA doesn’t lend money directly to small business owners.
The US Small Business Administration (SBA) works with lenders to provide loans to small businesses. The following list includes the 2019 Top 50 SBA lenders by Volume. A few banks generally lending to search funds will be found in this list. Location: RFC Search Funds / 6 Financing
Priority Banks & Brokers. According to Blackford Capital, a 15-year-old lower middle-market private equity firm, intermediaries like Investment Banks and Business Brokers control sixty-five percent (65%) of North American transactions. This list includes a selection of intermediaries who represent high-quality deals well-suited for search funds. Location: RFC Search Funds / 2 Marketing / 3 Brokers & Banks
COMING SOON
Guide to Managing Teams
Updated Due Diligence Guide
Additional Recorded Training Sessions
ARTICLES
Cold Calls: https://www.collaborativefund.com/blog/the-case-for-cold-contacting/
GAAP Earnings vs. Free Cash Flow metrics: https://www.economist.com/finance-andeconomics/2020/02/20/the-appeal-and-the-flaws-of-cash-based-accounting?frsc=dg%7Ce
Sustainable packaging: https://www.wsj.com/articles/startups-wrap-brand-identity-withsustainable-packaging-11582466400
Costco’s business model: https://www.investingcity.org/post/costco
Article on Rich Barton, founder of Expedia and Zillow: https://kwokchain.com/2019/04/09/making-uncommon-knowledge-common/
Article from Sequoia on the Coronavirus as a Black Swan: https://medium.com/sequoiacapital/coronavirus-the-black-swan-of-2020-7c72bdeb9753
Article on property technology: https://www.dlapiper.com/en/us/insights/publications/2020/02/proptech-3-smart-buildings/
INDUSTRIES
Specialty packaging companies: See article above. Would seem to benefit from e-commerce trends and could be somewhat sticky customer relationships once the correct packaging has been developed.
I recently came across a company called API Group, which has a variety of different business divisions that would fit into industry criteria. See investor presentation attached. business divisions that would fit into industry criteria. See investor presentation attached.
Incidentally, one of the founders previously ran Jarden before its sale to Newell brands and produced returns that could land him in Will Thorndike’s book The Outsiders!