Providing clarity through due diligence

Sunny River Management (SRM) is a private investment firm headquartered in Atlanta, GA. They focus on building best-in-class, middle-market companies poised for long-term success with revenue between $3 – $100 million.  It has successfully acquired 27 businesses in the US and Canada.

Most recently, SRM was considering an investment in a platform company with several bolt-on companies already identified. The target companies manufacture equipment for water and wastewater treatment.  The equipment is used in municipal water systems, industrial manufacturing, food production, and beverage manufacturers.  Companies that consume large amounts of water are working hard to meet their corporate sustainability goals by getting as close as possible to zero discharge.  This equipment makes that vision possible.

The investment involved two other investor groups. One of the co-investors in the deal, Satori Capital, had previously worked with Maven on due diligence projects and recommended them for this deal.

For all due diligence, Maven applies a proven framework to ensure all important facets of the investment are reviewed including total market potential, the competitive landscape, voice of customer, and any regulatory or industry-specific areas. What made the due diligence for SRM unique was the primary focus on the possible revenue synergies across the platform and identified bolt-ons.  Expert and customer interviews were important to understand the value that the combined target and bolt-on companies offered. Maven conducted secondary research on the market and completed 30 expert and customer interviews. The research and interviews were synthesized to develop a point of view on how to maximize the best revenue synergies.

Through Maven’s work, SRM, Satori, and the third investor had the confidence and insights needed to not only move forward but to understand the businesses’ strategic direction. Soon after the due diligence project was completed, the transaction closed.  Three additional bolt-on acquisitions were completed within the next month.

More time for strategy

Ronin Equity Partners is an operationally oriented private equity firm headquartered in New York.   Ronin is focused on Consumer, Industrial & Business Services, as well as the Technology & Media sectors with equity investments of up to $500M and transaction sizes up to $1B.  It leans heavily into investments with a focus on back-office efficiencies with minimal customer impact.

Ronin was leading the deal team on a new opportunity. Through a previous transaction, they saw the quality and value Maven could bring with its due diligence expertise. They were impressed with the work on the prior project and wanted to work with Maven on the new deal.   Adding to the team’s confidence, a former Bain partner was serving as a Ronin advisor and understood Maven’s approach and the value it would bring to the project.

The due diligence project encompassed two targets in the commercial refrigeration space that would complement one another.

The project was a typical due diligence project.  Maven evaluated market dynamics, the competitive landscape, customer profiles, as well as industry-specific considerations such as regulatory and supply chain. The timing of this project made it unique.  Traditional due diligence is applied toward the end of the deal cycle to ensure the investor has not overlooked anything crucial. Due diligence is intended to pressure test the assumptions made during the negotiation, and it provides confidence to close the deal.

For this due diligence, Ronin engaged with Maven early in the cycle.  The Maven due diligence framework remained the same, but the information uncovered gave the deal team time to think strategically about the transaction and to have the next steps considered prior to closing.

Finding strength in partnership

Satori Capital is a private equity firm founded by entrepreneurs based in Dallas, TX with whom Maven Associates has worked in the past. Satori approaches its investments as long-term projects. It is dedicated to partnering and aligning with talented leadership teams with similar values. Based on its previous work, Maven was internally referred to a new deal team within Satori for a due diligence project in the sports nutrition market.

The target of this due diligence project was a contract manufacturer of sports nutrition products. Customers included large retailers and influencers with their own brands.  The company is focused on protein-based sports powders and differ significantly from competitors in that it works closely with brands to develop their products.  This target is especially skilled at developing flavor profiles, whereas most other contract manufacturers are not as involved in product development.

The project was a typical due diligence project.  Maven evaluated market dynamics, the competitive landscape, customer profiles, as well as industry-specific considerations such as regulatory and supply chain. Given the timing, Maven dug deeply into the impact Covid had on the industry.  Satori wanted to understand how Covid impacted the market and how the market would change post-Covid.

Maven’s research showed that while Covid had an initial impact on the industry, by summer 2020 it had nearly returned to pre-Covid levels, and by late 2020 it was showing record growth.   In addition, the one-on-one customer and expert interviews indicated that the company had tremendous value to add to the industry.

Because of Maven’s thorough work, the Satori team was prepared to proceed with the deal, and the transaction closed shortly after the completion of the due diligence.

Beyond Checking the Due Diligence Box

Satori Capital is a private equity firm founded by entrepreneurs based in Dallas, TX.  With the acquisition of Purple Land Management on the horizon, it was an opportune time to find a new consulting firm to assist in market studies.  Satori principal, Rugger Burke, was a classmate of Mark Hess in the Stagen year-long Integral Leadership Program.  Maven Associates appeared to be a good fit for the type of market studies Satori envisioned.

Purple Land Management provides professional services to oil and gas companies throughout North America. The core of the services involves assisting in the acquisition of mineral rights.

Acquisition due diligence has evolved rapidly in the last decade.  In the past, it was sufficient to evaluate the quality of earnings, legal and environmental risks and interview a few customers.  As the private equity market has become more competitive, the risks have increased and lenders, investors, and insurance companies are requiring the scope of a due diligence effort to expand to include a more strategic view of the target.  Maven was well-positioned to offer a strategic view of Purple Land Management to Satori.

This project was unique in that the land management services market is a niche market that does not have a lot of industry data. This is where Maven’s expertise is showcased. In the absence of existing market research reports, Maven is able to leverage a variety of data sources to develop a point of view. For Purple Land Management, Maven was able to size the market by estimating the number of landmen in the industry (via LinkedIn and other sources) and then estimate the size of the market knowing the average revenue generated by each landman.  The calculation was compared to a small industry report and against what was learned in customer and industry expert interviews.

At the completion, Satori closed on the deal and has since engaged with Maven on four other due diligence projects. Maven’s ability to deliver beyond checking a box, and providing insights from limited data in a short period of time gives clients the confidence to move quickly in the right direction.

Concrete Due Diligence

Insight Equity (Insight), a private equity firm in Dallas, contracted Maven to evaluate the market for a commercial construction product as part of their due diligence.

Maven spent two weeks gathering data about the core market, the competition and a new growth opportunity for the business. 

The process Maven used when working with Insight was similar to how Maven works with each client. In a due diligence assignment Maven focuses on interviewing potential customers to get unbiased views of the product; determining the size of and changes in the market; and understanding a company’s major competitors and how a given company fits in the larger landscape. 

As is always the case, Maven went directly to the source of potential customers to get an unbiased view of a potential new product—or the new use of an established product. By going directly to the potential customer, Maven is able to obtain information free of preconceptions or agenda. And by analyzing that data without filters or predisposition, Maven can help a client determine the true obstacles or advantages of a new product or a new use of an existing product. 

The question Insight tasked Maven with answering perfectly highlights one of the main reasons companies rely on third-party consultants: with research, unbiased interviews, and statistical data, Maven is able to drill down past intuition and anecdotal reasoning to determine whether or not a company’s growth projections are realistic.  

Due diligence for confidence to move forward

Satori Capital is a Dallas, Texas private equity firm founded by entrepreneurs who understand the challenges faced by business leaders ready to grow, but unsure how to get there. Their mission and life’s work: to invest in aligned private companies and help them grow. 

Satori has partnered with talented management teams to accelerate the growth of companies that are “built to last,” including 24 Hour Fitness, SunTree Snack Foods, Longhorn Health Solutions, and Ranger Wireless Solutions.

Satori turned to Maven to perform due diligence on a machinery moving and rigging company they had targeted for acquisition. They chose Maven knowing they could provide the quality, creativity and rigorous thinking of a top-tier consulting firm at a price point that works for a lower mid-market deal.

Over the three-week project, Maven’s due diligence included the competitive landscape, market size, growth potential for the market (and areas where it was not growing), market positioning, extensive voice of the customer (VoC) research and a detailed analysis of the possible impact of a recession on this market and company. Crucially, Maven was also able to identify future growth opportunities.

Maven’s due diligence and findings gave Satori the confidence to move forward with the acquisition.