KRG’s investment analysis is based on the following key factors
- “Top-Down” Investment Approach. KRG (i) identifies trends upon which an investment thesis is built (e.g., aging population, infrastructure spending, regulatory trends, contract manufacturing and outsourcing trends); (ii) targets industries in which the Firm has deep expertise both independently and with the assistance of industry consultants; (iii) tests the viability of a “customer-centric” “buy and build” strategy; and then (iv) pursues a suitable platform company within that sector.
- Target “Best-in-Class” Platform Company. KRG believes the identification of an appropriate platform company is critical to a successful “buy and build” industry consolidation. KRG will generally require that a platform company be (or have the potential to quickly become) an industry leader in its niche (i.e., “best-in-class”) and that it possess a core management team that has the talent, vision, reputation and motivation necessary to execute at least the initial phase of the “buy and build” strategy.
- “Customer-Focused” Growth Strategy. The most important factor for KRG in determining whether or not a particular investment has merit is an analysis of how the buy and build and/or organic growth strategy will add definable and significant value to the end customer. Value to the end customer may include higher quality of service, broader product offerings, better supply chain management, more efficient distribution methods, expanded geographic presence or other definable improvements in the customer’s business mode.
- Implement Strategic, Organizational and Operational Improvements. KRG seeks investment opportunities where it believes it can effectively implement strategic, organizational and operational improvements to drive organic and acquisition growth, and ultimately build a larger and more valuable enterprise that could command a premium price on exit. The Firm’s success in executing these improvements is attributable to its deep involvement with its portfolio companies post-closing.
- History of Operating Profitability. KRG’s primary focus will be on companies that have a demonstrated history of operating profitability and above average margins (generally gross margins of at least 20% and EBITDA margins of 10% or greater). We will generally not pursue underperforming or turnaround situations for platform companies, nor will we pursue early stage growth or venture deals.
- Location. Headquartered in North America or a majority of revenues generated in North America. Once a platform established, KRG will consider acquisitions on a global basis.