Investment Approach
Target Investments
We invest in smaller middle market companies located in Northwest North America through leveraged buyouts, consolidations, turnarounds, recapitalizations and growth financings. We target industries where we have experience, including: Business Services, Industrial Services, Light Manufacturing, and Mature Technology.
Northwest North America is an Attractive Region for Private Equity Investing
Northwest North America is a highly attractive and generally under-represented region for private equity investing. Northwest North America is a large, diverse and growing economy. It is the 10th largest economy in the world and Washington State is the largest economy in Northwest North America.
NCA has completed over 30 acquisitions in Northwest North America. As one of the most established firms in the Northwest; we continue to be one of the more active and successful investors in the region.
The Smaller Middle Market Presents Unique Investment Opportunities
The smaller middle market represents a highly attractive market segment, which we believe drives superior returns due to the ongoing inefficiencies inherent in many companies of this size. These inefficiencies provide us with incremental opportunities to add value to our portfolio companies above and beyond cash flow growth. For example, companies in the smaller middle market typically lack the broader access to capital and/or exposure to operational insights that a financial sponsor such as NCA can bring. NCA's investment strategy is to add value to its portfolio companies by capitalizing on one or more of these inefficiencies in each investment the Firm makes.
Operating Strategy
The Firm believes that superior long-term value creation is a function of capitalizing on the inefficiencies in the smaller middle market by: i) creating active partnerships with experienced management teams, ii) acquiring quality businesses that are able to grow organically and through acquisitions with the implementation of operational best-practices, iii) optimizing purchase price, transaction structure and post-deal capital structure and, iv) properly positioning each company for exit and selecting the most appropriate time for such exit. We create value in these areas through an operating strategy built around its seven Core Operating Tenets. NCA believes the following operating tenets have been the keys to its success to date:
I. Proactively Create Quality Deal Flow. NCA has historically been very successful in generating high quality proprietary deal flow.
II. Structure Creatively and Execute Successfully. The Firm has an established track record of creatively structuring transactions and the Partners have extensive experience structuring and closing a variety of complex capital structures. In addition to investing over $200 million of equity, NCA has arranged, structured, negotiated and closed over $800 million of senior and subordinated debt financing for its portfolio companies.
III. Implement Best Corporate Governance Practices. NCA believes that strong corporate governance results in superior performance and minimizes execution risk by management teams. Many studies suggest that companies with strong corporate governance produce abnormally higher returns than firms that have weak corporate governance. In each portfolio company, NCA seeks to implement best practices in corporate governance.
IV. Build Competitive Advantages for Portfolio Companies. While creative financial structuring and appropriate leverage are part of every NCA investment, the Firm's objective is to generate incremental equity value by building long-term, sustainable, competitive advantages. This is accomplished by developing a focused strategy to implement operational best practices in NCA portfolio companies by upgrading products and/or product development, implementing new systems and technology, optimizing channel management and sales force efficiency, right-sizing cost structures and augmenting management.
V. Active Portfolio Management. NCA works with management of its portfolio companies to ensure that the business strategy stays focused on the investment objective. Upon making an investment, NCA develops and implements 100-day, one-year and five-year strategic plans against which management is benchmarked. In addition, NCA engages in weekly or bi-weekly scheduled meetings with each portfolio management team to consistently monitor the health and well being of its portfolio.
VI. Act Decisively and in a Timely Manner. Throughout each phase of the investment lifecycle, the Partners believe that acting decisively with thorough analysis provides important advantages to the Firm. NCA has demonstrated its ability to respond quickly to the changing needs of its portfolio, including: opportunistically pursuing follow-on acquisitions, completing the divestiture of non-strategic assets, refinancing or recapitalizing balance sheets and exiting.
VII. Align Interests Through a Team Environment. NCA approaches its investing as a team. All NCA investment professionals have an equity stake in the Firm and all portfolio company management teams have a significant equity stake in their company. The Firm's investment committee consists of all NCA partners and each investment requires unanimous approval by all partners.