Investor Rationale

Cobbossee has particular reasons for optimism about its ability to implement its strategy successfully. 

Our lower-middle-market asset class for investment affords certain advantages.  First, according to empirical evidence, value can be can be purchased at lower prices.  Second, the laws of supply and demand are in our favor.  From a supply standpoint, more companies are available for sale because the number of lower middle market companies is far greater than the number of companies with sales in excess of $50 million and many of these businesses are owned by the Baby Boom generation that will sell the businesses for estate planning purposes.  In terms of demand, there is less competition from institutional private equity.  A few private equity firms control a disproportionate share of the private equity capital.  These firms can't practically invest in small businesses.  Three, according to published accounts, smaller businesses tend to have unrealized opportunities for value creation.  Many explanation are given including the entrepreneur has done well with his business and is not comfortable taking on additional risk in order to do even better.

Our success is dependent on our ability to lead breakthrough performance in executive management roles.  Specifically we must be able to improve the economic fundamentals of the business over the ones implied in the purchase price.  We like our odds because we have done this successfully in our former management roles.  We like our odds for another reason as well.  Our abilities likely complement the talents of the existing management team; as a team, we will have a greater capability to maximize the value of the business.  For instance, we have worked overseas, sourced parts from low-cost countries and integrated bolt-on acquisitions.  In addition, we have developed management processes that have a proven ability to improve daily execution significantly.   

Our investment timeframe confers several inherent advantages.

• It allows for selective and strategic investments to improve a company’s long-term competitive position and maximize a company’s valuation.  As a related thought, we can take advantage of our more short-sighted competitors.  The likelihood of degradation of the economic fundamentals of a business is diminished. 
• A long-timeframe is a sizeable advantage for a strong management team.  Our operating expertise is our hallmark. 
• A long holding period minimizes the impact of transaction expenses and taxes. 
• The importance of timing the economic cycle to realize attractive returns is minimized as we exert more direct control over achieving the expected shareholder returns. 

The upshot is a compelling value proposition for investors.