Creating Long-Term Value and Impact Through Broad-Based Employee Ownership
WHY DO WE INVEST IN EMPLOYEE OWNERSHIP?
Employee Ownership is at the core of our value creation and impact strategy. Our investments create opportunities for all employees to become owners, which in turn builds wealth, improves individual and community outcomes, and unlocks talent and productivity. Ultimately, more engaged and motivated employees generate better business performance with lower risk, increasing long-term value.
A company of employee owners, thinking and acting like owners, is lower risk, more durable, and ultimately more valuable.
Existing models of employee ownership, like Employee Stock Ownership Plans (ESOPs) and worker cooperatives, are proven paths to build worker wealth and improve business performance. However, they account for just 2% of business ownership transitions. Southeast's employee ownership buyout model seeks to make employee ownership an easier exit option for more business owners. Our transaction structure is competitive with both financial and strategic acquirers in terms of valuation, structure, timeline, and cash proceeds at close.
Often, we are the only buyer in a process who offers both market terms and the opportunity for all employees to have meaningful ownership going forward.
OUR INVESTMENT CRITERIA
We acquire profitable businesses throughout the Southeast and Midwest with the following characteristics:
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Financial: $5-50M Revenue and $1-10M EBITDA, average EBITDA per employee > $50k
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Industry: Building Products; Manufacturing; Industrial Distribution; Architecture, Engineering, & Design; Home Services; Food & Beverage; and Utility Services.
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Business Model: Recurring revenue, stable customer base, low-to-moderate capital intensity, platform for future acquisitions
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Management: Full management succession, staged succession, or internal promotion
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Transaction Structure: Leveraged buyout (LBO) with broad-based employee equity
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Employee Ownership: All employees receive equity at close with a target of 10-15% employee ownership and $100k in average employee equity value over 5-10 years
If your business or a business that you are advising meets these criteria, we would love to hear from you. Please, contact us.
OUR PHILOSOPHY
Southeast Acquisition Capital is a private equity partnership focused on creating value by investing in small enterprises throughout the Southeast and Midwest.
We invest in the Southeast and Midwest because it represents one-third of US GDP, because there are relatively few private equity investors in the region, and because we grew up here and our families call it home.
We invest in small enterprises because they are drivers of growth and job creation, and the generational ownership transition underway in this segment presents a unique opportunity to generate investment returns and positive impact.
We look for partners – Business Owners, Experienced Operators, Investors, and Advisors – who share our values of accountability, transparency, and true partnership. We also look for partners who enjoy their work and approach it with energy and optimism. In short, we look to work with good people whom we trust.
OUR INVESTMENT THESIS
We invest in middle-market companies that offer attractive growth opportunities at reasonable valuations. We incorporate Employee Ownership into our investments to improve risk-adjusted returns and create positive impact. We consistently communicate our approach to value creation across the organization and ensure all team members know how they can influence the key metrics that unlock long-term value.
Specifically, our approach to value creation and impact involves:
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Partnering with Experienced Operators and Long-Term Investors: We partner with experienced operators to build industry-focused platforms into employee-owned holding companies. We take a long-term approach to value creation and work with investors who appreciate the power of compounding capital via Long-Term Holds.
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Making Everyone an Owner: We offer broad-based incentive equity that gives all employees access to stock ownership. We underwrite our investments to achieve an average employee equity value of $50-100k over the first ten years. To the extent our companies perform better than expected, these values can be substantially higher.
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Creating a Culture of Ownership: Allowing employees to invest and earn equity is necessary but not sufficient to unlock the full benefits of employee ownership. Our strategy goes further by empowering employees to engage proactively with all operational aspects of the business and develop a fundamental understanding of how their role impacts value creation. This requires a commitment to transparency and accountability by all members of the organization.
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Pursuing Sustainable Growth: First, we look internally to identify opportunities to deliver more value to existing customers and areas of focus for new customer acquisition. We also drive productivity by upgrading and automating legacy processes with agile and cost-efficient software and technology. Then, we look externally for acquisition opportunities in complementary markets and geographies, while maintaining a sustainable financial structure.
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Investing in Talent: Empowered employee owners attain autonomy, mastery, and purpose through their work. Promoting mastery requires continual investment on behalf of the company to help employees acquire and upgrade their skills. To maximize the impact of this benefit, we complement job-related training with life skills and financial literacy that encourage positive spillover to other facets of their lives.
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Building Long-Term Value: Our Long-Term Hold strategy harnesses the power of tax-efficient compounding for Investors and Employee Owners, alike.