Our Approach
We focus on investing selectively in a limited number of middle-market, service-based companies with the potential for growth.
What sets us apart is our approach to investing. We provide more than capital. We add value. Lake Capital was founded on the belief that growing businesses need more than capital to achieve their full potential. The firm’s founders and other key Lake Capital professionals built their careers as entrepreneurs and business operators.
Our principals have decades of experience in creating, leading, and managing successful service-based companies. We apply that experience to enhance efficiency and performance and to pursue growth while continuing to enable a company’s management team to lead the business on a day-to-day basis. Because we have been in the chair of those with whom we seek to partner, active support of our management partners in developing and executing growth strategies is our hallmark.
Service-based businesses currently account for more than 40 percent of the U.S. Gross Domestic Product. We believe service-based businesses offer outstanding potential for capital appreciation. Among the areas we target:
- Marketing services (sales promotion, loyalty marketing, interactive marketing, direct response, public relations, media, event services)
- Finance-related services (accounting-related services, cost-recovery, financial consulting)
- Operational- and infrastructure-related services (construction, engineering and environmental consulting, human capital management, operational consulting, distribution, logistics, technology consulting)
- Specialty services (corporate training, in-store retail support, public policy management, specialty and professional publishing)
- Healthcare services (home healthcare, infusion therapy, clinical research, specialty pharmacy, institutional pharmacy)
- Specialty consumer services (consumer product marketing, consumer finance, specialty media)
- Technology services (information technology consulting, systems integration, technology deployment and management)
- Business process outsourcing services
We draw on a network of key relationships with intermediaries, bankers, business owners, accountants, attorneys, and many other referral sources to identify investment opportunities.
Typically, opportunities we pursue and sort into three categories:
- A buyout of an existing, solid, service-based business
- A partnership with existing management in the acquisition and operation of a platform company
- A specialized start-up where a significant market opportunity exists
We do our homework, conducting rigorous industry research and due diligence with regard to management, growth prospects, competition and past and potential financial performance. We look for:
- Companies with strong, motivated and scalable management teams
- Potential for revenue and earnings growth
- Potential for margin improvement driven by product or geographic expansion, operationally-experienced support of management, economies of scale or cross-selling opportunities from add-on acquisitions
We understand the importance of aligning the interests of the sellers and managers of portfolio companies with the interests of Lake Capital and its investors. We structure transactions in ways that motivate key people to remain committed, protect client relationships and set the stage for organic and acquisition-driven growth.
We typically allocate $50 million or more of equity to each portfolio company initiative. Typically, a portion of the allocation goes into the initial transaction to acquire a base “platform,” leaving a substantial amount of additional equity capital available to carry out an organically and acquisitions-driven growth strategy. In addition, with seller financing, third-party debt and co-investment opportunities, significant capital in addition to the initial equity allocation is available to each initiative. In fact, we have allocated equity well in excess of $100 million to several initiatives.
We work actively with the management of our portfolio companies, and our management partners have found us to be informed, involved and interested, without being intrusive. We interact with our executives every week, not just at quarterly board meetings. Our frequent interaction, combined with our own experiences sitting in the chair of the entrepreneur and business operator, allows us to work effectively with our executive partners. We focus on measurability and accountability for everyone involved, including us.
We also provide resources that might not otherwise have been available. Our Portfolio Company Services Team is a unique group of in-house Lake professional resources with extensive experience managing finance and accounting, HR, operations, IT systems implementation and integration, marketing and communications, and business development and cross-selling, among other areas. Our team is able to work with you at the strategic level and then oversee the tactical implementation of the plan on a day-to-day basis, supplementing your own staff when necessary. We also generally perform acquisition-related activities for our portfolio companies, freeing management teams to focus on the day-to-day execution of their business plans.
We concentrate on a limited number of high-quality investments so we can give each portfolio company the attention and resources necessary to enhance accelerated organic and acquisition-driven growth that can produce significant capital appreciation. We seek to make one or two platform investments each year. For each initiative, we seek to:
- Improve market positioning
- Enhance service offerings
- Achieve scale
- Improve market reach
- Improve profitability
About Us
