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Acquisitions Criteria
Steel Capital focuses its efforts on acquiring companies in various segments of steel
industry, and seeks to play a leadership role in the evolution of these segments through
the aggressive strategic and operating management of acquired companies.
We are eager to hear from principals or their representatives about
steel businesses that meet some of the following common characteristics which
Steel Capital seeks in target companies:
Investment Size
Our investments range from $3 million to $100 million of equity per transaction. Larger
financings can be arranged through our strategic relationships with other private
investment firms.
- Profitable companies with good fundamentals and a defensible market position, yet are
underachieving relative to their inherent potential. This traditional buyout candidate
profile is often found in family-owned businesses or neglected corporate business units.
- Companies with unrecognized latent value. These will generally be in
"out-of-favor" industry segments or profitable businesses trapped within an
under-performing larger enterprise. The ability to recognize latent value is the key to
Steel Capital's investments.
- Companies with fundamentally sound operations that are burdened with excessive financial
obligations which can be restructured and then rebuilt.
- Companies in industry segment undergoing consolidation where a market leader can be
built through acquisition. Consolidation is a key component of Steel
Capital's strategy.
However, Steel Capital will pursue consolidation strategies only if a platform candidate with
sufficient mass to stand alone is available.
- Steel Capital is interested to purchase companies in distressed situations,
subsequently modifying company strategy and improving the performance of its operations as
required. Steel Capital is in the business of revitalizing and rebuilding declining steel
businesses, thereby creating opportunities for company personnel and their communities.
The Company will invest in companies where it believes operating
earnings can be increased through traditional techniques such as execution of strategic
initiatives designed to generate internal growth. However, Steel Capital
believes that this
class of investment is currently the most competitive in the private equity market and
opportunities to achieve adequate returns via such a strategy may be limited. Therefore,
Steel Capital also seeks investments where implementation of programs to reduce costs, increase
plant productivity and improve product quality can significantly add to value. The
demonstrated ability of the Principals to increase operating earnings and create value in
businesses with more modest growth prospects is a key differentiating advantage of the
Company.
Target companies generally have sales ranging between $20 million and
$250 million. Companies of this size are small enough that thorough due diligence can be
conducted, yet large enough to possess a viable infrastructure of reporting systems,
controls and management. Ideally, companies will have a capable management team in place.
However, Steel Capital experience has shown that supplementing management is an effective and
sometimes necessary action required to improve operating performance. The Firm is prepared
to augment a management team when necessary, and may occasionally draw upon managers from
within Steel Capital.
Steel Capital restricts its investment activities to companies with
principal operations in steel industry, and will place greatest emphasis on US-based
businesses. The Fund intends to use financial leverage in transactions to enhance returns,
but not to a degree that financial risk becomes incongruous with a portfolio company's
inherent business risk or when a company's growth prospects might be impaired.
Steel Capital also expects that target company management will co-invest with the
Steel Capital in some
transactions.
Simple businesses (if there's lots of technology, we won't understand
it)
An offering price (we don't want to waste our time or that of the
seller by talking, even preliminarily, about a transaction when price is unknown).
The larger the company, the greater will be our interest:
We would like to make an acquisition in the $5-30 million range. We are not interested,
however, in receiving suggestions about purchases we might make in the general stock
market.
We can promise complete confidentiality and a very fast
answer - customarily within five minutes - as to whether we're interested. We prefer to
buy for cash.
We frequently get approached about acquisitions that don't
come close to meeting our tests: We've found that if you advertise an interest in buying
collies, a lot of people will call hoping to sell you their cocker spaniels. A line from a
country song expresses our feeling about auction-like sales: "When the phone don't
ring, you'll know it's me."
Investment Proposals
Steel Capital welcomes investment proposals or inquiries from principals or their
advisors or from intermediaries or others aware of situations they believe would interest
the firm. |
