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South Bend-based Graham Allen Partners is launching a $200 million fund focused on leveraging untapped data within legacy businesses.
Data Focus Fund II follows the private equity firm's earlier $93 million fund launched in 2019 and employs a similar strategy. The company, which manages more than $400 million in assets, said it will continue its commitment to Midwest-based businesses.
“We're really interested in talking to companies in Indiana,” said Susan Ford, chief operating officer at Graham Allen Partners. “In our first fund, 80% of our business is headquartered in Indiana. We believe similar statistics will apply to our second fund.”
GAP's foray into data and analytics began with its leading flagship company, Aunalytics, a data platform company offering managed IT and analytics services.
“Analytics are critical and critical to what we do in the community and to our long-term strategy,” Ford said. “We can serve mid-market companies in the Midwest, and there are already existing companies that we help manage, and we can help with the strategies of future portfolio companies.”
Now in its fifth year, GAP's board expects its first “market-leading top-quartile returns” from its Fund I investments, Ford said.
“Now that we have proof that our thesis and strategy is working, it's the perfect time to launch a second fund and we want to do more with it. ” she added. “We believe there are additional opportunities in business services and health care. We believe we have the technology necessary to serve these companies and provide them with the value they can expect from us.” We will continue to invest in
The company invests in established, high-performing legacy businesses required by GAP's strategy to leverage cloud computing, data and analytics to accelerate digital transformation.
Mr. Ford will discuss the types of businesses GAP wants to work with and why existing portfolio companies choose to work with GAP.
“We are a group of people who have strong businesses, who know their businesses better than anyone, who want to leap into the next transition in digital transformation, and who know they can't do it alone. We look forward to working with you,” Ford added. . “So when we say legacy business, we're talking about people who know their space well and want to partner with us to see what the next iteration will be. means.”
Ford said GAP's strategy is not venture-like, but it has venture-style benefits and potential on the data side. And given the size of the teams it works with, the company always needs to accomplish more with less.
“Because we often work with original entrepreneurs, they don't always have a fully built leadership team. They don't always have the financial position we would expect. We don’t have it,” Ford said. “And our team is very happy about that because we have an entrepreneurial spirit ourselves. This is a consistent opportunity to help these businesses specialize and improve. ”
Management strength, company culture, EBITDA, revenue, profit margins, and market trends are some of the factors GAP considers before making an investment.
Institutional investors, pension funds, family offices and high-net-worth individuals invested in the first fund, but this time they're looking for “bigger checks,” Ford said.
“While we certainly appreciate and value donations from those who write small checks, the most compelling thing about what we do is to invest in the Midwest. I think it’s raising money from,” she said. “That's what's really exciting.”
While GAP is interested in delivering returns to its investors, its portfolio companies benefit from private equity firms in two ways. The initial investment from GAP is the first opportunity, and even greater opportunities await once GAP and the original owners sell the business. Ford said the two companies plan to exit this year.
“We believe that all these companies in the Midwest have untapped value in their data, and what we bring is the talent, expertise and capital to help them extract value from their data. ,” Ford said. “Original owners and Graham Allen Partners can work together to do more on the data side. That’s why our partners and sellers want to work with us. Because we offer something unique and different from what you hear from anyone else in the market.”
Ford said the founders were interested in working with GAP because the company is “authenticly Midwestern.”
“It's not like a private equity firm in New York is saying, 'Hey, South Bend business owner, I know better than you.' That's not the case,” she added. “We were here. We live here. We raise our families here. In some of these small communities, our networks grow deeper and spread farther. This is actually a huge competitive advantage.”
He said investors are looking for new opportunities outside of the saturated stock markets on the East and West Coasts. GAP focuses on small trades so you can earn higher profits faster.
“We're very comfortable investing in companies with $2 million to $10 million in EBITDA, which tends to fly under the radar of other large private equity firms,” Ford said. “Our strategy works in such a capacity and we were willing to take some of the smaller trades, so we were able to earn high multiples as soon as we implemented the strategy.”
Highlighting the region's 10 universities, strong internship programs and enhanced training opportunities, Ford said there is a rich pipeline of technology talent that GAP can tap into its portfolio companies.
“We feel strongly that we are competitive in attracting and retaining technical talent here, and so far we have had very good results,” she added. “I think we have the talent. I think it's getting better. I think we have to continue to think about what that looks like as a state economy.”
Data security and financial risk management are two aspects that GAP actively monitors. Ford said the company is employing a “thoughtful” strategy to leverage Analytics' expertise to ensure data is secure and protect against downside risk.
“We're very pragmatic, very conservative, very pragmatic in that respect. We also have a limited partner advisory board that executes our ideas,” Ford said. “So we have put in place a number of checks and balances to ensure that these institutional investments are maximized, maximized and managed to their full potential.”
With a successfully proven strategy, GAP expects Data Focus Fund II to deliver significant economic impact.
“If we can transform these businesses from traditional legacy businesses to being able to buy data globally or domestically, we are very confident. These businesses will become export businesses and that is where the real transformation will take place. It happens,” Ford said. “That’s what we believe our strategy can achieve.”
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