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The Centerfield team has a long history of working with middle market companies. Cumulatively, the partners have more than 100 years of experience working with growing companies, and many years of experience working together at Centerfield. During this time, their investment results have demonstrated that they have an ability to navigate successfully through changing business and economic conditions. Their diverse backgrounds provide the firm with the experience and willingness to structure an investment creatively to fit each opportunity’s distinct circumstances.
Centerfield has invested in over 30 companies, providing capital for management buyouts, recapitalizations, shareholder liquidity, acquisitions and organic growth. Overall, the firm invests along-side management and/or shareholders in a variety of transactions including:
- Acquisition and growth financings
- Management buyouts
- Transactions to provide shareholder liquidity
- Corporate divestitures
- ESOP financings
- Sponsored transactions, including those led by “fundless” sponsors
- Unsponsored transactions
Centerfield manages two institutionally-sponsored limited partnerships. Their investors include public pension funds, insurance companies, global and regional financial institutions, and universities.
Centerfield Capital Partners was formed in 1998 by Tom Hiatt and Scott Lutzke, two experienced Indiana businessmen who have worked extensively with middle market companies. In 2001, Matt Hook and Faraz Abbasi joined the firm. In 2007, in conjunction with the formation of Centerfield Capital Partners II, LP, Mark Hollis, Michael Miller and Jill Margetts were added to the team. In 2012, in conjunction with the formation of Centerfield Capital Partners III, L.P., Jackie Byers and Justin Haney joined the firm.
Collectively, their team has more than 100 years of combined experience in operations, private equity, banking and law, and during that time, the principals have completed numerous transactions providing growth capital to middle market companies.
Centerfield Capital Partners was founded on values of honesty, hard work, fairness and trust. They believe in the power of partnership, and insist that their relationships begin with an open, honest dialogue and culminate in creative ideas and a clear path to success. While they are disciplined in their analysis, they strive to incorporate good humor and courtesy into their daily business—traits they hope make the firm amicable business partner.
Centerfield Capital Partners seek to be known as a firm which achieves success not only for their investors and investment partners, but also for the management teams and employees of the companies they back and for the communities in which they are located.
The firm’s primary objective is to invest their funds with care and to provide a superior return to their investors. In addition to providing capital, Centerfield works alongside management teams to develop a common vision and provide support in areas they jointly identify as helpful to the team’s goals. They believe teamwork, a clear growth plan and hard work lead to success.
Centerfield investment process
Centerfield Capital Partners follow a disciplined and careful process to identify investments and work with portfolio companies. They source opportunities by maintaining relationships with a wide network of equity sponsors, intermediaries, business owners and professional service providers.
The firm carefully evaluates each investment opportunity they receive, and responds promptly to individuals who refer these opportunities to them. Centerfield’s first step is to analyze a company’s financial information and operating plan. Next, they seek to schedule a conversation with the owners or acquirers to learn more about the opportunity. If both parties agree to proceed, they will issue a preliminary proposal for review and discussion, which outlines the basic framework and economics of a transaction. A site visit follows, and then the preparation and execution a definitive term sheet. Once a term sheet has been signed by both parties, and the due diligence process has completed, they strive for a quick closing.
Centerfield invests in middle market businesses with excellent growth prospects and strong management teams. They take care to ensure each investment they make is structured so that the interests of all parties are aligned at the outset.
While the management team typically retains control of the business after their investment, they assist management teams with realizing the growth plans. They recognize that even well designed plans often face challenges, and stand ready to help with additional support and financial assistance as needed.
The firm seeks to exit the investment at the appropriate time for all partners in a transaction. They enter each investment with an exit strategy all parties have agreed upon in advance. They have the ability and experience to lead the process of selecting an investment banker and managing the sale process, working closely with the company’s board of directors and owners, if asked to do so.
Overall, the investment process includes the following steps:
- Initial review
- Discussion with owners / Overview
- Economic proposal
- Site visit
- Term sheet / LOI
- Due diligence
- Definitive agreement / Documentation
Investment criteria overview
The firm’s focus is to invest in leading companies in the lower middle market. While they pursue investment opportunities across the United States, their preference is to invest in companies in the Midwest, a region where they maintain a broad network of relationships and which is historically underserved by private equity.
Centerfield seeks companies that generally meet the following characteristics:
- Financial Characteristics:
- $15 to $100 million of annual revenue
- $3 to $15 million of annual EBITDA
- EBITDA margins greater than 10%
- Historical profitability and growth
- Business Characteristics:
- Experienced and well-rounded management team
- Strong market position
- Stable or growing industries and end markets
- Sustainable competitive advantages
- Discernable barriers to entry
- Headquartered in the United States or Canada
- Industries of Interest:
- Business Services
- Consumer Products and Services
- Value-Added Distribution
- Specialty Chemicals
- Specialty Foods
- Infrastructure Components
- Education Services
- Healthcare Services
- Centerfield Does Not Invest In:
- Early stage or developmental stage businesses
- Public companies
- Turnaround or distressed situations
- Project oriented financings
- Businesses with significant exposure to commodities or energy prices
- Retailers or restaurants
- Investment real estate
Centerfield’s mezzanine and subordinated debt financing
A majority of Centerfield’s investments are structured as mezzanine or subordinated debt investments. Mezzanine financing is designed to fill the gap between the amount the senior lender will provide and the amount of equity capital the owners or buyers are willing to commit. Mezzanine financing is typically issued in the form of subordinated debt with equity participation. Characteristics of mezzanine capital provided by Centerfield are as follows:
- Investment Size:
- $4 to $12 million, with the ability to arrange up to $30 million with support from the firm’s institutional limited partners
- Ability to source and arrange senior financing from their network of commercial bank limited partners
- Types of Investments:
- Subordinated debt, typically interest only, with principal due in 5-7 years (a portion of the interest may also be accrued and deferred)
- Subordinated debt with a warrant
- Common or preferred equity, typically in combination with a subordinated debt investment
- When investing equity, Centerfield is typically a minority equity investor
- Transaction Types:
- In most transactions, Centerfield provides subordinated debt and equity financing to support a financial sponsor. However, they also consider unsponsored opportunities and have significant experience arranging minority recapitalizations, management led buyouts, and growth financings. In both sponsored and unsponsored situations, Centerfield is typically the lead subordinated debt investor as well as a minority equity investor.
- Majority or minority recapitalizations:
- Management led buyouts or buy-ins
- Growth financings
- Acquisition financings
- Corporate divestitures
- Leveraged ESOP financings
- Sponsored or unsponsored transactions