In 2009 James Livingstone, founder and CEO of Ardenton Capital Corporation, started developing, building and operating his business model and structure with one objective: “…to invest in good businesses and commit to making them great with a long-term perspective on value creation.”
With an investment horizon exceeding 25 years Mr Livingstone’s permanent private equity model is more akin to the approach taken by many family offices than it is to traditional private equity asset managers. With nine offices across Canada, the United States and the UK, Ardenton enjoys a global perspective, resources and insight as it looks to allocate capital.
Having completed the first deal in February 2010, the current portfolio embraces 11 companies operating across a range of sectors, including infrastructure, business solutions and building products. With a number of US & UK deals scheduled for completion in the coming months and with further expansion into Germany and Japan planned for 2018 and 2019 respectively, the opportunity available to investors is increasingly global and diverse.
Mr Livingstone and his team at Ardenton have determined that there is a generational opportunity in pursuing private equity investments in businesses with enterprise values below the $60 million threshold.
As such, Ardenton looks to collaborate with cash-flowing, mid-market businesses, demonstrating a profitable track record with EBITDA in the range of $3 to $10 million. Typically, they share a modest piece of a big market and provide a clear value proposition to their customers. The investment teams are industry agnostic, although generally avoid resource extraction, real estate, disruptive technologies and turnarounds. The firm offers a fair price for good businesses.
The investment philosophy is about more than profit, says Mr Livingstone. “It is about building something enduring.”
Many businesses in this segment lack adequate succession plans and, due to the baby boomer demographics, the expected turnover in ownership of businesses in Ardenton’s target zone is expected to exceed 50 per cent over the next ten years. In Ardenton’s target market, small businesses with fewer than 100 employees account for more than 1 million businesses in the US alone. Valuations are lower than larger businesses due to less competition. Hence, Ardenton invests in many businesses which are mature and have slower growth rates, and typically not as attractive to private equity funds.
With our long term approach to value creation, Ardenton anticipates that it can continue to make new investments in smaller businesses at fair market value of 4-6x EBITDA, while providing financial and operating support for its existing portfolio companies to improve operations over the long-term. Through organic growth in earnings, synergies between existing portfolio companies, collective intelligence among its business partners, and Ardenton’s platform approach to acquisition integration, the multiples applied to the valuation of Ardenton’s portfolio exceed those applied to any individual portfolio company in isolation.
The firm works collaboratively with management teams to develop strategies and business plans that identify opportunities. More importantly, Ardenton provides the guidance to ensure they’re realised and ongoing support to ensure they continue.
The proprietary approach to business improvement and strategic growth is managed by the Ardenton Operating System (A.O.S) through the A.O.S team, the firm’s “secret sauce.” A.O.S team members work closely with business partners post acquisition to provide support and guidance as and when required and to represent Ardenton’s interests at board level. James is clear: “We work strategically to nurture management teams and expand into new markets, growing small companies into lasting multi-national organisations.”
Ardenton’s corporate structure enables it to take a long-term approach, giving Mr Livingstone and his management team the freedom to choose the timing of any exits in contrast to traditional private equity fund structures that can hinder long-term wealth creation. Ardenton’s approach contains significant differences that it believes will lead to superior wealth creation and enhanced alignment between management incentives and our valued investors.
For further information contact Louis Wood 020 3753 4650 lwood@ardenton.com
