Target Industries & Situations
USGF is actively seeking investment opportunities in the following target industries and themes.
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Branded Specialty Food & Consumer Packaged Goods
Branded Specialty Food & Consumer Packaged Goods are currently our primary focus. USGF has recently committed significant capital and resources to this sector.
We are most interested in companies with shelf stable, branded products that command a significant premium price over mainstream offerings in the same category. Gourmet foods, Organic foods, Over-the-Counter Personal Care and Household Products represent particularly attractive areas for USGF. Our management partners have intimate knowledge and strong relationships with most U.S. specialty retailers and many throughout Europe. Our management partners also have long-standing relationships with thousands of independent retailers selling exclusive brands. USGF understands the complexities involved in increasing brand visibility, while still jealously guarding the super-premium status of the brand and can provide unique guidance for growing businesses in this sector. Our Value Creation Hypothesis for this sector focuses primarily on (a) enhanced distribution, (b) improved manufacturing and sourcing efficiencies, (c) accurate understanding of costs, and (d) multiple expansion with scale.
We are least interested in perishable food product companies (ie meat, seafood and vegetables); private label manufactures, and commodity priced products.
Business & Financial Services
During the past several decades many niche business-service industries have been born out of the continued outsourcing of non-core functions by larger corporations. USGF is attracted to service companies which participate in large, growing markets and whose management teams have created a culture firmly committed to excellence. Often these industries are fragmented and USGF brings the capital and expertise to help management teams grow their companies into industry leaders.
Our partners have extensive experience in the financial services sectors, having including banks, insurance, credit card processing, factoring, consumer loans, ABL and conduit securitization. We are currently most interested in businesses providing services to banks, mortgage companies, insurance companies, and other selected non-bank financials. Payment processing, forms management and general credit services as well as quasi-lending businesses such as security alarm businesses (origination and contract monitoring stations) are expected to present interesting opportunities. Our management partners have intimate knowledge and strong relationships with most major U.S. financial institutions and many specialty lenders.
Cyclicals
During the past five years, USGF has avoided housing and auto related investments. Our view was that declining interest rates and increasing access to less stringent consumer credit was fueling excessive and unsustainable froth. However, recent weakness in these sectors have significantly reduced valuation multiples and are now beginning to separate speculative businesses from those with sustainable markets. Although we believe deterioration is likely to continue, we are currently seeking investments in companies with durable business models. We are most interested in consumer leisure and sports products, construction equipment rental, branded kitchen appliances, equipment manufactures serving the natural stone (granite/marble) counter-top, and OEM auto parts. Our Value Creation Hypothesis for this target sector is driven by revenue growth from a projected 2010 post-election recovery in consumer spending and multiple expansion from higher investor confidence in this sector.
Unbranded auto parts distributed through chain auto parts stores, Office Furniture and Oilfield Service business will be avoided. Unprofitable businesses from this sector will not be considered. Current profitability is essential.
Special Situations / Distressed/ Event
While USGF typically seeks companies with strong records of success, we also seek companies currently undergoing temporary operating and strategic challenges. USGF's business analysis skills and broad network of resources make us well-suited to assist a company achieve its potential. Special situation investments are typically short term and may include equities, convertible debentures and private loans. We are disciplined, value investors with an emphasis on intensive credit research and analysis. Our focus is on middle market companies that seek a friendly investor to help bridge a specific situation, or are currently misunderstood or under-researched by the market. Investments of interest to USGF include the following:
Pre-IPO Minority Investments - We purchase shares and convertible debentures in pre-IPO companies.
Bridge Ownership & Creditor Transitions - We assist companies transitioning ownership blocks and purchase fatigued creditor positions at a discount.
DIP & Bankruptcy Restructurings - We assist companies currently operating under an approved plan, or seeking support in emergence from bankruptcy.
Public Company Bridge Capital - We assist public companies with private equity to solve a variety of needs, including:
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Going Private Transactions - We have first-hand experience with the benefits and challenges encountered in going-private transactions.
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PIPES (Private Investment in Public Enterprise) - We purchase preferred stock or other non-public securities issued by public companies.
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Equity stakes - We purchase common stock or other public securities issued by public companies.
Opportunistic New Initiatives
Throughout our history, USGF has enjoyed meaningful success investing in new segments, which had previously escaped our focus prior to meeting management. Because our partners have broad experience across many industries, it is likely that you will find a receptive audience at USGF with some prior experience in your area of interest. If you know of an attractive investment opportunity that fits USGF’s Investment Focus, but is not listed in our Target Industries & Situations, please contact us.
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