By Tom Ballard, Chief Alliance Officer, PYA
It’s been about three years since we checked-in with Ben Brown for an update on Alderman Holdings, the Chattanooga-based private equity group that he formed with two other partners as noted in this mid-2015 teknovation.biz article.
“Things here at Alderman are going very well,” he told us in a recent interview. “We’ve learned to be patient waiting for the right opportunities.”
The latter comment was a reflection on the fact that the opportunities that the partners are seeking are different from those of many investment groups. Instead of pursuing deals that Alderman can exit in a few years, the team is looking for long-term acquisitions that it can help manage.
“It’s the opposite of a venture fund,” Brown reminded us. “We’re more focused on the ‘old economy’ type of business . . . manufacturing, distribution, and business services,” sectors from which venture capital tends to avoid.
About 18 months after its founding, Alderman announced its first two acquisitions – Majestic Stone and Southeastern Tool & Design Inc. The company added Dal Industries about a year ago which actually amounted to two companies – Dalrymple Rigging & Transport Inc. and A1 Hevi-lift Rentals. The former is a specialized moving and erection company, while the latter is the Southeast’s exclusive rental and sales distributor of Versa-Lift Forklifts, equipment used by Dalrymple and companies in the rigging business.
All of the acquisitions thus far have been in Chattanooga, primarily because of Alderman’s business strategy that includes pursuing opportunities where the prospect does not have a viable succession strategy, acquiring the enterprise, and providing on-going management.
“We like to touch our portfolio companies once or twice a week,” Brown says. That “hands on” relationship is part of Alderman’s oversight and long-term strategy. Several of the partners – it added Patrick Wells in late 2015 – have strong operational expertise as former Chief Executive Officers (CEO). In fact, Wells serves as CEO of Majestic Stone.
Is Chattanooga the only location that Alderman will consider for future investments?
“We continue to throw the geography question against the wall,” Brown says, noting that the initial plan was to focus on the southeast, and the firm looked early on at specific opportunities in Atlanta. However, the more extensive engagement it has with the portfolio companies makes acquisitions too far from Chattanooga impractical.
“If there was a scenario where a company had bench strength and we would not have to spend as much time there, we would consider it,” Brown added. Two other key criteria for Alderman are stable performance and good cash flow.
“We’ve stuck to our original premise,” Brown says. “We’re in machine shops, stone quarries, rigging, and leasing businesses, and those are representative of the things we like”
Alderman is looking for additional investment opportunities, and Brown says each deal is structured as a standalone investment for the limited partners so they can exit if they want or need to do so. As the general partner, Alderman plans to remain in each investment for the long-term.
“We are a hybrid private equity model, but closer to a search fund,” he explains.
In addition to Brown and Wells, the other Alderman partners are Jay Hildebrand and Andrew Kean. You can find more about each at this link.