Brazos Partners and the Tri-Northern Exit Case Solution And Analysis, HBR Case Study Solution & Analysis of Harvard Case Studies

Brazos Partners and the Tri-Northern Exit Case Solution

Question no 1

Over the last thirty years, Brazos has raised three funds. The first fund of the company which closed in 2000 with the total capital of $250 million, and it was successfully invested and the returns substantially exceeded the capital invested. The second fund closed in 2005 with the capital commitments of $400 million and the third of $715 million which was raised in 2008.

The investment strategy of Brazos Partners is to pursue the Buyout of the smaller opportunities with the emphasis on investing in its own backyard Texas. The targeted companies for the Brazos for the investment have the values between $50 million and $250 million. However, the focus of the Brazos is on the companies with solid management teams, and well-defined niches where the customers demand for selected products and the sub systems often in the small or medium volumes. Brazos has the strategy to invest in the companies which are close to the Brazos home in Dallas, to have better control on the companies they acquire.

The main areas of investment for Brazos include the industry sectors of consumer products, healthcare, business services, manufacturing/industrial, financial services and distribution. Brazos has also developed the Generation transfer transaction, which is a tax efficient method for family owned small and medium sized businesses to obtain the liquidity through the sales of the minority share and retaining the operating control, which solved the situation in family owned businesses where they can sell the company however, reinvesting a sum enabled them to retain the 50% of the common stock in the new company which keeps the owner actively involved in the business.

Texas is the 11th largest stand-alone economy in the world and is the home of many Fortune 500 companies as New York and California have a tremendous amount of public and private mid-market companies however, there are not many buyout groups due to which the investment strategy of Brazos makes sense and is performing very well. The limited competition in the region for the mid-market buyouts is an advantage for the Brazos Partners and its funds have performed well over the decades. Brazos targets the company with good cash flows which are important in the leveraged buyout and due to plenty of firms operating in the region the strategy of Brazos has been working efficiently. The GTI transactions also give the edge to the Brazos as the small and medium sized companies can stay involved in the business and it has the benefits like seller becomes comfortable with the buyout.

The dual acquisition of Tri Ed and Northern Video by the Brazos Partners fits the strategy because both companies have the potential to grow and create a significant cash inflows through the growth in the revenue and reduction on the expenses of the companies, However, the strategy to invest in the Texas was not much focused in acquiring the two companies but the change in the geographical location is also focused in the strategies of the Brazos Partners. Both of these companies had distribution strategies, complementary products and customer bases. When both of these would combine, then that would surely create significant opportunities for both cost savings and revenue growth. If we look at the income statements of both the companies, then it can be seen that the sales have been growing at an average rate of 6.9 % and 2.5 % for both the companies respectively..............

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