Kian Capital Partners says beyond making the valuation and the numbers work in a transaction, there are lots of soft considerations when you're dealing with a founder — about the legacy of the business, the treatment of the employees, and how the history of that founder’s business is going to be respected and carried on.
“One of the key threads that runs through virtually every investment we make is how do we back a founder-owned business?” says Kevin McCarthy, co-founder and partner at Kian. “How do we help that company realize its potential and with an eye towards maintaining the culture that made it successful and drew our interest in the first place?”
Money, he says, is a commodity. And it’s not always the most important aspect of a deal.
“People have different valuation methodologies and certain firms are willing to pay more than others, but money is a commodity,” he says. “And it really does come down to fit. And quite honestly, we like our chances when a founder is trying to decide between two or three or four groups, we like our chances in that lineup.”
McCarthy says in meetings with founders, the firm will provide among its references founders with whom deals didn’t go as expected.
“Because they don't always go according to plan. How do you react? Do you stay patient? Do you not overreact, or have a knee-jerk (reaction). And we tell them all that, but then we say, ‘Don't take our word for it. Pick up the phone and call the folks on this list.’ It's not just people where everything went smoothly,” McCarthy says. “We've got names on that list where, particularly with COVID, which everybody has experienced in the last 18 months, we had to make some really tough decisions and that's when you find out who your partners are.”
Earlier this month, Kian Capital Partners executed a majority recap in T Sportline, a provider of aftermarket automotive parts and accessories to the Tesla market. Scott Buschmann, a partner at Kian, says the deal comes as the firm has worked to develop its presence in the automotive aftermarket — T Sportline joins two other automotive aftermarket in its portfolio as the firm looks for ways to play the growth of the electric vehicle space.
“We were looking for a way to invest in a business that could benefit from the growth of electric vehicles and the increasing prevalence,” Buschmann says. “That's how we found T Sportline. As of today, T Sportline is exclusively focused on Teslas, and that will be the primary focus of T Sportline going forward. But we think there's a real opportunity to build a platform above that could sell products to a different brands and platforms.”
McCarthy and Buschmann spoke on the Smart Business Dealmakers Podcast about the firm’s most recent deal, how it fared in 2020, and their perspective on how they see M&A playing out for the balance of 2021. Hit play on the podcast below to hear the full conversation.
