PROCESS AND STRATEGIC INVESTMENTS TO CATALYZE GROWTH
DelCam Holdings focuses on the acquisition of and the investment in reputable micro manufacturing companies with revenue between $1M-$10M that are cash flow positive and have capacity in place to grow in their current location. In order to maximize tax benefits and investment appreciation, target companies will be located in Opportunity Zones.
By the end of year 3 the management company desires to secure between 4-7 acquisitions in complimentary businesses with a total revenue base of at least $30M. The management company expects to grow annual revenue of portfolio companies until year 10 at an average rate of 15%. The objective is to increase the net profit margin substantially from baseline levels at the time of acquisition, dramatically enhancing the combined value of the portfolio of companies. We will exit from the investments after year 10 to maximize tax benefits under the opportunity zone regulations. Distributions may be taken sooner than year 10, albeit the tax-free profit advantages afforded by the opportunity zone regulations will not be realized prior to year 10.
After an acquisition is made, a comprehensive review of the portfolio company will be completed by the management company and key consultants within the first three months after acquisition. The results of the review will be translated into a value creation plan of action to fuel growth in the immediate term (one year), intermediate term (3-5 years) and long term (10 years) to maximize the exit value of the company. With each subsequent acquisition we will look for synergies and opportunities to maximize the overall value of the portfolio. Some of the key investments that will be made are as follows:
Aerospace, Defense & Quality Certifications – Obtain certifications to increase portfolio company credibility and open the door to more sales opportunities.
Labor Bench & Training – Identify strategic sources of labor to ensure portfolio companies are staffed appropriately and have the right personnel depth to grow the businesses. Implement a portfolio wide apprentice program, lure high performing workers from competitors with incentives, and hire excellent leadership to drive exponential growth. Cross train employees to improve overall output and to protect against loss of resources.
Sales – Add sales staff in a balanced manner where needed to propel the top line growth of the companies. Many small manufacturing companies do not have a dedicated salesforce and can greatly benefit from the addition of key sales personnel. Cross-sell to other portfolio company customer bases where possible in order to drive growth from within while avoiding potential cannibalization with appropriate controls.
Technology – Software and systems will be a key tenet of DelCam’s strategic investments. Ensuring portfolio companies are using the most up to date ERP, CRM, Accounting, Design and Costing software and also investing in technology to integrate the portfolio companies on to a consistent platform across the board.
Equipment – Automation will be a key factor that will enable our portfolio companies to generate scale and to enhance the net profit. We will invest in modern machinery, and ensure employees are appropriately trained on how to use the equipment.
Operational Optimization for Maximum Capacity – Evaluate and invest in improvements around the efficiencies of day to day operations in the manufacturing plant. Ensure optimal set up utilizing best practices and methodologies to maximize capacity.
Real Estate – Acquire real estate to serve as a consolidation landing ground for the portfolio companies over time. Potentially leverage opportunity zone real estate vacated via consolidation for other development projects.
Research and Development – Produce higher value and higher margin product to increase value to customers so they become stickier. Develop new products and services to help drive growth and increase sales.