BMC is a private equity firm founded in 1999 that focuses on leveraged buyouts of small and medium sized companies. With over $1 billion in capital under management, BMC has established itself as a major player in the private equity sphere. This article will analyze BMC’s investment strategies, portfolio companies, and performance track record over the past two decades. We’ll examine how BMC identifies attractive LBO candidates, the types of companies it targets for acquisition, and how it goes about improving operations and exiting investments. Insights into BMC’s investment philosophy and value creation tactics will be provided, along with a look at some of its more notable deals. The aim is to gain a deeper understanding of this successful private equity firm’s inner workings and investment approach.
BMC Focuses on Profitable Small Businesses with Niche Market Positions
Unlike many private equity firms that pursue megadeals, BMC focuses on acquiring profitable small businesses with $10-150 million in revenue. It looks for companies that have carved out a niche position in attractive end markets and have the potential to continue growing organically. Industries like healthcare services, business services, and light manufacturing are common targets. BMC also seeks fragmented industries where there is an opportunity to complete add-on acquisitions and consolidate market share after acquiring a platform company. Its sweet spot is businesses with EBITDA between $3-10 million that have been undermanaged or undercapitalized.
BMC Improves Operations and Utilizes Moderate Leverage
After acquiring a company, BMC will bring in seasoned operators to help improve business processes, trim costs, and accelerate growth. It utilizes leverage of around 3-5x EBITDA to fund deals, allowing it to magnify returns while also instilling financial discipline. BMC works closely with management to identify new growth opportunities and expand into adjacent markets or geographies. Add-on acquisitions are often completed to complement platform buys. By improving operations, entering new markets, and acquiring competitors, BMC aims to double or triple a company’s earnings over its 5-7 year hold period.
BMC Has Delivered Strong Returns From Its Small Cap Focus
BMC has achieved excellent returns from its small cap private equity strategy. Since 1999 it has completed over 90 platform investments and hundreds of add-on acquisitions. It has successfully exited over 75 of these investments, generating gross IRRs of 45-50% and over $5 billion in realized gains. This performance has outpaced many mega-cap private equity firms. Notable successful investments include American Dental Partners, Theragenics, and Evergreen. By maintaining discipline around valuations and leverage while improving operations, BMC has managed to consistently generate outsized returns from the small-cap private equity space.
With its niche focus on small-cap buyouts coupled with operational improvements, BMC has delivered exceptional returns over its 20+ year history. Its proven investment strategies and deep expertise in the small-cap space give it an edge over larger, more unfocused private equity firms.