Independently Sponsored: LP First Capital

Before starting LP First Capital, I was a serial entrepreneur who started and sold multiple businesses for over a decade. I’ve had a lifelong dream of starting a private equity firm, so in 2018, I founded LP First Capital, a private equity firm with the goal of specializing in partnering with family or founder-led, privately held companies in the United States.Our first major milestone as a firm occurred because of the COVID pandemic. Prior to COVID, we had pulled together several dental practices in Texas for what would have been our first platform as a firm. Unfortunately, given the challenges presented to dental offices at the start of the pandemic, we were forced to set this down and pursue other ideas on our whiteboard. While disappointed, we started thinking about “recession-proof” industries that were still highly fragmented, and eventually landed on commercial landscaping and commercial HVACR/plumbing as two separate platform ideas. To find our first opportunities in both industries, I hit the road with my business partner, Gabe, and family (wife and four (yes 4) little girls) to visit operators across Florida and the broader Southeast. Looking back, I think holding in-person meetings during the peak of COVID turned out to be a huge advantage for us. We were able to meet with several impressive operators and found our platform investments for what is now United Land Services and Flow Services Partners in Fall 2020 and Spring 2021, respectively. Since 2018, the team at LP First Capital has closed on 32+ add-on acquisitions across 6 platform investments in commercial, consumer, and education services, and operates with 6 investment professionals and numerous operating partners today.

What is your investment thesis or value proposition?

We prefer to invest in highly fragmented, non-discretionary service industries with stable cash flow streams and attractive entry multiples. We focus on opportunities where we can immediately create value from optimizing marketing, improving personnel training and retention, negotiating vendor discounts, consolidating back office/IT, etc. We think of ourselves as an extension of our management teams that are here to support and help define and execute strategic initiatives.  

Any notable differentiators for the firm?

We have found success thus far developing an investment thesis, sourcing off-market opportunities, and building a management team to execute. We typically spend anywhere from 6–12 months prior to platform formation finding an industry we like and sourcing the right opportunity and management team to build around.

Our investment in OpenRoad Collision is a great example of this approach. We spent much of 2021 researching and networking with industry advisors and executives to better understand the collision repair industry (i.e., consistency and frequency of automotive accidents generates stable cash flow streams with high predictability), and refining our acquisition approach (i.e., acquire quality, cash flow positive collision repair shops that are accretive based on geography and insurance relationships). We evaluated and visited over 50 collision centers before finding our platform acquisition in Car Crafters, the largest independently owned collision center in New Mexico.

What are you looking for, and where are you seeing opportunities?

We like to find smaller businesses that are untouched by institutional investors and find ways to make these companies more profitable and grow faster. Over the next several years, I believe we will (and already are) seeing a shift to smaller family businesses where aging business owners want to ensure a future for their companies after they are gone. This presents a tidal wave of opportunities to pursue across a broad range of sectors.

Finally, can you regale us with an interesting or funny M&A story?

We have a few we could tell but one that stands out involves a goat. There was an owner that we met with once that was very frugal.  He had a water detention area on his property that the city required him to mow.  He got some quotes to mow it but was unhappy with the quotes, so he decided to get a goat and keep it in the fenced off area to mow it. This goat became somewhat of a mascot to the business and all the employees fell in love with it. When he gave us a tour of the property, he showed us the goat, and the owner got in the pen with the goat and grabbed the goat by the horns. The goat sort of grunted and he wrestled with it. We were quite surprised to see this take place. It was one of those experiences you will never see again, and we joke about it from time to time.

A bonus sixth question! Tell us about your experience working with Trivest.

Our experience working with Trivest has been great. First off, big shout out to the team at Trivest. Some of the best human beings out there in the world. Getting to work with people you like and respect is a blessing. Second, I think the Discovery Fund is very innovative and solves a big gap in the market for independent sponsors. The Discovery Fund is inherently thesis driven and open to starting small, which works well with our approach as a firm. The $1M EBITDA threshold allows us to get creative and flex our operational skill set, providing a runway for out-sized returns. It’s a good example of the flexible approach Trivest takes, and how it pays off.