Duane Street Capital

Investment Criteria
Investment Structure
Industries of Focus

Duane Street Capital's investment strategy is both disciplined and opportunistic. We focus on fundamental business criteria, but we also depart from convention to pursue compelling situations. Our flexible capital base allows us to customize the structure of an investment to meet the needs of any business across a variety of industries. Our founder leads a fast and efficient investment process which is enhanced by the extensive experience and network of the Duane Street Capital Advisory Partners.

Duane Street Capital seeks to make investments in established companies with sustainable competitive positions. We like companies that are experiencing strong growth or that are poised to grow. Most of all, we want to find companies that can benefit from our Experience, Energy, and Equity capital. Attractive opportunities will satisfy many of the following criteria:

General

At least 3 years of continuous profitability (no start-ups)
Recurring revenues from a diverse customer base
Defensible market position
Multiple growth opportunities

Financial

EBITDA of $2-$8 million
Healthy operating margins
Low capital intensity

Seller

Owners seeking to exit or reduce their involvement in the business
Owners needing capital for growth
Corporations looking to divest non-core assets

We believe that the structure of an investment should be dictated by a company's needs. That is why we provide the flexibility to invest in a business for today and for its future potential.

Buyouts

Through collaboration with business owners and managers, we develop specially tailored exit strategies that provide owners fair compensation for their enterprises while working to ensure the long-term health of their business’ legacies.

Recapitalizations

We provide liquidity for owners looking to sell a majority stake in their businesses while allowing them to retain significant equity positions. Our flexibility allows owners either to use this event to reduce their involvement in the operations of their businesses or to maintain operational control.

Growth Capital

We will use every financial and management resource at our disposal to help a company achieve its potential. We marry our Experience, Energy, and Equity capital to provide businesses with complete growth solutions.

Our primary objective is to invest in great companies. We focus on service businesses spanning many industries and business models in the United States.

Integral to the Duane Street Capital investment process is our ability to listen and learn. As perpetual students of business, we are constantly broadening our knowledge of attractive investment areas, often outside of the service sector.

Below are just a few of our current priorities:

For-Profit Education

As of 2008, BMO Capital Markets estimated the For-Profit Education industry to have annual revenues of $108 billion or just less than 10% of the $1.2 trillion spent on the broader Education Industry. The face of education has been changing over the past 10 years due, in large part, to government funding programs, third party funding options, and new business models for education delivery. Technology has enabled schools to more efficiently and cost effectively deliver content to students; creating a new level of business scalability in a traditionally brick and mortar industry. Duane Street Capital is focused on businesses that achieve healthy ROIC’s in the education industry through the effective management of student acquisition costs, program retention rates, and maximization of a student’s lifetime value.

Businesses we like:

K-12 schools
Vocational schools (Title IV and non-Title IV accredited)
Corporate training
Special needs education
Online education (competitively advantaged content or delivery)

Pet Industry

According to the American Pet Products Association (APPM), the population of dogs and cats in the United States is over 160 million; penetrating more than 60% of US households. The pet population has grown more than twice as fast as the human population over the past 10 years and annual spending on the companion animal industry has grown at a 7% CAGR since 1994 compared to 5% consumer spending growth in the US during the same period. Today, consumers spend over $40 billion annually on the pet industry. We believe that feeding this growth spending is a trend towards the humanization of animals. With the ubiquity of products and services targeting pets (and their owners), it becomes increasingly easy to think of an animal companion as a member of the family. The AVMA reports that 49.7% of the pet owning population consider their pet a “family member”. Duane Street Capital is actively pursuing investment opportunities pet industry.

Businesses we like:

Branded specialty products
Pet Health Insurance
Scalable business services

Healthcare

The US spends $1.9 trillion in the healthcare industry annually or 16% of GDP (staggering when compared with spending of 5.2% of GDP in 1960). Healthcare spending has been growing rapidly and is expected to continue its trajectory as the baby boomer population continues to age, government changes to healthcare policy materialize, and technology/innovation continues to advance the delivery of medical care. The US hospital system provides close to 1 million beds that serve 37 million patients per year in over 5 thousand hospitals.

Businesses we like:

Revenue Cycle Management
Medical product distribution for conditions that promote recurring revenue: oxygen, diabetes, etc.
Limited or managed reimbursement/regulatory exposure (private pay patients, pharma or provider services, etc.)
Medical tourism
Healthcare IT: Electronic Medical Records / Practice management software
Home healthcare

Consumer Brands

Businesses we like:

#1 or #2 brands in an industry or niche
High growth brands with low market penetration

Financial Services

Businesses we like:

High ROA specialty lenders
Accounts receivable management
Niche insurance brokerage (regional or industry focused practices)
Life settlement services (LE, Portfolio Management, etc.)

Publishing / Media

Over the past year marketing spend has contracted by approximately 15% as the decline in GDP has been amplified in companies' advertising budgets. Multiple studies indicate that over the past 6 years marketing spend has been shifting from advertising to direct marketing and this trend is expected to continue. The key drivers of change include the strong demand for measurement and accountability, the desire to “own” the customer relationship through direct marketing, events, their own websites, and shifting dollars to in-store presence and promotion (i.e., at point of purchase). Additionally, advances in technology and infrastructure are democratizing consumers’ choice of media consumption – impacting what, where and how media content is consumed. These changes are supporting the public’s voracious appetite for media consumption, both increasing and fragmenting total consumption. Duane Street Capital is focused on businesses that are appropriately positioned to capitalize on these trends.

Businesses we like:

Local content generators (community newspapers, radio, etc.)
Direct response advertising and consulting