Collaborative
Through two generations of Marwit Partners, good economic times and bad, our first two questions are always the same – “Who are we backing?” and “Why should we back them?” Like most private equity firms, we believe that exceptional Operating Managers are the most important drivers to building successful companies. Simply finding experienced and qualified entrepreneurs and managers, however, is often not enough to generate extraordinary returns on invested capital. We believe that invested capital is best multiplied through Collaboration with our Operating Partners and Partner Companies – frequent interaction, the sharing of ideas and responsibilities according to expertise, challenging the status quo, and mutual accountability. The Operating Managers that we back are bred from unique stock – they embrace accountability and the challenge of meeting operating and investment goals, and are not afraid to work closely with us in areas where we add value.

Value Centric
Though the importance of “buying the company right” has become a bit passé in the private equity business, we have been practitioners of this philosophy for 40+ years and it has served us well. We have been and remain Value Centric investors and buyers. This doesn’t means that we pursue only low valuation multiple deals, mature businesses devoid of growth, or broken wing companies that can bought on the cheap. Nor does it mean that we are motivated by doing a large number of deals, or raising our next fund. To us, Value Centric investing means seeking out businesses where we believe operating performance can be improved through identifiable means and in a reasonable period of time, where we are buying more cash flow than the current ownership feels it is selling, and finally where we can apply our years of experience and network of relationships collaborating with management to create a larger number of attractive investment realization opportunities.

Responsive
A hallmark of our approach is to be one of the most Responsive investors operating in the lower middle market. A favorite saying of ours is: “We get paid for performance, not endurance.” Although each situation has its own unique dynamics, it is not uncommon for us to originate, negotiate, structure, finance and close buyout and investment transactions in 30 to 45 days if required by the circumstances of the deal. Sometimes, that is how long a selling owner has given his management team to close a management buyout in the face of an offer from a competitor whose likely purpose is to shut down the business as a part of its integration strategy. We also understand the value of a quick “No,” which our referral sources appreciate, and are not afraid to spend the time to educate an entrepreneur or referral source about other firms that may be interested in their deal if it is not a fit for us.

Creative and Disciplined
Beyond responsiveness, we are also well known for being Creative in structuring transactions, regardless of whether or not it is a control Buyout transaction, non-control Recapitalization transaction, Growth and Expansion investment, or follow-on investment. Since we invest our capital as a mix of structured equity and junior debt, our approach offers great flexibility and is built to suit, subject only to the Discipline of our Investment Focus and Approach. Our Operating Partners do not run their businesses by formula, and neither do we.

Versatile
It is one thing for an investor to be adept at creatively structuring transactions, yet quite another to consistently deliver on closing transactions. Success often requires a great deal of Versatility. A private equity firm cannot simply sit back and wait for all of the elements of a transaction to come together, and then show up with its capital at the closing. We actively engage the process and the various elements required to achieve a successful closing. Few, if any competing private equity firms addressing our market have more experience in negotiating directly with sellers, supplementing our own capital with raising bank debt, subordinated debt, or other capital to complete transactions, bridging differences between buyer and seller to get good deals done, or managing service providers towards a successful close.

Contrarian
We have a Contrarian streak that reflects the personality and investment style of our Founder and our Partnership. We don’t run with the herd. We were founded in 1962 to invest in small businesses, when virtually no professional capital existed for this market, and we have long been a source of capital for “story deals” where we alone saw value and opportunity.

We have been based in Southern California for the past 27 years, and operate in a business whose sources of capital are heavily concentrated in other regions of the country, yet there are a greater number of lower middle market businesses in this region than anywhere else. As a proven “value added” investor, we believe that there is no substitute for being in close proximity to our Operating Partners and their businesses they lead. Over many years and in varying market conditions, we have found that going against the grain can often produce outsized returns. While others have continually increased the size of their funds, causing them to compete with each other in an increasingly efficient marketplace, we have consciously remained focused on the less crowded lower middle market, operating from the perspective that as investors, efficiency is our enemy. We were investing in movie theatre exhibition firms when others were selling, and selling when others were buying. We believe that we will realize similarly outsized gains from recently becoming one of the largest Burger King franchisees in the country when many question the brand’s ability to survive. During the Internet bubble, we sponsored and invested in a number of mundane businesses, and while no one was looking, delivered consistently strong returns for our capital partners. Another axiom at Marwit is: “It’s not how many home runs you hit, but how many total runs you have at the end of the game.”

Leadership and Tenacity
Consistent with this philosophy, we also subscribe to the concept (often associated with Warren Buffet and others) that “the first rule of making money is not to lose money.” While there is certainly more to successful investing than this, experienced and successful investors never lose sight of this cardinal rule. It may or may not get you into the baseball Hall of Fame, but in private equity sometimes a Save is as good as a Win. To be successful in managing downside during the dark days that sometimes arrive, an investor must provide Leadership to its management partners and, often, to its co-investors. Tenacity and Persistence, which are not often associated with Private Equity firms, are two of Marwit’s longstanding traits. We have always believed that to invest in a business, you have to be prepared to own the business. There are no easy write offs at Marwit Capital.

Integrity
Lastly, there is one investment principle we adhere to that serves as a guiding light for all that we do. Integrity. For our Investors, this means serving as trustworthy stewards of their capital, communicating with them frequently whether good news or bad, and reporting to them with complete transparency. For our Operating Partners and Partner Companies, this means delivering on our commitments at the outset and throughout the life of an investment.