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Our Firm

Prodos Capital Management LLC (“PCM”) is an investment firm focused on North American lower middle market companies. Under the right circumstances we will pursue investments on a global basis. PCM is not a traditional private equity firm and this gives us several degrees of flexibility on our investment strategy, structure, hold periods, and target industries.

We seek companies with solid foundations in the marketplace and (typically) in need of a more institutional business framework.

Our strategy is hinged on identifying outstanding entrepreneurs/management teams, match them with the right companies, and partner with them to create long term, sustainable value. Our investment horizon is not constrained by formulas or contractual provisions imposed a priori by our investor base.

We structure our transactions to create the right incentives for both owners and managers; we strive to make sure that our companies are optimally capitalized and that the right framework is in place to ensure that all efforts are being channeled in favor of collective value creation.

We are industry agnostic, but the common denominator across our investments is represented by strong, partnership-driven managers and sound long-term strategy.

Approach

The partnership mindset is embedded in everything we do as we strongly believe in the ability to leverage human capital.

We see ourselves as additive partners (not day-to-day managers): we thrive in combination with management and/or owners to augment the reach and depth of our organizations. In fact, we find our approach to work best when founders/owners and management realize that outside resources -operational, financial, managerial- are necessary to achieve the next level of success.

Therefore, we are particularly (but not exclusively) attracted to investment opportunities where management and/or owners will commit with us to the next phase of development.

In every investment we pursue, we take great strides to ensure that we are bringing the right elements to the table. We call this our “angle” and it may be in the form of an industry expert, a strategic co-investor with valuable insights and relationships, financial capabilities, M&A expertise, and/or access to global markets.

The strategic roadmap is devised and set at the outset, at which point our primary responsibility is to act as the catalyst to ensure proper, timely execution.

Contribution

PCM will not get involved in day-to-day tasks unless it is required by extraordinary circumstances. However, our team will be intimately involved in all aspects of the businesses. Our mandate dictates that we assist management and drive the execution of our investment strategy.

We want management teams to have the freedom to operate the business autonomously and rely on us for anything ranging from acting as a sounding board, assessment of business development opportunities, hiring, to implementation of specific plans.

Our participation will likely result in significant improvements in business development, cost savings, and operating improvements, as well as financial reporting, banking relationships, strategic planning, and corporate governance.

To make sure we provide our partners with a unique angle into the investment, we encourage critical thinking and unbiased questioning during the due diligence process; therefore our impact to the organization may also derive from bringing a strategic co-investor, or signing up an industry veteran to the board of directors, or opening doors to key customers or vendors.

Investment Process

Owners have a business to operate and a sale or financing process can be overwhelming: that is why our underwriting process is designed to be non-disruptive and actually enriching to the organization. It is not uncommon that the owners we deal with engage in an M&A process for the first time ever, often selling control of a family-founded and family-run enterprise. We understand the needs and concerns of sellers in this situation.

Typically we start the process with an exploratory conversation with management; if the right connection is confirmed we will visit the company and review operations on site.

After the initial due diligence is completed, we would promptly present an indication of our interest. At this stage we would have identified the top three, most critical elements of the investment thesis, which will be addressed as part of the formulation of the investment terms.

Next we would seek to enter into a thorough, exclusive letter of intent before engaging into the final, more detailed, and often confirmatory due diligence (market research; quality of earnings; competition, customers, and vendors).

Partnership

Our philosophy is to build strong, genuine partnerships with business owners/founders and management teams to ensure the achievement of our collective investment thesis. Very often, our involvement represents the first non-family owner in the businesses.

We believe in the benefits of leveraging human capital and when making an investment decision we carefully craft architecture for the organization that is primarily intended to channel our joint efforts toward the same shared goal: accelerate profitable growth and build long-term economic value.

This partnership mindset permeates across our whole ecosystem, and includes beneficial relationships not only with management teams, but also co-investors, financial partners, operating partners as well as the deal community and our global partners.

With Owners:

  • PCM will assist in transitioning the ownership and providing liquidity to the owners of a business in one or more steps
  • We can be creative in how we design transaction structures and partnership arrangements with existing owners
  • We believe in protecting the "heritage" of the franchise and culture of a business created by the owners/entrepreneurs

With Management:

  • PCM will work closely with management to develop and execute the strategic plan
  • Focus on business development and strategic transactions such as add-on acquisitions
  • We do not seek to run day to day operations
  • Institutionalize operating, financial, management and IT systems

With Deal Partners:

  • PCM seeks value added investment partners
  • Flexibility in structure and investment time frames are preferred
  • We will typically manage the deal and due diligence process
  • We will act as fiduciary to all capital
  • Governance will reflect capital commitments
  • Seek alignment of interests and economics

With Operating Partners:

  • PCM typically brings in an operating partner during the assessment period and throughout the investment period
  • Operating partners could, based on the circumstances, become part of management, act as a consultant, and/or serve on the Board
  • Operating partners will leverage their industry knowledge, network, ability to work with management to enhance the operations, profitability and sales growth
  • Operating Partners are an important deal source for PCM

Guiding Principles

At PCM, we strongly believe in protecting and enhancing our reputations

We apply the same principles in our professional lives, and therefore our pledge to the deal community, sellers, managers, and our partners is to never betray the following prin-
ciples:

Honesty

No legacy is as rich as honesty

Fairness

Expect nothing less from us than actions taken according to the greater wisdom of fairness

Chivalry

Always do the right thing and seek inspiration in the right reasons

Best in class

Our work shall always be measured against the highest standards of quality