Vancouver-based investment company Highland West Capital has a unique strategy when it comes to private equity: think in the long term and invest your own capital.
Business partners David Rowntree, Dave Mullen and David Schellenberg run the company, which was founded in 2013, and bring a wealth of large-fund experience and company operation background to the job.
Mullen joined the office in late 2014. Having previously worked with investors to raise funds and invest that capital, he said Highland West Capital’s perspective on private equity was different, but he added that it’s what makes the company successful.
“Every time we do a deal, we invest our own capital,” Mullen said. “If necessary, we bring in some of our partner institutional investors. Because we aren’t a fund, we have a little bit of a different strategy – we have a longer-term horizon and more focus on trying to build the company for the long term.”
Mullen said he and his partners at the firm are fortunate to have had success in their other initiatives, which has left room for them to be able to invest their own resources into each deal. Because it is not a fund, the firm retains the ability to be more flexible and selective in its partnerships and management.
“Normally in a private equity fund, the partners of that fund or the managers of that fund usually invest a couple percent of the fund, so they have a relatively small equity commitment in every deal,” said Mullen. “And [in]the case of our deals, we have a much larger percentage of every deal. And in some cases we just buy the company among the three partners here.”
Mullen says he works collaboratively with Schellenberg and Rowntree in every investment, and they all stand to be equal partners in every deal. The success of the firm’s business model has drawn the interest of many groups.
“Some of the groups we look at buying like that strategy,” Mullen said. “Certainly our experience helps. We also have a fairly good network of individuals in Canada and the United States that know these industries. So we find a company we can usually tap on industry expertise to help us evaluate a deal.”
Highland West Capital’s playbook involves looking for middle-market-sized companies valued between $3 million and $10 million. The partners make a significant investment in the companies, but also seek to expand them by bringing in experts to supplement the management team, leaving room to foster the business over the long term.
Recently, the firm, with institutional investors, went out of its comfort zone and closed a deal with sawmill manufacturing and construction firm BID Group of Companies.
The company, which has 15 facilities and 1,000 employees across North America, has been a privately owned family business for 30 years. Mullen said he was glad Highland West Capital is BID’s first deal outside of the family business.
“This sort of fits our template very well. The current owners there approached us and we were able to strike an arrangement that worked for both them and ourselves.”
In addition to investing, the company also provides help with management and operations.
“We try and add value to all our investee companies, and we’ll add value in whatever way makes sense,” Mullen said. “Obviously we can help recruit and find individuals to supplement their management team. We can help them in certain aspects, whether that’s strategic acquisitions and financings, and certainly sit on the board and help the company go to the next level.”
Highland West Capital has closed two deals thus far and is looking into a number of prospects in the meantime.
“We’re a patient investor so we’re only looking to do one or two deals every year,” Mullen said. “We’re looking for …companies that we can build and hold for a long time frame. My goal would be to be able to over the next half-dozen years just add one or two companies to our portfolio every year, and maybe at some point we might sell one or two, depending on the markets or depending on the opportunities.” •