KLV Capital’s Vic Keller said his firm is in the market to make acquisitions, and already has two active letters of intent on two companies.
“We look to close in the next 14 days on a very successful company in the animal health industry,” he said. “We also have an outdoor sporting goods company that we have an LOI on.”
KLV Capital is a Dallas-based private equity firm that has two portfolio companies under its belt, Christensen Arms, an outdoor sporting manufacturer, and AUTEC Car Wash Systems, a manufacturer of automatic car wash equipment.
The private equity shop is focused on companies that fall in the technology, manufacturing, consumer product brands and other industries as well.
Keller spoke with the Dallas Business Journal about the firm’s investing strategy and merger and acquisition activity.
Your firm has letters of intent on an animal health and outdoor sporting company, how are these industries doing during this recession?
The outdoor industry and both the animal health industry have been insulated and have excelled, generally speaking, during the pandemic. These are areas that we have had expertise on staff. We have amazing operating partners that know these two industries very well. We've been focused on these industries for quite some time. But certainly they are industries that have weathered the storm during the pandemic and we believe that the way consumers view and the way that they purchase both outdoor sporting equipment and pet supplies and animal health-related products will be different given the emergence that has happened within the e-commerce industry during the past several months.
Your firm has narrowed its investment strategy, how exactly has your firm’s strategy narrowed?
Over the past year KLV Capital has had a very strong interest in products that are made in the United States. We have sought manufacturers that provide products, goods and services that are completely dependent on the U.S. economy. We continue to be very bullish on the global economy overall. But we believe that there's a tremendous opportunity ... for U.S. manufacturers to gain efficiency.
How have your firm’s portfolio companies been operating in the past several months?
The businesses that we're (invested in) have either been great through the COVID-19 times, or have started to rebound quite impressively. Our manufacturing businesses have had a little bit of a slow down, we've certainly seen the upside from what I would consider to be a pent-up demand.
I think there's a renewed sense of energy, focus and strategy within all of our portfolio companies that we had a bump in the road, and we want to make up for lost time. We're just going to have to adjust our sails for the wind to blow a little bit differently over the next several months, probably years. We're just taking action and putting strategies in place that are ultimately going to complement what we think the new economy is going to look like.
What do you think M&A activity will be like going forward?
There's a lot of speculation in the middle market and lower middle market private equity space that the capital markets are going to become tougher and that there's going to be some pretty significant headwinds in this area. We remain quite bullish on the M&A opportunities overall.
Texas is an economy of its own in some way. We believe that Texas is going to continue to grow in an unbelievably powerful way. As we've seen, in the last several months, many people from other states have relocated to Texas, that's going to increase our population density. It's going to happen a lot faster than what had been projected and planned because of the pandemic. We love Texas-based businesses, and we love growth opportunities in Texas. With that being said, we certainly are taking investments and looking at deals outside of Texas. But we feel like right now there's just a tremendous opportunity in the state.
This interview has been edited for brevity and clarity.
