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Episode 04 The Investor Series
Russ Lazaruk on how NCP buys founder companies and builds them into platforms
Russ Lazaruk, portfolio manager at NCP Capital Partners, a multi family office in Victoria, BC, on direct majority deals, the $3M to $6M EBITDA sweet spot, buy and build, and why valuation is where most deals break.
Buy and build
One company seven years ago, about eleven today
About seven years ago NCP bought a wear parts manufacturer with roughly $5 million of EBITDA. It has since merged about ten complementary companies into it, all part of the same value chain: the parts that wear out, like the teeth on an excavator, rollers and belts.
Companies in NCP's wear parts platform, as described by Russ Lazaruk in the interview: the original acquisition plus about ten merged in since.
sweet spot
purchase multiple
tickets start
net worth
The numbers are the numbers.Russ Lazaruk, NCP Capital Partners
Key takeaways
How NCP decides
What it buys, how deals are structured, and where they break.
Direct deals, majority control
NCP is a direct deal only shop. It prefers a majority position so it has control, makes sure the right management team is in place, and gives management part ownership.
The size has to fit
The sweet spot is $3 million to $6 million of EBITDA. Smaller companies do not justify a time consuming and expensive diligence process, bigger ones make the capital harder to raise, and in that range NCP can buy at a reasonable multiple.
Grow the platform, expand the multiple
Each acquisition is grown organically and through complementary mergers. Once a platform reaches $50 million to $100 million of EBITDA the multiple expands, so investors own a bigger company valued at a higher multiple.
Valuation is where deals break
The sales pipeline matters, but most failed deals come down to whether buyer and seller agree on what the company is worth. For a founder who built it over decades, the company is often the retirement plan, and emotion gets priced in.
Each company sits in its own LP, with other family offices and a couple of institutions co investing from about $250,000. Sector matters too: an internal thesis on the electrification of everything led NCP to a maker of dry power transformers for mine sites, factories and now data centres, which it is growing on its own because no add on it has found would match its margins.
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