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Case Study

the situation

This shotgun situation was the first transaction, in September 2000, in Shotgun Fund I, we helped the operating partner buy out his 50% co-founder. The co-founder triggered the buy-sell clause the day that the operating partner was supposed to leave on his summer vacation.

The Shotgun Fund was able to respond quickly and opportunistically to a low-ball offer that had a quick turnaround requirement. It was tailor made for The Shotgun Fund as the operating partner actually wanted a new shareholder to add value at the Board level and assist with growth initiatives. Within 48 hours of our first meeting, The Shotgun Fund issued a Commitment Letter, and we advanced funding and closed the transaction 33 business days later.

The first investment decision driver related to the business fundamentals.  It did not need material capital expenditures to grow, it had a culture of profitability and a solid foundation to build on. The second investment decision driver related to the operating partner, who owned more equity than we did, so our interests were aligned from the start, and he wanted a new shareholder partner to become active at the board level to assist with evaluating strategic growth initiatives.

the investment

Rationale: Strong operator running a solidly profitable company with revenues of $18 million that didn’t require material capital spending to grow, and had a culture of profitability. In addition, interests were aligned from the start with the operating partner, he owned more equity than the fund and wanted a new shareholder partner to become an active financial partner to assist with strategy, growth and building a team. We recognized a kindred spirit who wanted to work together to build value.

 

Accomplishments: Between 2005 and 2007 Etratech acquired and successfully integrated a complementary electronics components business in China. Quality certifications were obtained in the following years. The engineering team consistently solved customer problems leading to the successful introduction of new products into new markets. The success of the partnership was based on working with the team to prioritize their ideas and bring structure and discipline to the action plans.