Cambria seeks to generate long-term capital gains for itself and its co-investors by working closely with entrepreneurial management teams to build the value of the enterprises in which it invests. Key elements of the philosophy underlying Cambria’s investment program are:
Quality Businesses:
Cambria seeks to limit risk and enhance returns by focusing its attention and capital on fundamentally sound and durable businesses. Typically, the firm’s first investment in an industry will be in a company whose historical margins and profitability demonstrate a strong market position. Add-on acquisitions may be facing short-term financial or operational setbacks, but must still be solid, defensible businesses.
Prudent Capitalization:
Cambria will employ leverage only at a level its principals and management believe is appropriate to the operating and strategic plans of each business — an approach which recognizes that the primary drivers of value creation must be operational and not financial. Reflecting this approach, Cambria has pursued transactions ranging from all equity financings to highly-leveraged transactions. In every case, Cambria seeks a capital structure which will provide a company with reasonable flexibility to take advantage of unforeseen opportunities and to accommodate temporary setbacks which may arise. And, not least, in many of its investments, Cambria has invested further capital to help sustain a company facing adversity, to fund growth initiatives, and/or to pursue strategic acquisitions.
Aligned Interests:
Cambria believes that aligning a management team’s interests with its own and those of its co-investors is essential. Cambria allows executives to invest in the companies they manage and will generally provide equity-based incentives to top management to allow them to participate meaningfully in the value they help create. Where appropriate, financial and other incentives will also be developed for broader employee groups.
Strategic and Operating Orientation:
Cambria believes that the most effective means to generate attractive investment returns is to create value at the operating level through sustained growth of operating earnings. Thus, Cambria pursues situations in which management and the firm’s principals see the opportunity to produce both short- and long-term improvements in the business through a combination of growth strategies, cost management programs, technology initiatives, and strategic acquisitions.
Strong Management:
Cambria believes that the most critical determinant of a portfolio company’s on-going success — and therefore of the success of Cambria’s investment in that company — is the company’s management. Strong management teams are typically already in place or are recruited specifically for each transaction.
Active Role for Cambria:
Cambria will play an active role in its portfolio companies, beginning in the pre-closing stages when its principals work closely with management in the development of a plan for the business. Once an investment is made, Cambria does not generally play a role in the day-to-day management of a portfolio company. However, consistent with their role as lead equity investors, Cambria’s principals and their associates will participate actively at the board level and, by creating operating partnerships with management, employ their expertise, knowledge and relationships to benefit the business.