Head of Guideboat Capital sits down with Dallas Business Journal to discuss investment thesis, what's ahead

June 24, 2020

Labor markets were tight before the COVID-19 pandemic, but now that the economy is experiencing a downturn, there are opportunities for businesses to hire great people that are being let go by their jobs, said Mike Sutton, managing partner of Guideboat Capital Partners.

“The lifeblood of the companies that we invest in are great people,” he said.

Guideboat Capital is a private equity firm based in Dallas, and primarily invests in consumer, business service and specialty asset companies. The firm typically works with institutional investors and family offices, but also works with high-net-worth individuals, Sutton said.

“Our thesis in each of these situations is, if we just make prudent decisions... we can make good returns,” Sutton said. “If we make some great key decisions or get some great people in place, every now and then, we'll hit a home run too.”

One of the shop’s investments includes Buff City Soap, a retail chain that recently announced moving its headquarters from Memphis to Dallas. Sutton spoke with the Dallas Business Journal about the firm's investment strategy and its goals going forward.

How has your firm shifted its strategy in the past couple of months?

We haven't had to shift. It's a sad consequence of what's going on, but we have great businesses that have a lot of liquidity and have had the ability to weather the storm. Due to that, we're going to come out of this even better. What's going to happen to a lot of folks, and a lot of other businesses in our space, is they just couldn't weather the storm. You'll end up with a bit of a thinning of a herd that typically a recession provides. The strong get stronger… It's sad that it has to happen this way. But, we're still emboldened by our thesis and love the businesses we have.

What are the challenges that your firm has experienced as a result of the COVID-19?

A lot of what we have spent our time doing is getting a grip on the overall situation and any potential downside scenarios. We are trying to keep everybody even keel and calm... At the very least, with the exception of some of the companies that have truly benefited from this, everybody across the country is going to have a second look at what their planned spending is going forward and dig deeper into that. (We are) prioritizing what we want to do as we continue to make sure that we have a great fundamental base to survive any situation that gets thrown at us.

Is Guideboat Capital operating out of a fund right now, or are you in the midst of a fundraise?

We started Guideboat with an independent sponsor model. It's (a model) that has been actually a benefit to us, and we've never had an issue funding any of our deals. It has allowed us to cherry pick sometimes in certain situations. … We dance back and forth with the idea of whether we (should) go and raise a fund or not. But, ultimately, we love the situation, the setup we have. We have great partners that we're excited about. As long as we can continue to do that, there's no reason to change it.

What is the firm’s investment strategy in portfolio companies for the rest of the year?

We're still selective. We still want to find great businesses and great people. One thing that we always do when we invest in a company is commit to them that we're going to be there, be hands-on for at least some period of time post-closing. We're still going through that with Buff City (Soap) and helping them lay the foundation for rapid growth. If something else comes along, that's great. What we typically do is take a relationship-driven approach. We don't move super fast. We love to get to know (the people). There's always a beer test: if you love going and grabbing a beer with someone. That will always be important to us, and it won't change just because of (the) coronavirus.

This interview has been edited for clarity and brevity.

Rebecca Ayers
Staff Writer
Dallas Business Journal

Original Article Here

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