Dobbs Family HistoryThe Dobbs family has been in business since 1920 when James K. Dobbs, the father of John Hull Dobbs, Sr., entered the automobile business. This initial business was so successful it led to almost of 80 years of leadership in the auto industry as well as successful investments in…
Dobbs Family History
The Dobbs family has been in business since 1920 when James K. Dobbs, the father of John Hull Dobbs, Sr., entered the automobile business. This initial business was so successful it led to almost of 80 years of leadership in the auto industry as well as successful investments in many other industries. These investments among others include: (1) a chain of automobile dealerships; (2) Dobbs Houses, Inc., a New York Stock Exchange traded public company engaged in the restaurant and airline catering business; (3) Premier Distributing, an Anheuser-Busch distributorship operating in the state of New Mexico; and (4) Three Rivers Holdings, Inc., a Medicaid Health Plan holding company with operations in Pennsylvania, Ohio, Tennessee and South Carolina.
Dobbs Equity Partners, LLC ("DEP")
DEP is the Memphis-based investment vehicle for the John Hull Dobbs Jr. family. We seek to make long-term investments where we partner with owners to build outstanding middle-market companies. With over three generations of investing in private operating businesses, our team is highly experienced working with individuals, families, and management teams as they seek to grow their companies. We are not constrained by the necessity to continually raise outside capital or by fixed investment horizons like traditional private equity firms.
Through its team of family members and professionals, DEP is now actively engaged in both active business and passive investment management activities. DEP seeks to acquire controlling interests in active businesses that will allow it to earn a return on equity of at least 20% over a business cycle and which meet the other criteria described below.
Financial Criteria
- EBITDA: $2 to $15 million (current or potential earnings)
- Equity investment size: $2 to $50 million
- Pre-tax return on equity: 20% plus (see note below)
Note: DEP's target return-on-equity depends on its perception of the predictability of the earnings of the business. DEP seeks a 20% ROE (or perhaps slightly below) for a business which historically has had, and which the firm believes will continue to have, a highly predictable stream of earnings over a cycle. DEP seeks higher returns-on-equity for businesses whose earnings are less predictable because of known risks facing the business. In assessing DEP's return-on-equity over a cycle, the firm factors in any concrete growth opportunities and employs leverage appropriate to the business.
Company & Industry Characteristics
Because DEP places a high value on management and company culture, the firm is flexible regarding industries in which it will invest. Like most investors, DEP prefers businesses in industries which have good growth potential, which have high barriers to entry, which enjoy superior and consistent margins, which are non-cyclical and which have stable customer relationships and defensible market positions. However, DEP has repeatedly seen businesses operated very profitably by talented management teams in industries not meeting these criteria. Thus, while DEP does generally avoid certain industries (see below), it is generally willing to consider a wide variety of industries provided the right management partners will be involved.
Primary Sectors of Interest
- Business services (industrial, specialty, and tech-enabled)
- Distribution (value-added and wholesale)
- Healthcare services & supplies
- Food & beverage
- Pet (food, products, and services)
- Machinery & equipment franchises
Sectors In Which DEP Will Not Ordinarily Invest
- Speculative software & technology (hasn't achieved product-market fit or demonstrated proof-of-concept)
- Biotechnology or drug development
- Capital-intensive manufacturing
- Commodity products
- Personal service businesses
Geographic Considerations
While geographic proximity to Memphis, Tennessee is desirable, DEP will consider investments anywhere in the United States and currently owns several franchise auto dealerships and operating companies across the country.
Startups
While DEP's principal focus is on acquiring existing businesses with a record of accomplishment, the firm will consider start-up businesses. DEP views management as especially critical in start-up businesses and generally looks for management teams who have a track record of success in the type of business being considered.
Turnarounds/Distressed Companies
DEP is willing to invest in turnarounds or distressed companies provided the company involved otherwise meets its investment criteria.
Transaction Types
DEP is especially interested in management buyout transactions where management is buying out an historic individual owner of a business or where a corporation has made the decision to divest a non-core operation. DEP has expertise relating to family succession matters which allows the firm to participate in a flexible manner in a recapitalization of a business undergoing a generational change in ownership
Ownership Structure
DEP ordinarily owns businesses through a pass-through entity (generally a limited liability company or a limited partnership) which allows current distribution of profits without double taxation. This allows both DEP and its management partners to enjoy the fruits of successful operation without waiting for some kind of financial exit.
No Need for Exit Strategy
DEP's usual investment goal is to own companies for the long-term with cash distributions of profits being made currently (to both the firm and the managers) once the business is properly capitalized and current growth needs are satisfied. While DEP is certainly willing to consider exit strategies such as an IPO or strategic sale, a quick profit is not the principal goal of the firm. DEP believes this long-term perspective gives it an advantage over many potential acquirers who often have 4-7 year time horizons for getting into and out of transactions. DEP typically implements equity redemption arrangements with its management partners to allow them to achieve liquidity at an appropriate time.
Assets Available For Investment
DEP has in excess of $200 million in liquid assets available for private business investing activities. Available capital, together with prudent leverage, allows us to consider companies with an enterprise value up to $200 million in many industries.
