Brazos Partners

Brazos Partners: the CoMark LBO

1) Would you please prepare a brief case summary?

Brazos Equity Fund, a middle market leveraged buyout group is making CoMark as an investment target for mainly several reasons. However, the LBO industry in 1990s faces several challenges. The problem Brazos and CoMark are facing now is the conflict between closing the transaction as equity or asset deal.

2) What is the investment strategy for Brazos Partners?

The Brazos Partners focuses on buyouts of U.S. companies, particularly Texas and Southwest companies, valued between $25 million and $250 million with solid cash flow and good management. Texas is considered as the 11th largest stand-alone economy in the world and has the third largest universe of public and private mid-market companies in the United States. In addition, Brazos developed the Generation Transfer Transaction (GTT), a tax-efficient structure that provides liquidity, flexible capital structure and operating control. Under such system, the managers benefit from liquidity as well as equity ownership. Beside GTT, Brazos also partnered with Maverick Capital, a large hedge fund.

3) Why does the CoMark fit into the investment style of Brazos Partners?

First, CoMark is a fairly priced traditional manufacturing business, which Brazos have significant investing and operating business, with solid cash flow and good management. Besides, Randall Fojtasek, partner in Brazos Equity Fund, L.P., is familiar with the family business model. Due diligence was rather easy since it fits into the company background. In addition, the partners are under pressure to close the deal for the first time. To summarize, there are three major advantages of CoMark. First, it is a good company with government relation in a good industry. Besides, it has diverse market segment and end users. Lastly, modular buildings are effectively avoiding downturn economy because of its low cost.

4) The founders of CoMark prefer stock deal while Brazos...