We primarily buy from founders and smaller institutional investors, partner with excellent management teams, and work with a wide range of deal sources to leverage our industry expertise and executive network to be excellent investors in and stewards of lower middle market businesses.
Investment Criteria
We have spent the last two decades focused on lower middle market healthcare and business services in North America.
Company Attributes
- Sustainable competitive advantages
- Attractive growth opportunities
- Track record of strong financial performance
- Experienced management team
Size
- Enterprise Value: $50 to $300 million
- Equity Investments: $25 to $150 million
- EBITDA: $5 to $30 million
- No minimum for add-ons
Investment Themes
Market
- Continuing and growing trend towards outsourcing
- Secular growth
- Low cyclicality
Company
- Sustainable competitive advantages
- Low cost of service, high cost of failure
- High free cash flow margins
- Recurring revenue
90+
Investments
$1.7B
Invested
20+ years
Working Together
These are some of the sub-verticals where we spend most of our time here at Northlane. The themes discussed below are representative – the work we have done in each of these markets gives us insight into adjacencies to each sub-vertical.
Healthcare
We are motivated by the following trends in healthcare:
- Aging of the population
- Increased use of medical care
- Cost containment and efficient management of healthcare equipment and supplies
- Results-oriented medicine
- Pharmaceutical research and development
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Behavioral Health
We invest in businesses that offer and support effective care delivery models to patient populations.
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Dental Services
We invest in dental providers, including service organizations, laboratories, distributors and suppliers.
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Employer Health Benefits
We invest in administrators of healthcare benefits and cost containment services.
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Healthcare IT
We invest in healthcare IT providers with a focus on tech-enabled services.
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Lab Services
We invest in businesses that provide testing, consumables, equipment, and services within lab settings.
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Medical Device Outsourcing
We invest in outsourced medical device manufacturers that provide support across the value chain (research and development, design and engineering, final assembly, and training).
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Pharmaceutical Services
We invest in businesses that provide outsourced services to pharmaceutical companies in support of drug development.
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Regulatory and Compliance
We invest in companies focused on providing outsourced regulatory and compliance functions for various healthcare subsectors.
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Business Services
We are attracted to companies benefiting from the following factors:
- Increased reliance on technology (software and automation) to augment service offerings
- Digital transformation
- Use of data analytics to automate business decision making
- Cost of containment focus driving outsourcing across all verticals
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Automation
We invest in companies that provide engineering, design, services, and support for automation applications.
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Education, Training, and Certification
We invest in platforms that provide professional training and certification across a broad range of end-markets.
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HR Outsourcing
We invest in companies that provide businesses with solutions that help manage healthcare and other employee costs.
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Insurance Services
We invest in insurance brokerages and independent agencies to build out a nationwide footprint in a rapidly consolidating industry.
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Legal Services
We invest in outsourced service providers supporting attorneys throughout the lifecycle of legal matters.
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Logistics and Transportation
We invest in asset-light transportation and logistics companies.
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Software and IT Services
We invest in outsourced providers of software and technology-enabled services.
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Testing, Inspection, Certification, and Compliance
We invest in companies that help their customers maintain compliance with various regulatory frameworks (e.g., environmental, food safety, transportation safety, information security and privacy, etc.).
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Transaction-Based Financial Services
We invest in companies that provide technologies and services that reduce the frictional costs of financial transactions.
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How We Add Value
We have employed some combination of these strategies in each of our investments to accelerate growth in our portfolio. Recognizing there is no “one size fits all” approach, we work collaboratively with management before and after closing to agree on a value creation plan.
Organic Growth
Focus on identifying multiple levers of growth including:
- Sales and marketing strategy, incentives, and resources
- New products and services
- New locations and/or geographic markets
Growth Through Acquisitions
- We have completed more than 60 add-on transactions for our portfolio companies
- We typically function as outsourced corporate development, allowing management to focus on the core business
Leverage Northlane Executive Network
- We partner with operating executives with industry-specific experience who can work with management to identify opportunities to expand profit margins
Who We Work With
We primarily buy from founders, partner with excellent management teams, and work with a wide range of deal sources to leverage our industry expertise and executive network to be excellent investors in and stewards of lower middle market businesses.
