Philosophy

StoneBrook Capital, LLC offers a Unique Approach to Private Equity.

After nearly 15 years of leading acquisitions of profitable privately held companies that generate sales of $10 to $40 million, Clinton E. Kasten founded StoneBrook Capital to bring a unique pool of talent and private capital to middle-market companies. More specifically, we provide owners of select service-based companies with $3 to $10 million in annual revenue the opportunity to complete a sensible transition of their business while also completing a legitimate transaction.

From our perspective, for years, the overall market has fixated on larger companies and graciously rewarded the owners of larger companies for their accomplishments. However, how does an owner of a solid, cash producing middle-market company complete the transition of his/her business to a party qualified to run it and at the same time receive adequate monetary consideration for his/her accomplishments? It is not as easy as it should be, and StoneBrook seeks to fill this void in the market.

As a tightly knit group of former owners of various businesses, we believe the key to creating value is to help companies that are already good become even better. StoneBrook’s managers and Advisors believe that a select number of such solid middle-market companies will immensely benefit from our commitment of skills, experience and capital during their transitions into larger, more successful organizations.

Through its Unique Approach to Private Equity, StoneBrook provides a skilled and well-capitalized group that facilitates the transition of companies that are hard to buy or sell. StoneBrook also implements a series of Basic Strategies that offer its stakeholders a disciplined route for accessing the potential returns the private equity market can provide.

Basic Strategies >

Basic Strategies

StoneBrook actively seeks to create value in middle-market private companies in three basic ways:

1) By Acquiring and Growing Companies with a High Level of Service. There are many service-based companies that may be able to accelerate their growth with the hands-on support and capital of StoneBrook. Because every one of these situations can be all-consuming and complicated, we limit our participation to a select few. See “Service-based Companies.”

2) By Investing in Other Opportunities. In many situations, great people need only that “something extra” (such as capital or experience) to bring their dreams to fruition. StoneBrook can fill such a void, in either a large or small way. See “Other Opportunities”.

3) Through appropriate levels of Management Support. The StoneBrook Team has extensive experience in actively supporting the daily management of companies in which it has invested. We expect to continue to expand this role in current and additional holdings. We are not a group of passive investors; instead, we will do what it takes to help owners achieve maximum results. See “Management Support”.

< Philosophy

Why the particular interest in Service-based Companies?

StoneBrook's managers and advisors passionately believe that a well-organized service company, which provides effective solutions and products in a professional manner through a motivated team, will thrive long-term.

We are committed to hands-on basic service businesses (including those that offer products) because:

• Service companies have the opportunity to apply the world’s best technologies and techniques. Such inevitable technical changes do not render a service-based company obsolete, but instead drive it to become more adept at meeting the needs of its customers.
• Basic service companies cannot be “off shored”. Unlike manufactured products, that someone overseas will always be willing to make for less, services must be provided on location in the community.
• These companies do not try to distribute to the masses, making them less likely to be run over by Big Box stores.
• Most service companies do not have prohibitive barriers to growth such as an endless need for capital.
• The service sector may be one of the last segments of the market to consolidate in a meaningful way. Does that mean it will consolidate eventually? No one really knows. But, in the event it does, StoneBrook is prepared to effectively position its holdings.
• Many service companies could grow “to the next level” if they could get the right “mix” of people, vision, capital, and other resources.
• In the end, regardless of interest rates, globalization, changes in technology or other macroeconomic factors, StoneBrook believes that a well-organized service company run by energetic people who are “good to do business with” will thrive.

StoneBrook also believes that many of these quality companies can be hard for the current owners to transition. Service-based businesses can be great to own (because they tend to provide nice cash flow), but can be very difficult to sell (and therefore to buy). An ideal suitor for this type of company possesses a rare combination of skills, experience and capital. For instance, the smallest companies can often be bought, sold or financed through individuals, local banks and/or the SBA. Larger companies can attract big-time capital providers of all sorts. But, who is capable and willing to work in the areas of hands-on smaller middle-market companies that provide basic service-driven solutions? StoneBrook purposefully targets companies that are classic “tweeners” in size that have been largely ignored.

Through its Unique Approach to Private Equity, StoneBrook offers valuable skills, experience and capital to fill this void in the market.

What "Fits" >

What situations fit best with StoneBrook?

Of course every situation is different, but in StoneBrook’s experience these circumstances can create the best fit:

• An owner who has tired of his/her business. In reality, many people need change to realize their full potential in life. StoneBrook can bring new energy and vision to a company before it stalls. Everyone benefits.
  
• An owner who would like to see the management of his/her business transition to chosen operator, and wants a quantifiable transaction. Business owners often know someone within the business who would take good care of the company, but who may not have any money or transaction experience. Although an owner might be willing to turn the business over to this well-qualified operator as a gift, that may not be the most appropriate or prudent transition for the business or the new owner. StoneBrook will work in concert with such owners and well-qualified operators to facilitate an orderly transition AND an equitable transaction.
  
• A company needs capital for growth. Many areas, including receivables, inventory, service trucks, equipment, adding products/services and opening new geographies can consume cash. At some point, most companies need a deeper pool of resources to support growth. StoneBrook has proven its ability to access various types of capital.
  
• A company needs something more to achieve its potential. Often the entrepreneur with the skills and fortitude to start a business from scratch is not the same person who knows (or wants to know) the best path for perpetual growth. If a “hunter” tries to become a “chef,” the results are not always good! StoneBrook has fine-tuned its skills and resources to build a company that has an established base.
  
• Internal conflict, perhaps between partners, has stifled growth . The marketplace is tough enough that most companies cannot move forward if they are not in harmony. StoneBrook can be the objective 3rd party that can help resolve disputes and free an organization for growth.
  
• It’s just time to sell. An owner may feel the business has peaked in its current cycle, or may have some other pursuits in mind, or might like to see another person move the business forward or may simply not want to take another step in the current direction. StoneBrook provides the unique balance of understanding, patience, vision, sense of urgency and drive needed in these sensitive situations that require skills, experience and capital.

Regardless of the situation that stimulates the fit, StoneBrook expects to first work with individuals within the company. These people are often by far the most informed about a company’s strengths and weaknesses. Such collaborative efforts with people at every level in the company should provide for the overall development of everyone in the organization and provide rewards for those who play the most prominent role(s) in growing the business.

StoneBrook can provide daily leadership and/or recruit needed talent. However, based on many years of experience, we prefer situations that initially present a legitimate candidate for the primary leadership position. StoneBrook loves to work with hands-on people who know a business well, but who may not yet have had the education, financial resources and/or the opportunity to fully develop their leadership potential. We want to provide these leadership-ready individuals with a unique and rewarding opportunity of a lifetime. Through hard work and performance, these individuals can dramatically increase their regular pay and participate in the capital appreciation of the company.

< Why

How to Improve >

How does StoneBrook expect to help improve a Service-based Company?

Each business is unique and presents its own opportunities, but many service-based companies can dramatically improve in at least three general ways:

1) Enhanced Organization – most entities evolve over time. As such, it is difficult for daily management to retain an objective view of what makes the most sense for every aspect of the organization. An outside entity can suggest improvements in the areas of scheduling, accounting, purchasing, customer databases, hiring/training, sales & marketing systems and even the basics of who reports to whom. Such changes can often free a company to grow. Based on years of observing both effective and weak organizations, StoneBrook is convinced that being able to execute every task well is essential if a company wishes to become a top performer. This is especially true for any company that competes on a relatively level playing surface in which their competitors offer similar products and services.

2) Proactive Marketing – Yellow Page ads are not enough. Most service companies have tremendous potential to develop simple systems that will allow them to effectively sell themselves. Many service companies need the discipline to effectively use sales calls, mailers, telemarketing, customer referral programs, trade shows, technician incentives, sponsorships, up-selling opportunities, free press and countless other tasteful ways to proactively approach customers. Within a few years, StoneBrook believes such measures will not only facilitate tremendous growth, they will be essential to survival as the competition becomes more and more sophisticated.

3) Extension of Products & Services – Most customers work hard to find a company they like doing business with and would prefer to simplify their base of providers. With an appropriate level of effort and capital, most service companies can strategically develop closely related products and services as well as expand geographically through in-house development or by acquiring another well-established entity. StoneBrook has extensive experience in planning and executing this type of growth.

In spite of the ideas set forth in this web site summary, we realize that companies are like people: each one is different. We do not have any pre-conceived notions about what the best opportunities will look like, what companies might need or the ways in which they may be improved. As we hold dear any companies we become involved in, StoneBrook will invest the time and energy to understand all the issues facing a company and its people. Often, the solutions themselves are easy. Identifying the true ailments is the hard part!

< What "Fits"

Summary >

Summary

StoneBrook Capital, LLC is committed to its Unique Approach to Private Equity. We will apply our broad base of skills, accelerated experience and capital to acquire and improve service based companies so that:

1) An integrity-based owner may effectively transition his/her business to similarly minded principal(s) under equitable terms & conditions

2) A mutual understanding of trust and hard work can develop between employees of the company and its new owner to preserve viability

3) Gradual improvements can be made to allow the business to thrive long-term

4) All stakeholders can equitably participate in the future of the enterprise.

< How to Improve

Over the years, business (like life) has proven there is no single path to success. We have seen and participated in various ways in many ventures that realized growth and prosperity by combining the right components. In our wonderful USA, the right people with drive and a sense of opportunity can achieve extraordinary results.

StoneBrook provides a systematic means by which unique opportunities can be assessed and resolved. Although we do not aggressively pursue the following alternative opportunities, we may consider situations including:

• Helping an entrepreneur get started. Although many of these self-starters will not make it, a few will. We find such successes to be very rewarding for all involved.
  
• Aiding a company in distress. Although StoneBrook does not consider itself to be the best party to fix most turn-around situations, a special few may fit particularly well.
  
• Facilitating an ownership transition. Even if there is not a majority ownership opportunity for StoneBrook, we may help an entity transition to an owner of its choice. We have a tremendous amount of experience in setting up situations that work, identifying hidden pitfalls, dealing with immense complexities, financing transactions (debt, sub-debt and equity) and in facilitating post-close transitions. We do very well in these situations and truly enjoy seeing these difficult tasks completed well.
  
• Small real estate projects. Nothing big or flashy, just a few small projects that really make sense.
  
• Facilitating outsourcing. Through a wide-ranging network, StoneBrook may be able to facilitate the growth of a business by introducing it to parties who could dramatically improve their cost competitiveness.
  
• Many other situations other than get-rich-quick schemes. We do not believe in the concept and will not support anything related to such a scheme.

StoneBrook is very selective in the other opportunities it will consider. Generally, the closer to home, the better we know the key players, the more clearly we understand the opportunity, the more attractive the risk/return, the more likely we are to become involved.

Potential Role

As an experienced and active participant in a number of privately held companies, StoneBrook expects to expand its role in current and future holdings in order to maximize results.

StoneBrook’s involvement in companies in which it has some type of ownership interest can include:

• Supporting operational projects – StoneBrook has experience in overseeing organizational change, leadership transitions, enhancing various information systems, developing proactive marketing programs, recruiting/hiring/training key talent, streamlining various processes, facilities expansion and many other activities essential to moving a business forward. Although StoneBrook is capable of providing daily management, more typically such a role would either be a transition to a longer-term solution or a response to some type of crisis.
  
• Raising capital – in addition to sensible acquisition financing, portfolio companies often need larger or re-structured financing solutions to allow for growth. StoneBrook has extensive financing capabilities, in all forms of capital, for most forms of businesses across the USA.
  
• Letting the operators operate – sometimes, it’s just best to let a natural born leader and his/her team do their thing. A harmonious status is usually the best indication that things are going well!

Examples >

Recent Examples

Some examples of current or recent portfolio companies, held and/or serviced by StoneBrook and/or its principals, include:

Big J Enterprises					WoodMarc

Interstate Group		BHS		Freeman
		Bulk Handling Systems

< Potential Role

Manager

Clinton E. Kasten: As the Manager of StoneBrook Capital, LLC, Clint makes the final decisions for StoneBrook.

Clint has nearly 15 years experience in making and managing private equity investments. In 1997, Clint assumed primary responsibility as manager in his prior firm, Kasten Group, LLC. By developing a unique vision and executing it well, he led that entity to become one of the country’s preeminent private equity firms.

Until March 2005, Kasten Group specialized in working with proven operators to find, acquire and grow an array of companies across the USA. Typically, the acquisition targets generated annual revenues of $5 to $30 million at the time of close. Over the firm’s 25 year history, acquired companies grew at an average of about 15% (essentially doubling every 4 or 5 years). Kasten Group (or entities related thereto) initiated the acquisitions, arranged all the financing, managed the closing process, held minority ownership positions and supported post-close growth in active and/or passive ways. As manager of this firm, Clint retained final decision-making authority for 8 years.

StoneBrook’s mission is a conscious effort to improve on the former successful business model of Kasten Group. StoneBrook believes it has improved on the proven model by allowing each company, current owner and situation to drive the ultimate solution. It also believes that its current focus on the middle market and harder-to-do transactions involving service-based companies provides value that fills a void in the market.

Clint holds a Bachelor's Degree in Business from the University of Iowa and a Master's Degree in Business Administration from St. Louis University. A detailed resume, specific examples and references can be provided upon request.

Advisors >

Advisors

Curtis A. Kasten: As the founder of Kasten Group in 1979, Curt pioneered the concept of partnering with proven operators to acquire and grow smaller middle-market companies. Although he relinquished control of Kasten Group to his son Clint Kasten in 1997, Curt’s foundation, ideas, vision and ongoing input was critical to Kasten Group’s success. Curt fully supports the evolution of StoneBrook’s business concepts and provides ongoing advice and counsel based on 25 years of helping private companies in transition.

 

Chadwick A. Kasten: In spite of being a) an attorney b) a permanent resident of New Zealand and c) Clint’s brother, Chad is a valuable advisor to StoneBrook. Prior to his relocation, he established a thriving Merger & Acquisition-based practice and was a significant contributor to the success of Kasten Group, LLC. Chad has had a unique level of in-depth exposure to many companies, the influencing economics and ownership transitions. Chad demonstrates a remarkable level of creativity in finding solutions that work, and has the unique ability to see a “bigger picture” and the drive to see projects completed successfully.

Please note: Advisors may offer advice to StoneBrook, but will not have managerial authority over the decisions of StoneBrook.

< Manager

Others >

Others: On a less formal and as-needed basis, StoneBrook has access to experts in many fields.

Through a range of experiences, StoneBrook is blessed with ongoing relationships with a number of successful entrepreneurs and their operating teams. These proven business managers provide incredible perspectives on how to best run and grow various companies. Several of the companies run by these individuals have grown from $10 million to $40 million or more in less than 5 years.

StoneBrook also has access to a wide range of professionals available to provide task-specific services. We have purposefully developed this pool of available advisors to cover the gamut of information systems, accounting, marketing/sales, safety, risk management, benefits, recruitment and other areas. StoneBrook may formally engage these advisors, or seek more general counsel from these trusted sources, as the situation dictates.

< Advisors

StoneBrook Capital, LLC	(p) 417.882.9889
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Springfield, MO 65804	admin@stonebrookcap.com