Transformative Value Capture ™
The basic investment thesis at Altair is rooted in its belief that lower middle-market companies are often classically undervalued (i.e. Captive Value). While it is apparent that there is unrealized value in companies in need of full-on operational transformation due to cash flow distress, companies that are not realizing their full potential are also subject to pent up cashflow generating opportunities that require similarly focused transformative vision to unpack Captive Value. Our natural propensity and proven expertise in the arenas of corporate finance, business transformation, and operational excellence provide for a unique combination of skills aimed at building intrinsic net worth at the enterprise level through leveraging our team’s core competencies.
Thus, we coined the term Transformative Value Capture ™ – we transform businesses that have pent up capacity to grow, that can generate substantially more cashflow via executable change management, that can benefit from a pivot into tangential market or business segments, or that are suppressed by the burdens of either an unoptimized cost structure or mismanaged balance sheet.
A fundamental tenet at Altair is that good investment management begins with mitigating risks to investor return hurdles that occur due to overpayment at purchase. Price inflation of individual or collective shares or interests in a business is rigorously filtered out of the investable universe via a disciplined quantitative approach to screening. In particular, Altair’s rigorous valuation discipline obviates the temptation to participate in the overstatement of value across entire sectors. This includes bullish investment cycles when the general market is responding to the irrational exuberance of perpetuated economic growth. On the contrary, the firm focuses squarely on transformative operational opportunities within firms that are either distressed or that lack a focus on the realization of all elements of any captive or untapped value.
At the root of this philosophy is the recognition that the valuation curve for micro-enterprises in particular, including the lower end of the middle market, tends to lag the price inflation dynamics of their larger brethren due to five major factors: i) illiquidity, ii) unrealized value due to the subjective design of the strategic plan (e.g. operators not motived to go beyond a lifestyle business), iii) underperformance in plan execution, or iv) balance sheet misalignment.