Knowledge Center sets itself up for strong growth with private equity

 

President and CEO John Degory started Knowledge Center Enterprises LLC 11 years ago under a holding company, but the business outgrew that environment.

“Life was tough there because it was part of an operating company, not really a growth entrepreneurial-type environment,” he says of his company, which develops software for public safety and emergency incident management.

The owners offered a management buy-out, which Degory and a partner accomplished in 2012. But the structure still wasn’t right, as the business wasn’t positioned to invest in things like sales people.

The next step was private equity capital. A recapitalization would allow Degory to buy out his partner and retire the acquisition debt — finally setting Knowledge Center up for growth.

“I didn’t know a lot about private equity investment opportunities, other than I knew they were there,” he says. “My experiences had been more with VCs and angel investors.”

Degory was pleasantly surprised at the range of available options for a profitable company.

“We’re not a startup, but we needed to have a change in ownership to get the company moving to the next step,” he says.

Today, Knowledge Center has transitioned through its 2014 recapitalization to set itself up for a big growth year. The company already operates in 12 states, and its software, for instance, was used to manage the emergency response in Philadelphia during last year’s Papal visit and Amtrak accident.

Get your house in order with a long view

In younger companies, the CEO tends to be an owner/founder who doesn’t plan ahead.

“In a small company like this, you sometimes have to put blinders on and solve certain problems because that’s the best way to do it in a small environment,” Degory says.

But you can’t forget about where you want to be in five or 10 years. Degory knew what he needed to do, to position the business for growth, and took the steps to get Knowledge Center there.

Prior to recapitalization, however, Degory says make sure your company is in order.

“Right from the get-go we installed good systems — to the point where our private equity group says that it was the easiest due diligence that they had ever been through,” he says.