Crescentia Capital

The lower middle market has long been perceived as a complex investment landscape due to its high degree of fragmentation, characterized by small, independent businesses owned by founders or families. This dispersed market presents a variety of players and unique business models.

Crescentia Capital sees a significant opportunity for long-term value creation within this space, given its three decades of experience initially with Legg Mason Merchant Banking and continuing as the equity buyout business of Calvert Street Investment Partners. Based in the greater Baltimore area, Crescentia has since leveraged its deep investment acumen and spirit of partnership to gain a comprehensive understanding of the market. Success at Crescentia is driven by its three-pillar investment approach—sector-focus, thesis-driven investment strategies and a structured value-creation playbook.

Since its inception, Crescentia has acquired over 70 companies across 24 portfolio companies. This invaluable experience has led the team to focus on three sectors that it knows well and has developed a deep network of relationships—industrial services, infrastructure services and specialty manufacturing.

Distinguishing Crescentia is its proactive, thesis-driven investment strategy. It conducts extensive in-house research in collaboration with its network of operating professionals to identify attractive sub-sectors within its sectors of focus. Crescentia then leverages its relationships and calling efforts of these executives to source proprietary deal flow, often leading to lower purchase prices than ‘auctioned’ deals.

This structured process from sourcing companies, monitoring investments and executing growth and value-creation plans is outlined and documented in Crescentia’s ‘Playbook.’ After acquiring a family/owner-operated company, Crescentia establishes a board and develops a value-creation plan that provides the details of how Crescentia, the company’s board of directors and management team will execute to achieve and monitor success. Growth can be achieved through acquisition and consolidation or organically via new products, customers, service lines and by expanding branches or offices. This detailed strategy ensures that Crescentia consistently creates long-term value within the lower middle market.

“Our Playbook focuses on creating a supportive work environment at Crescentia and at our portfolio companies, to attract, develop and retain talent. Recognizing that our greatest assets are the people, we invest heavily in training and development to ensure our workforce remains highly proficient and motivated which is essential for our success,” says Brian Guerin, managing partner.

A prime example of its approach is its investment in the traffic safety sub-sector. After more than two years’ worth of extensive research, the firm identified traffic safety as an attractive space due to its recurring revenue streams and consistent funding for infrastructure maintenance. In 2022, Crescentia acquired a company in the Chicago area that provides pavement marking, traffic control and flagging services. Working closely with a seasoned industry expert, it successfully expanded the business by building out the management team, opening new locations and pursuing strategic acquisitions.

“A key part of our thesis-driven investment strategy is developing relationships in space by going to trade conferences, talking with industry experts and meeting with CEOs. We ultimately met Kathi Holst, who is a leading expert and 40-year operator in traffic safety. She helped enhance our knowledge, not only of the opportunities but also of the risks in the industry,” says Michael Booth, partner and chief investment officer.

Another current thesis focuses on nuclear power services. Crescentia is seeking businesses that provide testing, inspection, repair and maintenance services for nuclear power plants. The dual goal for companies in this space is to provide services to maintain these facilities in optimal condition and assist in obtaining the necessary licenses for continued operation over the next 30 to 40 years.

In line with its investment strategy, Crescentia maintains a transparent and open relationship with its investors. Regular quarterly reports, annual meetings and an open-door policy ensure that investors are well-informed about their investments.

‘Crescentia,’ means land of growth or increase. This reflects the company’s view of the lower middle market and its passion to drive investments to increase value and drive tangible success.