Security Capital Partners - Investing for a Secure America

INVESTMENT APPROACH

Market Opportunity and Investment Approach

Supply chain disruptions and dependence on China have led to two trends --

Firms reshoring supply chains
Congressional enactments of 2021 and 2022 -
The Infrastructure and Investment Act ($1.2 trillion)
The CHIPs and Science Act ($52 billion)
The climate and energy provisions of the Inflation Reduction Act ($379 billion).

Continued strong growth can be predicted, relatively immune to recession --

The reshoring trend is strengthening in the face of the war in Ukraine and Chinese saber rattling over Taiwan
Congress will make the expenditures contained in these and other bills in critical industries regardless of economic conditions.

Many U.S. firms operating in “Critical Industry” sectors in the lower middle market --

Are positioned to capitalize on these trends
But are in need of growth capital to build additional capacity to address this new demand --
Making critical components in the supply chain,
Operating in the Lower Middle Market, a segment with more firms and less PE competition.

The Lower Middle Market

The Firm's investment thesis leads us to believe the greatest prospects for success lie with the Lower Middle Market, a segment with more firms and less PE competition:

Lower Middle Market Companies are generally owner-operated businesses with revenue of between $5 million and $50 million.

These companies are in diverse industries and are generally profitable.

These companies often provide a niche or targeted offering/product to their end customers.

They tend to gravitate towards more recession-resistant industries like healthcare, distribution, heating and ventilation, waste management, etc.

Critical Industries

The Firm will seek to invest in lower middle market firms that are operating in industries identified by the federal government as critical to national defense, health, and economic security. These include:

Advanced Manufacturing
Critical Minerals and Materials
Communications & Cybersecurity
Defense Industrial Base

Energy
Financial Services
Healthcare and Public Health
Pharmaceuticals and Ingredients

Information Technology
Semiconductor Manufacturing
Transportation Systems
Water and Wastewater Systems

The term "critical infrastructure" has the meaning provided in section 1016(e) of the USA Patriot Act of 2001 (42 U.S.C. 5195c(e)), namely systems and assets, whether physical or virtual, so vital to the United States that the incapacity or destruction of such systems and assets would have a debilitating impact on security, national economic security, national public health or safety, or any combination of those matters. [Presidential Policy Directive 21.]