1 How was deal activity in 2010 for Trivest?

Trivest experienced a very active year in 2010, closing on five new platform investments, four of which actually closed in the last two months of the year. In addition, we exited ATX Networks, which we originally acquired in August 2008. ATX was one of our first deals in our current Trivest Fund IV, a $325 million investment vehicle. Given the real concern about the potential increase in the capital gains rate from 15 percent to something much higher in 2011, we anticipated a busy fourth quarter as business owners would want to lock in the lower tax rate. We increased our marketing activity to emphasize this point, and this fear translated into closed deals for Trivest.

2 Trivest recently acquired AM Conservation, a maker of water conservation products. What attracted Trivest to this company?

First and foremost, AM Conservation fits our core strategy of partnering with well-run founder or family owned businesses. Second, the business seemed to outperform its peers in the fast-growing energy and water conservation market by growing 30 percent-plus annually during the Great Recession. Importantly, AM Conservation sells products to a diversified group of more than 1,000 customers, mostly in the public utility sector. Looking ahead, we see opportunities to expand within the core business by targeting additional utility companies in other states as well as other ancillary direct-to-consumer and retail markets. We have an investment in our prior fund called Twin-Star International, which is the leader in the electric fireplace category. We learned from that investment that the “green” movement is not just slogan—it’s fundamentally altering the buying habits of millions of Americans. Like AM Conversation, Twin-Star grew through the Great Recession and Trivest specifically sought out investments that play on a similar theme.

3 What is your outlook for 2011?

From where I sit, I am extremely bullish on Trivest’s 2011 outlook. Why do I say that? Two primary factors. An improving economy combined with an extension of the 15 percent capital gains rate should help us build on the positive momentum we experienced in 2010. Many business owners thought they missed the window of opportunity to sell their business at the lowest capital gains rate in decades. With the Christmas gift of lower rates from Congress, along with a year of better earnings in 2010 under their belt, I believe that business owners won’t allow themselves to miss this opportunity again. The biggest challenge in 2011 for the lower middle market is finding acceptable financing for companies generating sub $10 million of EBITDA. Until that dynamic improves, Trivest will continue to conservatively structure its deals and seek seller financing where appropriate.

4 Trivest has been around since 1981, but it seems to keep a low profile.

Funny you should say that, as we will actually be celebrating our 30th anniversary this year and I’ve been at Trivest for over 20 years. After three decades, it seems like we are an overnight success story. Through the years, we’ve resisted the temptation to move up-market, choosing instead to stay firmly entrenched in the lower middle market.

5 Where is Trivest in fundraising cycle?

We are currently investing out of Trivest Fund IV, which has $325 million in commitments and was raised in the summer of 2008. To date, we’ve invested in seven platform companies and called a little over 60 percent of our capital. Based on our current investment pace, I would think we will be in the market raising Trivest Fund V in early 2012.

Edited for clarity