Dundee’s “Rescuer” Keyes Capital – Remarkable Change in Investment Strategy?

Dundee Football Club has had its share of financial trouble over recent years. Administration (twice). The ruinous Marr Brothers regime. Ravanelli. Caniggia. Giovanni Di Stefano. Arkan.

Despite this, and as a result of Rangers own woes last season, they had managed to make it back to the SPL before falling back out of it and missing a last minute reprieve because the SPL decided that Hearts have not quite yet suffered an Insolvency Event.

The latest saviour to turn up at the gates of Dens Park is Keyes Capital of Texas, represented by John Nelms.

Sometimes I read things that baffle me – this is one of them.

The BBC reported on its rescue bid, which is apparently hanging in the balance.

Keyes Capital say the chance to bring Dundee straight back to the Scottish Premier League may be missed if their investment offer is not accepted soon. The Texan group are hoping to put £1.5m into the Dens Park club, who have been relegated to the First Division.

“Next year is our best to get back up into the SPL,” said Keyes’ John Nelms.

“Year two, I’m assuming that the boys from Glasgow [Rangers] are going to be there and that’s going to make it much more difficult proposition.

“They find companies that need parts added to them and they turn that £1m business to a £10m business. The manager’s trying to keep the spine of the team and we need to get the players that we have and build around them,” said Nelms.

“And we need to start supplying this team with longer-term contracts so we can have some consistency going through. We have a fear that if we don’t do this now, we’ll end up being in the SFL potentially for the next three years or so. We want to make sure that the money does the most good for the club.”

Keyes Capital invest in businesses expected to experience “slow growth”, according to Nelms.

“They find companies that need parts added to them and they turn that £1m business to a £10m business over time. We actually starting talking about this quite a long time ago. We looked at other countries, not just Scotland, because we’re looking for the raw materials to build the best players and develop the best players and each country has their own set of attributes and Scotland ticks all the boxes when it comes to the type of player that we’d like to develop.

“We started looking at the clubs in Scotland we were actually looking at SFL clubs at the time because we wanted to be able to build a long-term plan and be able to put parts into a club that we could have a long-term future. Dundee had some bits and pieces missing that we could put in that could keep that club at a very high level for generations to come.”

We know that foreign investors are keen on some British football clubs – but a club relegated to the SFL?

And how much money have the foreign investors actually made? Is this Dundee investor like Ron Dixon, the reclusive Canadian who owned the club in the mid-1990s? Is this an investment designed to support Dundee as Keyes Capital is owned by long standing Dundee fans? Or is it an investment to make money? It looks like the latter.

So who is Keyes Capital and what is its track record in football investment?

You can find its website here.

Its investment policy is as follows:-

Keyes Capital seeks to partner with exceptional professionals to grow the value of our investments over a long-term horizon.

INVESTMENT CRITERIA

Keyes Capital actively invests in businesses with the following parameters:

• Revenues of $3 million or more
• EBITDA of $1 million to $3 million
• Enterprise values of $2 million to $20 million

KEY BUSINESS CHARACTERISTICS

• Management teams with a vested interest in the future of the Company
• Defensible market position
• Predictable earnings and cash flow
• Unique products or processes
• Industries where we can add value through our knowledge and contacts
• A selling entity that cares about the future success of the business

INVESTMENT PREFERENCES

Keyes Capital will consider investments in most industries and geographies but has a preference for the following, which represent areas where have specific industry expertise and contacts:

• Industries: automotive, business services, construction, energy/HVAC, financial services, niche manufacturing, office products, telecommunications, utilities
• Geographies: Texas preference but will also consider Wisconsin and South Carolina

TYPES OF INVESTMENTS

• Management-led buyouts
• Generational changes of ownership
• Recapitalizations
• Corporate divestitures
• Late-stage growth equity
• Co-investments with other family offices or private equity firms
• Real estate

So its preference is for companies turning over at least £2 million per year, with committed management teams, a defensible market position, predictable earnings and cash flow, unique products or processes, and in industries where Keyes can add value though its contacts.

It prefers various industries, none of which involve sport. Its preferred location for investment is Texas, but it will consider Wisconsin and South Carolina.

The company profile says:-

Keyes Capital is a private investment firm based in Austin, TX with an additional office in Charleston, SC. The principals of the firm have been investing in, operating and managing companies for over 50 years. We have led companies as small as a start-up to as large as a Fortune 100 Company. Our investment philosophy is based on generating meaningful returns over a long-term horizon by partnering with knowledgeable professionals.

We invest primarily the Keyes family money and therefore do not have any limited partners which require a return of capital in a fixed period of time. This allows us to be patient long-term investors.

We prefer to invest where we can add value through our industry knowledge and contacts. We have experience and relationships in a number of different industries including automotive, business services, construction, energy/HVAC, financial services, niche manufacturing, office products, telecommunications and utilities. For operating companies our focus is on significant ownership positions through the acquisition or recapitalization of private companies. We will also consider growth equity investments in mature companies needing additional capital for growth.

We invest alongside our management teams to create a common vision and goal of creating shareholder value. We assist them with strategic planning, financing and growing the company in a consistent, sustainable manner. We are not venture or turnaround investors.

We are also active investors in real estate. We follow a similar approach to our operating company investments by seeking long-term value creation in partnership with experienced real estate professionals.

The top men in Keyes Capital are James and Timothy Keyes. They seem both to be very highly experienced businessmen – but not in the murky waters of Scottish football.

Bearing in mind what Keyes Capital says about its philosophy and its past experience, what on earth is it doing seeking to invest in Dundee FC? (With all due respect to Dundee FC).

If they see it as a vehicle for “slow growth” then they might be right! Mr Nelms’ words suggest that the plan is to use Dundee FC as some sort of “farm club” to develop young players for sale.

If that is a genuine plan, will Dundee fans be happy to be seen as a nursery?

Bearing in mind some of the bizarre and remarkable characters who have intervened in Scottish football in recent years, a multi-million dollar US investment company would actually be quite staid. However, and I suspect this might be a reason I do NOT own a hugely successful investment company, how on earth does this Texan company see itself making a worthwhile return on its investments? Has it looked at Dundee’s history?

Dens Park awaits its new saviour

As for Mr Nelms, he is not mentioned on the Keyes Capital website. Maybe he is branching out the company’s business into new areas – quite how he has sold Dundee to his employers as a company with “a defensible market position, predictable earnings and cash flow, unique products or processes, and in an industry where Keyes can add value though its contacts” I do not know.

Mind you, if he can persuade Mr Keyes and Mr Keyes to invest, not in Texas, or even Wisconsin or South Carolina, but on Tayside, maybe he will have the magic touch enabling Dundee to rise again! (At least as long as they get promoted before “the boys from Glasgow” get there!

Posted by Paul McConville

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