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Case Study : ' Capital Partners ' Largest Investment, Construction Partners, Inc ( Cpi ) Essay

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CPI Case Analysis
Weiwei Zhu
Background:
SunTx Capital Partners’ largest investment, Construction Partners , Inc (CPI), is one of the largest road construction firms in the United States. CPI had grown dramatically in size and value during SunTx’s ownership, and now SunTx is deciding the exit strategy of CPI.
Good Business Model Analysis:
• Market position: As roadbuilding in U.S. is an extremely fragmented business, with each local market having a number of locally based competitors. Although APAC is the largest roadbuilder in every Southeastern state (Exhibit 2a), CPI established strong local market positions by several acquisitions. Thus CPI is a major competitor.
• Market growth: The overall roadbuilding market is stable, with a moderate growth of 5% per year.
• Market share trends: CPI is gaining shares with acquisitions.
• Business Cycle Risk: the roadbuilding market has moderate cyclicality. 2007-2008 financial crisis proved to be a significant negative event for CPI and the industry. It has average cyclical risk. As when there are economic or financial risks, government will have tax cut to stimulate economy, which decreases tax revenue, state budgets to fund highway projects. But CPI recovered quickly after the crisis.
• Unlevered free cash flow generation: CPI has strong positive cash flow. CPI’s organic growth was 70% of its total growth, a level well above market growth rates. From Exhibit 6, CPI revenues keep going up. It shows a good trend. Current
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