Capital

Each of our investments include mezzanine debt and we may also invest in the equity in the same companies, either on a minority or majority basis depending on the situation and opportunity.  Below are more details about mezzanine loans and equity investments. 

Mezzanine Debt

Mezzanine debt is a loan that is contractually subordinated (or behind) senior bank debt, but ahead of the equity owners of a company.  It typically has a five to six year maturity and during the term of the loan interest is due monthly and principal due at maturity.  Mezzanine debt is intended to fill the financing gap that sometimes exists between bank debt and equity in a company’s capital structure.  It is more cost effective and less dilutive than equity, and also more “patient” than senior bank debt, as it requires no principal payments during the loan term. 

Equity

Equity investments can be either be on a minority or majority ownership basis and are typically in the form of either common or preferred equity (or both) of a firm.  When making an equity investment, it typically accounts for 10% to 50% of our total investment.  

See Purpose or Partners to learn more.

Purpose

Our investments finance major corporate events rather than day-to-day business operations.  The majority of our investments are to support corporate acquisitions, recapitalizations and management buyouts.  The following describes common types of financings that we pursue. 

Acquisition Financing –  Supporting acquisitions is the most common form of investment we make, whether it is supporting a private equity fund, independent sponsor, family office or other investors.  Acquisitions can be in the form of an investor group acquiring a company as a new platform or as a result of a merger of two companies. 

Minority or Majority Recapitalization – A recapitalization can take many forms, but it is typically where there is a refinancing of debt and/or a partial change of ownership but not a full change of ownership.  For example, a business owner may seek to sell a portion of his or her business to gain partial liquidity for personal planning and take on a value-added capital partner to help grow his or her company.  A minority recapitalization typically consists of refinancing debt plus the owner selling a minority of his or her company to a new investor.  A majority recapitalization is similar with the difference being the owner selling a majority of the company to a new investor rather than a minority ownership position.  

Management Buyout – Management buyouts are typically where a management team that does not have a controlling ownership position seeks to acquire their company from the existing owners.  It is similar to acquisition financing except in this case it is company managers who are the primary sponsor of a transaction and they oftentimes need a partner for both debt and equity (we can do both). 

Growth Financing – In many cases, companies that are seeking to grow may need capital beyond what a bank is willing to provide.  This can often be addressed with a mezzanine loan and, if required, an equity investment.

Shareholder Liquidity – In cases where a company has multiple owners, there is sometimes a need to redeem the ownership of one or more of the shareholders without the owners needing to sell the whole company.  This is a common use for mezzanine debt and, in some cases, equity.

Generational Transfer of Ownership –  Ownership of private companies is oftentimes passed down from generation to generation.  In many cases, it is appropriate to finance such an ownership transfer with outside capital in order to provide value to the current generation of ownership while the successor generation takes over the reins for the next stage of the company’s development.

See Capital or Partners to learn more.

Partners

Our partners include management teams, private equity funds, independent sponsors, family offices, high net worth individuals, mezzanine funds, and trusted advisors to lower middle-market companies.  Oftentimes, we provide capital to support an acquisition led by another investor, such as a private equity firm or an independent sponsor.  In other instances, we work directly with a company’s existing owners and management team to provide subordinated debt and equity as the lead investor.

Each of our investments contains a mezzanine investment and, in many cases, an equity investment depending on the need and opportunity.  In some cases, an equity co-investment is not part of our investment and in others, there is a need for a large equity investment.  We are not partial to what role we take as long as we are working with great companies and partners and have a shared vision for a company’s future.

We bring integrity, experience and a common sense approach to working with our investment partners and management teams with the goal of being a value-added capital partner.  

See Capital or Purpose to learn more.