Geographic preference
Middle Market companies located in California and nearby states. This would include the Southwest, Nevada, Utah, the Pacific Northwest, and Hawaii. On a more selective basis we would consider companies as far east as Colorado.
Old economy Companies that are not high tech or have a high obsolescence factor, but may support the high tech community, not agriculture, and not high fad such as garment or toys. Retail and Construction trades will be considered but will need to have a well-established track record and not be at the volatile end of the business that is subject to significant product changes.
Established We don’t invest in start ups. The companies we invest in will have a minimum of three to five years of operating history in their existing line of business. We are looking for companies that are established in their niche and know their business. In an acquisition situation, we are looking for deals where the acquirer knows the business and the acquisition will add strong synergies to their existing business.
Size Our deals will all be under $3.0MM so the sales size of the companies will most likely be in the $3.0MM to $50MM range. We have relationships with other similar groups so we may be able to partner with another group or to direct companies to another group or equity holder if the deal size is larger than our maximum.
Profitability Our companies must have a history of profitability. They may not be currently profitable due to some understandable and quantifiable problem, but they must have a history of making money in their existing business and have a plan to return to profitability that is real and imminent.
Management The companies will most often be privately owned, but they must also have strong management that is proven in their existing business.
Lenders The senior debt holders must be agreeable to executing an inter-creditor agreement.
Exit strategy Our loans will be a maximum of 5 years in length and will be subject to a prepayment penalty if paid off prior to 3 years. The Fund’s return will be from a combination of interest, dividends, fees and warrants. The Fund will expect to be totally cashed out in a maximum of seven years.