Typically IBCF finances growth capital opportunities and recapitalizations for businesses having growth and value creation opportunities. This focus allows IBCF to better address factors unique to “basic businesses”, as opposed to emerging technology businesses with perceived hyper-growth opportunities preferred by most venture capitalists.
IBCF welcomes the opportunity to partner with other experienced private securities investors in its investment transactions. On occasion, IBCF will also act as lead or co-lead in control and buyout transactions and, as such, will expect to gain a significant ownership position in those companies.
IBCF is currently investing primarily in subordinated notes, as well as preferred and common stock. In conjunction with these financings, warrants, conversion features or other types of equity participation will be obtained. We also finance change of control, recapitalization and later-stage growth transactions for established and successful lower-middle-market businesses.
Change of control transactions entail the acquisition of an existing business, usually as a spin-off of a division or business unit from a parent organization, or, a family-owned business being sold for liquidity or estate planning reasons.
Recapitalization transactions can involve the raising of debt in order to provide partial liquidity to business owners or further strengthen a company’s balance sheet.
Later-stage financings can involve mezzanine or equity capital to continue, or accelerate, growth, including the acquisition of “add-on” businesses or product line extensions.
Portfolio Company Management
The most important aspect of successful private capital investing is the quality of the operating company’s management team. We seek to partner with mature, experienced and competent management teams with dedication, integrity and proven records of success. IBCF seeks to partner with management teams that have, or will earn, significant ownership positions in the portfolio company.
IBCF seeks to invest in companies with annual revenues of $10 to $50 million and operational cash flow greater than $1 million. There should be a history of consistent, non-cyclical earnings and sufficient tangible assets to support reasonable amounts of senior debt. Transaction values, generally, will not exceed $25 million with junior capital requirements of $10 million or less. We prefer to make initial investments of $2 to $5 million. In rare situations, smaller investments may be considered.
Products & Industry
We seek to invest in profitable manufacturing, distribution and service businesses. There is no interest in pre-revenue and/or emerging technology situations, “turnaround” or “project” financings. Products need to be innovative, if not proprietary, address niche markets, and not be subject to rapid technological obsolescence nor require substantial ongoing R&D expenditures. Industries and markets should not be cyclical in nature and should afford reasonable prospects for modest, steady growth.
Through the issuance of warrants, options or equity, IBCF will work to negotiate an ownership position that is fair to all parties based upon company value, management’s financial commitment, the size of the fund’s investment, return on investment goals and perceived risk in the transaction. It is necessary that management own a meaningful amount of equity, preferably through invested capital. In most cases, performance based stock options may also be appropriate.