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The Fund's investment focus is on providing private equity capital
to profitable lower-middle-market manufacturing, distribution and,
in some cases, service companies in the Southwest. Typically the
Fund finances change of control, recapitalization and later-stage
growth transactions of low or non-technology businesses having unusual
growth and value creation opportunities. This focus allows the Fund
to better address factors unique to "basic businesses",
as opposed to high technology businesses with perceived hyper-growth
opportunities preferred by most venture capitalists.
The Fund prefers to operate as either lead or sole investor, but
will also co-invest with other private equity firms.
IBCF is interested in financing 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 and equity in order
to provide partial liquidity to business owners or further strengthen
a company's balance sheet. Later-stage financings provide equity
capital to continue, or accelerate, growth, including the facilitation
of "add-on" business or product acquisitions.
The most important aspect of successful private equity investing
is the quality of the operating management team. We, therefore,
seek to partner with mature, experienced and competent management
teams with dedication, integrity, substantial accomplishments and
proven records of success.
Generally, the Fund seeks to invest in companies reporting revenues
of $10 to $50 million and adjusted free cash flow greater than $1
million per annum. 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 equity requirements of $10 million or less. In the
case of later-stage growth financings, revenues may be as low as
$5 million and operating results at breakeven.
The Fund's investment limit is $4.6 million per company although
initial investments of $1.5 to $3 million are preferred. In rare
situations, smaller investments may be considered. For larger equity
requirements, the Fund will arrange other equity investors.
The Fund seeks to invest in profitable manufacturing, distribution,
or in some cases, service businesses. There is no interest in "high
tech", "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 R&D expenditures. Industries and markets
should not be cyclical in nature and should afford reasonable prospects
for modest steady growth.
The Fund will work to negotiate an equity position that is fair
to all parties based upon company value, management's financial
commitment, and 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 will also be appropriate.
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