Investors, Aquisitions and Management


The investors now look for Acquisitions or Joint Venture Equity Partners or Management Executives where a company is in its life cycle and assess the factors that affect the growth of its market segment. The company must have the ability to increase market share and profit margins. The interest in Start-ups is only when a “very interesting” project comes up and the investment costs( set-up, start-up, developing and exit ) is in the range of $500k to $1,000k.

The real investors interest is in three types of transactions:

1) Small to Mid-Size market niche Companies
The “angel” investors prefer companies that have demonstrated strong growth and are capable of sustaining a 15% to 20% earnings increase per annum for 3 to 5 years after acquisition. Pre-tax earnings for the latest 12 months should be at least $2,500k. Typically these are companies with high asset bases in relation to shareholder value and that, because of their growth, consume capital. Thus we seek to provide a capital structure that addresses not only the acquisition but the continued financial requirements of a growing business. When and where appropriate, we will invite the retention of an equity interest by the seller(s) or key management. This is an attractive incentive for owners/managers seeking personal liquidity but wishing to remain active in the business and thus benefit from future equity appreciation.

2) Industry consolidation
For the “classic” investors the objective is to acquire a company who can serve as the nucleus to add related businesses. Usually these are in fragmented industries where consolidation can complement a company’s competitive position, improve customer service and decrease product or service cost.

3) Under performing Companies, Turn around or Chapter 11 Opportunities
The “shark” investors are looking for 2000’s and 2010’s spawned excesses of financial leverage in a recession environment. We believe there are consequent opportunities to achieve superior investment returns in under-performing, turnaround of for Chapter 11 companies (Chapter 11 bankruptcy allows a business to reorganize and refinance to be able to prevent final insolvency). Often there is no trustee, but a “debtor in possession,” and considerable time to present a plan of reorganization. The final plan often requires creditors to take only a small percentage of the debts owed them or to take payment over a long period of time). Unlike market niche companies, purchase prices for transactions in this category should bear a reasonable relationship to asset value. Our preference in this category is for companies that have revenue in excess of $2,500k to $5,000k in the latest 12 months.

4) Acquisition & Management focus
In all of the three above-mentioned categories, our focus is to identify such companies that have the potential for significant profit improvement. Our procedure is to provide strong incentives and equity ownership for remaining management within the target company. Our experience shows that companies produce success because of the quality of their management. Consequently, we participate as active advisors and directors and work with management to establish realistic strategic and operational objectives. Once these goals are established, the company’s management is responsible for all day-to-day business decisions.

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The Peninsula One and Two project in Shekou, Shenzhen, China