Discovering Value-Creation Opportunities

Even though the current global economic crisis is fraught with great uncertainty, we believe these conditions actually create once-in-a-generation opportunities. The business landscape is littered with companies trying to adjust to — even survive — the realities of today’s paralyzed capital markets. The toxic mix of over-leverage when capital markets were relaxed, and a lack of liquidity today, has bred a fertile setting for investment opportunities. Operating companies struggling to meet financial burdens, and private equity or debt holdings of financial institutions needing balance sheet liquidity because of recent market meltdowns, are prime candidates for divestiture and/or investment transactions — at advantageous terms.

The Need for Focus

As the painful de-leveraging process continues, investors are parting with existing holdings and companies are shedding even well performing — but non-core — assets. And wisely so: companies are resuming focus on their core business; casting the net wide is a luxury few can afford. But in their rush to liquidity, distressed sellers are casting off undervalued assets that, with the proper operational attention, could become powerful businesses in their own right.

Attractive Opportunities

These divestitures are, and will be, priced at multiples dramatically discounted from recent historical levels. Furthermore, we foresee terms of issuer debt and equity financing being more favorable than at any time in recent memory.

The upshot: there will be a large and growing supply of attractive assets in the marketplace, driven into liquidation by a near-desperation to raise cash. We believe that this new reality will allow us to cost-effectively secure positions of influence and apply our mix of operational expertise, financial acumen, and technological savvy to greatly increase the likelihood of near-term profitability.

We will leverage our operational and transactional expertise to identify these opportunities, in the $5 to $50 million range — opportunities we believe are well positioned to generate strong ROI within a two- to five-year timeframe. Our perspective and experience doesn’t allow us to just passively buy and sell companies. Rather, we will actively participate in the management of these entities, to derive the maximum benefit from the investments.

Our Targets

We will specifically focus on:

• Assets with purchase prices significantly below sum-of-the-parts, cash flow, or other measurable value indicia;
• Non-core assets of companies struggling under the new realities of the capital markets; and
• Companies with viable business plans — but needing managerial assistance to handle the pressures of today’s crippled capital markets.

In each case, we will aim to find entities that present

• the opportunity to control and/or exert significant operational influence,
• currently positive, neutral, or marginally negative cash flows,
• significant revenue and cash-flow growth potential,
• a motivated seller, and
• an exit or monetization window within a five-year timeframe.

We will also be particularly interested in opportunities with any of the following characteristics:

• TMT and Consumer Products and Services (including supporting technologies);
• The ability to improve existing business models through technology;
• Global potential;
• Market roll-up potential; and/or
• Ethnic or other demographic niche application.