Target Investment Description

Target Company Profile

Balance Ventures' target investments are small or medium size, privately-held companies with sales in the range of $2 million to $30 million per year. Target companies are usually in non-cyclical industries with established product acceptance, product recognition, and product endurance in their respective markets.

A target company generally has normal working capital needs and usually has immediate capital expenditure needs to support long-term growth. It has no history of significant labor/employment issues, environmental exposure, or legal problems that have distracted the management team from its focus on growing the business. It is not near bankruptcy or in 'workout' or 'turnaround' mode.

Deal Flow

Balance Ventures actively cultivates leads from its network of various business relationships for introductions to entrepreneurs who may or may not be looking for investment capital or whose businesses may or may not be for sale. We make direct contact with these entrepreneurs to inquire of their plans for growing their businesses, to discuss their financial needs in achieving their goals or desire to plan for succession, and to explore the possibility of partnering with us to reach those goals.

Geographical Location

Target companies are usually in Texas and the Western United States, though we review excellent investment opportunities from other regions of the U.S. and from other countries.

Industry Focus

Balance Ventures seeks investments in established, 'old economy' companies. Early-stage, gene-splicing startups may be better served by a seed-stage or angel investor or traditional venture capital firm. Most of our target investments are in manufacturing, consumer products, media and marketing/distribution businesses. We also target investments in ancillary businesses that provide marketing, production, distribution, and administrative or other synergies for existing portfolio companies.

Financial Characteristics of Target Companies

Balance Ventures prioritizes investment opportunities in companies with cash flow and strong balance sheets. Ideal target companies can support some leverage (debt). Target company revenues should be diversified among a large customer base, or any concentration of sales among a few, large customers should be mitigated by verifiable, stable, long-term relationships with those customers. Target company cost structures should provide economies of scale to achieve improved gross margins and operating margins with any incremental growth in revenues.

Deal Structure

Every direct private equity investment requires a unique approach and a unique structure, depending on the goals and desires of the owner/manager/entrepreneur and of Balance Ventures and its investor clients. Therefore we negotiate the terms of each deal structure (e.g., amount of capital invested, ownership interests of the various stakeholders, and provisions for how and when these stakeholders will get paid) before executing the investment in the target company.

Capitalization of the acquired company immediately after the investment may include varying proportions of seller financing (through a note receivable or milestone earn-out), bank debt, subordinated debt, direct private equity from Balance Ventures and its investor clients, and management equity (from the existing owner/manager).