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About Private Equity
Private equity is a generic term used to describe investments in unlisted companies. Investments can be in companies ranging from start-up operations to mature, established companies and can be in the form of straight equity or equity-like capital, such as mezzanine or convertible debt. Broadly speaking, there are two main categories of private equity investment: leveraged buyout acquisitions ('LBOs'); and early stage, expansion or venture capital investments ('venture capital'). LBO transactions are typically larger and less risky than venture capital transactions.
LBOs utilise significant levels of leverage so as to minimise the equity requirement and maximise the returns on equity. The strategy over the investment period is to pay down debt and increase the total value of the company, so that the value of the equity increases disproportionately to that of the company and the general market as a whole. These investments are usually exited via an initial public offering or via a trade sale, depending on market conditions at the time.
In order to sustain significant leverage and be in a position to grow the value of the company, attractive LBO targets will usually demonstrate a combination of the following attributes: strong management teams; stable cash flows; profit margin improvement potential, low capital expenditure requirements; high proportion of fixed assets; strong competitive position; and good growth prospects.
We target the capital and financial advisory requirements of high-growth businesses. CSL can make direct investments of up to $10 million, either in its own capacity 'on balance sheet' or by arranging a syndicate of investors. Investments can be for either new capital or the sale of existing shares.
CSL caters to the needs of businesses seeking equity raising of greater than $10 million.
CSL takes an active interest in its investments and is specifically looking to identify investment opportunities where it can add value beyond simply the provision of capital.
CSL has a flexible investment mandate in respect to industry, however, it will not make an investment in a business that has not proven the commercial potential of its product or service. Invariably, this requires existing product or service revenues and, if the business is not currently profitable, the ability to identify a clear path to profitability.
CSL looks to make long term investments in businesses with outstanding commercial prospects, and accordingly, anticipates making a small number of investments each year.
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