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Description: Capital is deployed based on the growth prospects of the business rather than the availability of security or the adequacy of cash flow.
Benefits:
Implies a partnership based on the mutual objective of supporting growth, creating value and sharing in success
Patient nature of equity preserves cash flow, enabling focus on growth and execution of strategic plans
Can provide an opportunity for a financial exit
- Highly flexible and fully customized
- Designed to provide critical capital, but not drain cash flow
- May take the form of common shares, preferred shares, convertible debentures, or debt with equity participation (warrants)
- Dilution to existing shareholders varies based on the investment amount, company valuation and deal structure
- Typically carries few (if any) covenants
- Roynat's typical investment horizon for equity investments is 5 years
- Mergers and acquisitions
- Buyouts
- Organic growth
- Major expansions
- Succession planning and shareholder exits
- In fully levered transactions, equity can be used to round out cash requirements
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