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Partnering with strong management
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EdgeStone is active in the market looking to invest in businesses with the following attributes:
- EBITDA range of $10 - $50 million and EV range of $50 - $250 million
- Light manufacturing, business services and consumer services with a Canadian focus
- Equity and equity-like investments, with flexibility
- Majority ownership/control positions and active board involvement
- Attractive business fundamentals with a high return on capital and strategic and/or organic growth opportunities
- Management buy-in or buy-out, acquisition and roll-up strategy, recapitalization, growth capital, divestiture of non-core business and succession planning
- Long-term hold periods
When we assess a company as
an investment opportunity, we consider the fundamental prospects of the
potential investment, taking into account:
Quality and commitment of management
We believe that partnering with motivated and highly experienced management
teams is important to realizing superior investment returns, and to helping
investee companies meet their business objectives. We invest in management
teams that have:
- High standards of integrity, capability and
commitment
- An appropriate mix of business skills
- A substantial stake in their company, with
remuneration linked to investment returns
- Passion for their businesses
Attractive industry fundamentals
An industry's fundamental attractiveness is one of the dominant factors
influencing investment returns. We consider the following issues before
making an investment:
- Expected growth rate and maturity
- Sensitivity to economic cycles
- Intensity of and potential growth in
competition
- Profitability and return on capital
- Availability of substitutes or new
technologies that could alter the industry dynamics
- Relative power of suppliers and customers
- Customer dependancies or concentration
Sustainable competitive advantage
We invest in companies that are leaders in their industries or that have
strong positions in industry niches. We look for companies that have:
- A strong brand and market share
- Superior levels of quality and service
- Technology leadership
We also invest in companies
that are positioned as the low-cost provider in the industry and/or
demonstrate top performance in a fragmented industry.
Structure for superior risk-adjusted returns
We attempt to structure transactions in such a way as to enhance
risk-adjusted rates of return. This includes the utilization of senior
securities, such as convertible securities, that provide downside
protection while preserving upside potential.
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