Red Barn seeks investment and acquisition opportunities which generally meet the following criteria:
Size
- Preferred Red Barn equity investment size of $1.0 to $5.0 million
- Transaction value of up to $30 million
- Positive EBITDA for established acquisition candidates
- Discernible path to sustained profitability for growth equity candidates
- Larger equity requirements and transactions can be accommodated with like-minded co-investors
Structure
- Equity or quasi-equity securities
- Control or shared control positions
- Use of proceeds may be for existing shareholder liquidity, debt recapitalization, acquisitions, organic growth plans, capital expenditures or working capital requirements
Industry
- Distribution, business services, niche manufacturing, transportation/logistics, consumer, media/entertainment, software, energy, retail, and healthcare
- Stable or growing markets with limited cyclicality
Business Considerations
- Sustainable competitive position in a growing market niche
- Fundamentally sound operating businesses with a history of profitability, or in the case of growth equity investments, where there exist real near-term prospects for profitability and supernormal growth
- Recurring revenue businesses with large, atomistic customer bases are of particular interest
- No substantial turnarounds
Financial
- Reasonable purchase price
- Ability to support prudent leverage, whether financed on a cash flow or asset basis
- Minimum annual historical (EBITDA) of $1 million for acquisition candidates
Management
- Desire of current management to remain — particularly in key functional roles — is preferred but not required
- Willingness of key executives to make personally significant investments
Investment Horizon
- Tailored to corporate strategy, but generally holding periods will vary from three to ten years
- Willing to hold and build positions in attractive companies indefinitely