Of particular interest to Red Barn are businesses built around enabling technologies that generate monthly recurring revenue from an atomistic customer base of consumers or enterprises. Typically these businesses offer themselves at a relatively low price to the end-user, represent excellent value, and don't require long, volatile sales cycles.
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 $25 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
- Business services, software as a service (SAAS), niche manufacturing, consumer, media/entertainment, energy, retail, and healthcare
- Stable or growing markets with limited cyclicality and strong secular trends
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
- 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