Evaluation process
Mezzanine Partners’ evaluation of potential mezzanine investments entails adopting a team approach to analyse each investment opportunity whilst carrying-on a dynamic process of consultation with all the relevant stakeholders.
Mezzanine Partners’ evaluation process is highly analytical and places considerable emphasis on:
- Evaluating each company’s critical success factors or competitive advantages;
- The relevant management team’s and/or sponsor’s ability to execute and deliver on both its historic and forecasted operational and strategic initiatives.
In evaluating investment opportunities, Mezzanine Partners' approach will include inter alia:
- Establishing a comprehensive understanding of the purpose for which the mezzanine finance is required;
- Determining and analyzing the primary, secondary and tertiary sources of payback in so far as they relate to the mezzanine finance;
- Analyzing the credit risks associated with the borrower / counterparty in so far as they relate to the relevant mezzanine financing opportunity, including:
- Macro considerations;
- The commercial viability and business risks of the borrower (including an industry and competitor analysis);
- A financial review analysing the risks stemming from the borrower’s capital funding structure;
- Relevant considerations associated with the management (background, skills and experience) and ownership structures of the borrower;
- Evaluating the transaction risks and rewards, having regard to the redemption profile, the mezzanine’s ranking, relevant safeguards to be put in place, and the relative pricing of the various capital layers.
- Analysing the sponsor’s / management team’s ability to execute on plans aimed at adding value to the investment such as: strengthening the management team and organizational structure; enhancing the market positioning of the company; realizing synergies; improving customer and supplier relationships; and refocusing the business.
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