CORPORATE INVESTMENT

Overview
Arcapita’s corporate investment team operates out of its offices in Atlanta, London and Bahrain. Arcapita acts as a principal and arranger in the acquisition of controlling interests in established companies in the United States, Europe, the Middle East and India, focusing on growth-oriented corporate acquisitions with a total transaction value between $100 million and $1 billion. Smaller transactions are considered in certain high-growth situations or in circumstances where opportunities exist for strategic add-on acquisitions. Arcapita looks for companies that have innovative products or services, leading market positions, and strong management teams capable of building shareholder value.

Transaction Review
While target acquisitions are not sector specific, the target company should have a sustainable value proposition due to market strength in product line, technology, distribution, manufacturing, or brand; a clear business strategy with multiple avenues for growth and market share gains; industry growth drivers that are fundamental and compelling; management motivation through meaningful incentives and co-investment; and exit potential through financial or strategic acquisition, or initial public offerings.
 
Arcapita receives approximately 300 potential corporate investment referrals from its extensive network of deal referral sources each year. Of these referrals, approximately 40 to 50 meet Arcapita’s investment selection criteria which include (a) the fit with Arcapita’s investment criteria described above, (b) fit with Arcapita investors’ preference, (c) ability to generate the targeted internal rate of return over the investment holding period, (d) ability to obtain sufficient financing from external financiers, and (e) the fit of the investment into Arcapita’s investment portfolio. Of the investment opportunities that meet Arcapita’s investment criteria, the corporate investment team undertakes detailed due diligence on approximately 10 to 12 of these transactions and completes three to four transactions each year.

Deal Structure
Corporate acquisitions are funded with a combination of equity and Islamically acceptable financings. Arcapita underwrites the equity portion of each acquisition using its own financial resources and, where the target company’s capital structure allows, arranges non-recourse financing from leading financial institutions. The equity in each investment is then placed with the Bank’s investor base in the Arabian Gulf region.

Portfolio Company Management
Arcapita’s corporate investment team and portfolio management group work closely with company management in establishing a clearly defined business plan for creating equity value, while crafting management equity incentives and a tailored capital structure to foster growth and profitability. Once the business plan is established, Arcapita’s portfolio management professionals monitor the investment at the portfolio company board level, working constructively with management to address the needs of the business.

Exiting the Deal
Arcapita’s aim is to nurture and grow the investments through the holding period with strategic and financial support when necessary, and to exit at the right time and price in order to maximize returns for all stakeholders. To this end, Arcapita works together with management to monitor the performance of each and every corporate investment and position the company for sale to a financial or strategic buyer, or for an initial public offering.