Arcapita acts as a principal and arranger in the acquisition of controlling and non-controlling interests in established companies with an emphasis on the United States, Europe, the Middle East and Asia, targeting growth-oriented corporate acquisitions with a total transaction size between $50 million and $300 million per transaction. Arcapita focuses on sectors where it has established industry knowledge and a successful track record. Future acquisitions will most likely be in the energy, business services, industrial and consumer sectors.
Arcapita looks for companies that score highly in a number of important areas. These companies should have innovative products or services; growing market positions and strong management teams, in place or identified; be capable of building shareholder value through 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; and exit potential through a financial or strategic sale, or IPO.
Furthermore, Arcapita targets companies where it has a unique angle to secure the acquisition or to create value thereafter. In practice, this has arisen from transactions being offered to Arcapita on a proprietary basis, the opportunity to install a new expert management team, a special situation or industry knowledge that leads to identification of an opportunity, or in situations where Arcapita is able to leverage its extensive network of business relationships to the advantage of the target company, especially within the Middle East.
Once an acquisition is completed, and the target company becomes part of the private equity portfolio, Arcapita’s executives work closely with each portfolio company management team in establishing a clearly defined business plan for creating equity value, while designing a tailored capital structure and management equity incentives to foster growth and profitability. Arcapita aims to nurture and grow the investments through the holding period with strategic and financial support when necessary and, at the appropriate time, to position the company for sale to a financial or strategic buyer, or through an IPO.
Portfolio Management for Private Equity
Arcapita’s portfolio management approach is designed to ensure the highest possible performance of each of its portfolio companies - bringing critical insights, strategic capabilities, and world-class best practices in delivering superior investor returns. Arcapita currently provides full support to all private equity portfolio investments, and periodic support to the private equity business as required.
Arcapita’s portfolio management approach is applied in each of the critical stages of a company and asset ownership process—including pre-acquisition and due diligence, early ownership, the core ownership period, and the process leading to exit. Prior to the acquisition of a company or asset, we conduct market and operational due diligence, along with an assessment of the management team.
During the critical early ownership period, the approach includes process disciplines in the areas of strategy, operations, and people management, as well as leading-edge board governance and audit protocols. Early on, we work with senior management to identify the key industry and company-specific operating and financial measures that best reflect the true performance levers for a particular business. We design incentive plans to encourage and motivate management teams to meet agreed-upon metrics. Through a disciplined program of monthly performance reviews and quarterly board meetings, we work with each management team to evaluate the company’s performance, ensure early recognition of any deviations from expected performance, and determine appropriate course corrections. More extensive involvement is undertaken as needed.
During the ownership period, Arcapita executives serve as members of each company’s board of directors, seeking to increase the value of the investment in three primary ways: (1) assisting management in defining and continuously updating the optimal three to five year action-based strategy, (2) identifying and driving initiatives in the company’s annual operating plans that improve the near-term operating performance of the business and support achievement of ambitious financial objectives, and (3) improving the company’s human resource management and succession planning. We also regularly identify opportunities where our functional capabilities (both in-house and with selected third-party advisors) can be leveraged in support of marketing, sales, and growth-related initiatives, as well as cost reduction, working capital reduction, process improvement, and supply chain initiatives. Finally, we also play a critical role in evaluating, selecting, and developing CEO candidates, and often assist the CEO in the recruitment and selection of senior management team members.