Our Unique Investment Approach – Debunking Common Misconceptions

Whether entrepreneur-owned, family-owned or management-owned, most business owners spend the better part of their lifetimes (for multi-generational owners several lifetimes) building their businesses.  For those middle-market companies that are minority or majority ESOP-owned, you have confronted and overcome many specific challenges to purposely create a highly unique employee ownership structure and culture.  Overall development and growth of the business is born out of collective experience with success and failure as leadership, vision and skill sets are sharpened by experimentation.  It’s a learning process, and past mistakes often contribute to current and future success.  

In contrast, changes in ownership or recapitalizations take place infrequently, if only once, and typically at key points in the lifecycle of a privately-held business. The process can create a charged atmosphere as ownership seeks to address and/or balance personal/family/ESOP and business needs. The fact that the decision is so important, both financially and personally, to owners, management and employees can make the process more, rather than less, prone to error. Inevitably, there are misconceptions you will face along the way. To address a few:

  • You don't have to give up equity in your company in order to grow it.

If your business has strong enough free cash flow characteristics, we can provide subordinated debt, which is a less dilutive alternative to pure equity, in order to support an acquisition, recapitalization, or organic growth. We are comfortable providing non-control mezzanine capital and partnering with management as either the sole institutional capital partner or one of a few existing capital providers.

  • You don't have to sell your company to get some liquidity.

Liquidity is not an “all or nothing” proposition. We can provide subordinated debt and minority equity to provide partial liquidity, enable generational transfer, or diversify asset concentration for retirement needs or estate planning.

  • Growth and liquidity are not mutually exclusive.

You can grow your business and take some money off the table in one transaction. Both goals can be achieved hand-in-hand with the right kind of capital and the right partner.

  • You don’t have to relinquish operational control of your business

AWC seeks to partner with owners, managers, and employees in an additive fashion. We are not day to day managers and believe you are far more well-suited to manage your business than we could ever hope to be. AWC does, however, offer over 150 years of collective capital markets and advisory experience in the middle market and we utilize these skills to further management’s initiatives.

  • Private Equity/Mezzanine Capital and ESOPs are not mutually exclusive.

Traditionally, employee owned businesses have faced constraints when attempting to fund family or owner-operator ownership succession, internal growth or external growth via acquisitions, ESOP repurchase obligations and management incentive/ESOP diversification interests. Many traditional private equity funds will condition their purchase or investment on the removal of the ESOP or any established broad-based employee ownership plan. As a result, businesses with substantial employee ownership have been dependent upon available bank or traditional debt financing and have faced inherent trade-offs between retaining and preserving employee ownership and corporate autonomy while adequately funding corporate growth opportunities and meeting shareholder liquidity needs. Conversely, AWC expressly seeks to put capital to work productively addressing growth opportunities and liquidity needs while preserving employee ownership and corporate autonomy. We actively invest capital in ESOP companies.k

Flexible Mandate

Fundamentally, AWC is a true co-investor seeking opportunities to partner and invest alongside resident family, owner-operator and employee ownership interests. Unlike traditional private equity, we can invest in a range of securities including equity, structured equity, mezzanine and subordinated debt or some combination thereof. We are neither a strict control investor nor a strict minority investor, rather we have the ability to customize a capital and ownership structure for each unique investment opportunity. This also applies to investment horizons and exit strategies. Beyond traditional exit strategies, AWC’s investments can be structured to facilitate our eventual longer-term exit from the investment via a recapitalization so that existing shareholders have the opportunity to retain long term ownership of the business.

AWC seeks to develop strong multi-faceted partnerships with our clients and with our commitment to an ongoing partnership we deliver results and value beyond the initial transaction. Please contact us to learn more about AWC.