Investment Approach Print E-mail

We seek investments in companies that meet the following investment criteria:

Revenue & EBITDA
  • Revenue:  $5 to $30 million
  • EBITDA: $500,000 to $2,500,000, though we will consider EBITDA outside of range if there is a compelling growth story or if EBITDA margin as a percent of revenue is above average.  Where there are logical for add-on acquisitions, we have no EBITDA minimums.

 

Financial Trends
  • Prefer trend over 2-3 years or more of positive revenue and EBITDA growth but not required; if there are not positive trends then evidence of associated expense control to sustain EBITDA margin as % of revenue is required.
  • Like to see company created financial projections for next 3-5 years (income statement; balance sheet and cash flow if possible)
  • Stable collection history on accounts receivable with no or very little exposure to accounts 90 days or more past due; same for accounts payable with no accounts past due payment
  • Stable working capital relationship with no out-of-cycle spikes

 

Management Team
  • Strongly prefer management team to remain in place
  • In considering compensation, seller should adjust management salaries to reflect market compensation

 

Ownership Characteristics
or
Transaction Types
  • 1st or 2nd generation owner seeking full or partial transition
  • Company generally at least 10 years old and often over 20+ years
  • Demonstrate sustainable, competitive advantages and strong customer relationships
  • Private companies undergoing an ownership transition, management buyouts, recapitalization, debt purchases, family transitions or companies requiring growth capital
  • Corporate divestitures
  • Select financial restructurings or turnarounds

 

Geographic Preference
  • Arch will consider investments across the continental U.S. but prefer within the range of greater Midwest (bounded by Salt Lake City, Phoenix, Dallas, Atlanta, Cleveland, Chicago and Minneapolis)
  • Focus on smaller metropolitan areas such as Springfield (MO and IL), Louisville, Peoria, Omaha, Boise, Des Moines, etc.
  • Will look at companies based in the U.S. with operations in Europe, Asia and South America

 

Industry Segments
  • MANUFACTURING: niche manufacturing companies that make customized products with short order and production lead times and generate gross margins in excess of 25%.
  • DISTRIBUTION: companies with defensible market positions, value-added branding, products & services, or unique processing with gross margins in excess of 20%.
  • BUSINESS SERVICES: Select service providers with a unique and value-added service offering, deep customer relationships, high switching costs and a scalable business platform.
  • We do not directly invest in real estate: natural resource companies; highly regulated businesses such as banks, insurance companies and utilities, retail businesses; restaurant chains; early stage companies; or technology, telecommunications and internet companies.

 

Control
  • Control (alone or with a compatible co-investor) preferred though non-control investments will be considered. 

We understand that every investment opportunity is unique and so may not exactly meet the criteria outlined above.  We encourage owners and financial advisors to contact us to discuss their specific situation and see if there is a potential fit with Arch.

 
Home Investment Approach