Unlocking Value & Identifying Opportunities.
Private equity has been the cornerstone of Marchant's platform since its inception. Our private equity strategies focus on investing in undervalued companies across a wide array of industries and geographies where we deem there to be paths to value accretion.
We aim to achieve superior performance by working with portfolio companies on strategic and operational improvements, unlocking growth in enterprise value at a rate greater than the overall market. Our private equity holdings have flexible capital structures, helping to provide greater downside protection than their liquid counterparts.
Focusing throughout North America, our private equity sector and industry composition includes industrials, manufacturing, and durable goods with an emphasis on strong cash flows and fixed assets that are often overlooked by growth investors seeking solely capital appreciation.
We scour the markets for privately held operational assets that we believe to be mispriced. While there is a plethora of companies that fit our investment parameters, we will not transact without an exhaustive and thorough due diligence process. The emphasis of our discovery is to protect against unknown risk exposure.
Along with our professional services partners at premier legal and accounting firms, we look to regulatory and tax conventions to determine whether or not a transaction is viable and in the best interest of our investors. Equally as vital, we conduct several counterparty analyses to determine whether or not a deal contains risk factors stemming from human capital.
We structure our private equity investments based on risk tolerance, time horizon, and distribution preferences in a way that aligns to our partners' financial goals. Each transaction is originated with the following in mind:
Access to perfect information
Strategic influence or control
Flexibility of capital structure
Modest leverage to augment returns
Exit and contingency strategies that are in accordance with investor expectations
Our real asset investments adhere to Marchant's investment philosophy, seeking to acquire mispriced real estate that can be improved to unlock value asymmetric to its purchase price. These investments are based on real estate industry relationships, where we believe there to be risk reduction, better management of assets, and the ability to smoothly exit an investment.
Marchant's real estate private equity platform invests in opportunistic developments through joint ventures with seasoned developers, purchasing well-located assets at discounts to replacement cost, augmenting value through construction and capital improvement, and ultimately bringing the asset to market.
Our opportunistic projects typically have longer investment horizons, carry higher risk, and offer the highest prospective returns of any category in real assets. We may at times invest in passive real estate transactions, private REITs, and liquid credit instruments depending on market dynamics and the performance of other asset classes.
We aim to mitigate risk by working with experienced developers in their respective regions, formulating capital structures that can withstand fluctuations in interest rates and asset prices, and by only investing in projects priced below replacement cost with a margin of safety.
Navigating the market cycles is imperative when carrying real assets in a portfolio. We transact in a contrarian manner, shifting from net buyers to net sellers when we feel a market is showing glimpses of oversupply.
In the investment world, things seldom go as expected. This is especially true with respect to real estate developments, where projects tend to come in over budget and with a longer time to completion.
We arrange each transaction such that additional contingencies are built in. This helps us withstand any operational or systemic headwinds along the way. We will never engage in a deal that is not able to withstand minor setbacks, as often, they are inevitable.