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 private credit strategies seek to attain attractive, risk-adjusted returns by investing in privately issued corporate credit instruments. These investments are predicated on risk control and the sensible allocation of capital to yield consistent returns.
Our private credit platform offers some distinct advantages. Primarily, our blend of senior secured and junior or mezzanine debt investments have better predictability of performance. In a low interest rate environment, we find these strategies to be a plausible means of capital preservation and locking in positive performance.
Further, we structure many of our credit investments with the goal of return maximization, whereby we participate in the upside of the businesses we lend to so long as they are not commensurate with undue risk.
We invest across the spectrum of private credit instruments, favoring those which we deem to be mispriced in the market. Whether it be senior or mezzanine debt, high yield or convertible bonds, our emphasis is on consistency and preserving our partners' principal. Overreaching for yield, depending on the state of the market and economic cycle can be largely detrimental to an investment manager's P&L.
Due to the operationally passive nature of credit investing, it is always our prerogative to keep a bit off the throttle. We believe that outperformance can be achieved through the prudent structuring and negotiating of lending agreements without sacrificing underwriting standards.
As a firm with an internal locus of control, we concentrate the majority of our resources towards active investing and improving portfolio companies. Throughout a market cycle, however, opportunities emerge that fall outside the bounds of our typical investments.
Our special situations investments are made in order to seize a glaring market opportunity or inefficiency and combines both private equity and credit strategies. These situations require creative and efficient execution.
Some special situations may require us to allocate in more liquid and listed securities. For more information, please refer to our Investment Mandate or contact us.
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.