Sponsored Investments

In addition to our business and investor services practice, we actively seek out private equity investment opportunities in which our group of professionals can add value through ongoing active involvement with financial, operational and strategic matters. These types of investments can cover a broad range of industries and primarily include turnaround opportunities, buyouts and other special situations.

Through our network of high net-worth individual investors and smaller investment groups, we can sponsor direct equity investments of $1 million to $5 million. Depending on the situation, we also arrange debt financing from financial institutions in conjunction with our equity investment.

Typically, ProActive raises the equity capital needed to consummate a sponsored investment transaction in a single purpose partnership that it controls and represents for the duration of the investment. The partnership serves as the direct investor in the venture.

  • Investment Criteria

    We have a significant degree of latitude in the types of direct investments in which we can act as the principal sponsor. However, our involvement and ability to attract the necessary capital is highly dependent on the presence of certain characteristics of the investment opportunity.

    Business Profile: Texas and Southwest-based companies with a core business that has reached a normalized scale of operations, typically with revenues of at least $1 million. While some history of profitability is preferred, it is not necessarily a prerequisite to our involvement. However, we are not early stage investors.

    Investment Size: Depending on the situation, we are seeking opportunities to invest between $1 million and $5 million in some form of debt and equity.

    Industry Focus: Manufacturing, distribution and service companies, including those with a technology component.

    Active Involvement: We are not passive investors. There has to be an active and ongoing advisory role for us, both during and after the investment transaction. This active involvement can take many forms, varying from interim management positions to an active advisory role as a member of the Board of Directors. (Our compensation for post-transaction advisory services is based on reasonable market rates for the types of services performed and are paid by the investee company.)

    Control: While as investors we rely heavily on the strategic and operational expertise of the management team, we require a degree of organizational control in order to meaningfully support our active involvement.

  • The DTM Example

    Executives of the DTM Corporation (Nasdaq:DTMC), a manufacturer of rapid prototyping and manufacturing systems, approached ProActive regarding its interest in acquiring approximately 50% of DTM’s outstanding capital stock then owned by BFGoodrich. BFGoodrich had previously implemented a partial divestiture of DTM through an IPO in 1997. With the support of DTM’s management, we were able to negotiate with BFGoodrich the purchase of its remaining DTM stock, thereby gaining effective voting control of DTM.

    The principals of DTM immediately became involved in a variety of strategic, operational and financial matters, including the following:

    • Strategic/Organizational
      • Overhauled Board of Directors, including the addition of 2 principals of ProActive and 2 independents
      • Restructured option plan to grant equity ownership to all employees and to significantly increase the equity participation of key executives
      • Coordinated eventual sale of the company
    • Operational
      • Coordinated overhaul of compensation plans
      • Extensively reviewed and challenged sales and marketing initiatives, including reorganization of international distributor and agent network
      • Advised on systemization of new product development review process
      • Advised on litigation strategy regarding various intellectual property matters
    • Financial
      • Assisted in establishing an asset based credit facility
      • Advised on proposed Nasdaq delisting, which was ultimately avoided
      • Coordinated discussions with investment bankers on feasibility of a secondary stock offering and/or private placement of securities
      • Advised on alternative financing strategies
    • Result
      • DTM was sold to the industry leader 30 months after initial investment
      • Annual revenues increased from approximately $27 million to $40 million during the first two years of involvement. (Grew to number 2 in the industry)
      • Ten consecutive profitable quarters in a row (after only one profitable quarter in its history prior to ProActive’s involvement)
      • Annual Earnings increased approximately $8 million over first two years of involvement
      • Market capitalization increased from approximately $7 million to $45 million during ProActive’s ownership period