Catalyst Acquisition Group, LLC - Investment Criteria

Catalyst Group: Investment Criteria


	Financial	We tend to seek out firms with up to $750 million in revenues. We look for both stand-alone firms and units within larger organizations. Though we focus on units that can finance their own operations quickly after acquisition we are not averse to entities with negative cash flow. In these instances we look to use our operations expertise to cultivate the underlying potential value of a business and develop growth. We do not generally pursue "recapitalization" opportunities. We would prefer to use our capital to invest in the business, rather than service existing debt. Historically, we have considered select opportunities that require some level of recapitalization where the potential for operational improvements and the fundamentals of the business intrigue us.
	Financial

	Capital Structure	We generally look for acquisition opportunities that will afford us a controlling stake in the new business. Because we are operationally focused we tend to insist on control so that we can effectively implement transformation in the organization. Though we will consider non-control stakes in businesses, our scrutiny of the management team becomes quite intense in such situations and we will generally look for covenants or significant board representation to maintain oversight balances. We tend to entertain opportunities that permit us to take an equity stake of up to $200 million and will use leverage cautiously where necessary.

	Strategic	We believe that our greatest asset is our ability to uncover hidden value and refine operations among our portfolio firms. Accordingly, we are most interested in firms that can benefit from our operational and marketing expertise and grow organically into full-fledged operations with our guidance and mentorship. As a result, we find ourselves repeatedly interested in: Non-core divestitures, either resulting from the strategy shifts of large or reorganizations as well as units that are made redundant or "orphaned" by a merger or acquisition activity. Stand-alone firms that have found themselves bumping against a revenue "ceiling" and who's management is willing to partner with us to make the necessary changes to take the firm to the next level. Units or cost centers within large firms that are being considered for elimination through outsourcing. In these cases we use our proprietary "Carve-Outsourcing™" model to permit the seller to remove the unit from their books and receive a higher level of service with lower costs, superior continuity and potentially even a cash payment up front for the unit. For more information see our special section on Carve-Outsourcing™.

	Cultural	Often the same skills and talents that are required to build a business from the ground up prevent its growth past a certain point. When the management of a small to medium sized firm reaches this point and is unable to push the business to the next level, professional expertise is required. Catalyst, with its operational focus, is uniquely positioned to free these businesses and release their trapped potential in order to actualize their full capacity. We actively seek firms that have the benefit of entrepreneurially oriented management teams we can mentor up to the next strata. With respect to larger corporations we have a particular fondness for divestitures of units with strong, entrepreneurial, management teams, even if they are inexperienced or have never had the opportunity to be marketed in any fashion other than as a resource to the parent. Overall we seek opportunities with cultures that respond well to incentives like equity participation, profit sharing and performance linked bonuses. Though we are not averse to acquisitions where we have to build a management team "from scratch," above all we look for groups that have an internally developed hunger and desire to succeed. We are enthralled with management teams that bring the necessary passion and drive to succeed such that we need only inject a measure of professional operations acumen to quickly grow the organization.

	Verticals	We do not typically limit ourselves to particular verticals. In some areas, however, we have a particular "comfort zone." These include but are not limited to: Aviation/Aerospace Defense Financial Services Professional Services Consulting Market Research Financial Research Training Telecommunications Networking Wireless Technology Disruptive Technology Fast Moving Goods Brands

	Geography	We pursue acquisition opportunities in North America without regard to region as well as in Western and Central Europe and South America. We are particularly interested in investments in Switzerland, the United Kingdom and Scandinavia.