We make selective investments in companies primarily backed by middle market private equity sponsors. Our capital is deployed across every segment of the capital structure, from senior secured debt, to subordinated debt, to non-controlling equity. The core tenets of our investment approach include a focus on capital preservation, identifying strong cash flows, and cultivating strong working relationships with our sponsors and portfolio companies.
We are trained to identify defensible business models, auspicious market positions, and proven management teams. To aid our search for value in the middle market, we have established lasting, productive relationships with a number of leading financial sponsors.
It is not sufficient for us to deploy capital on the basis of a balance sheet alone. We prefer to de-risk and deleverage our investments on the basis of a company’s demonstrated ability to generate cash.
Consistent with our focus on strong cash flow, we avoid businesses with heavy capital expenditure requirements. We also generally avoid industries such as fashion, retail, and restaurants.
Our value-oriented approach ensures that investments have an appropriate return profile in relation to risk.
In any given deal, we expect to invest between $10 and $100 million across the capital structure (senior secured loans, subordinated debt, and other investments). Our capital preservation and risk calibration efforts are aided further by our robust industry diversification.
Our long-term retention of highly experienced senior leadership team members has positioned our firm to benefit from a powerful network of long-standing relationships. We work routinely with the most well-regarded private equity sponsors in our field. These relationships often lead to unique investment opportunities not easily accessible to others.
Furthermore, these relationships are kept intact thanks to our reputation of acting in good faith in the event of challenging circumstances. Should we encounter any challenging circumstances, our partners, as well as our investors, know they can rely on PennantPark to pursue a capital preservation strategy while acting with transparency and integrity at every turn.