| Q: Does Quad-C have full control over its investment funds? A: Yes, we have complete discretion over our investment funds. We typically issue a “capital call” to our investors approximately two weeks prior to making an investment, and our investors transfer the money to our account in time for the closing of the transaction.
Q:
For people concerned about confidentiality, how secure is the data that I provide to Quad-C?
A: We respect that the information that you provide us is most often very sensitive and private in nature. As such, we treat it very carefully and to give the provider of the information even more comfort, we are happy to enter into a confidentiality agreement.
Q: Does Quad-C have a geographical focus?
A: Quad-C invests in companies located throughout he United States and we like companies
that have established an international presence as well. Our offices are located in Charlottesville, VA and New York City, but our investment horizon is national.
Q: Would Quad-C consider being a minority holder?
A: We prefer to have a controlling or 50/50 position in the investments that we make. However, if we can structure the appropriate protections, we will consider making investments that result in slightly less than a 50% ownership.
Q:
How long does it usually take Quad-C to close on a transaction and what is typically covered during this process?
A: Once we have signed a letter of intent, we can usually complete our due diligence, arrange the appropriate debt financing, execute the definitive purchase agreement and close on an investment within 45 to 90 days.
During the due diligence process, we review the company’s historical financial and operating performance as well as study the industry dynamics and current market trends and use all these analyses to create a detailed five-year forecast that we collectively agree is achievable. In addition, we review the current Management Information Systems, and matters pertaining to the company’s tax, legal, environmental, intellectual property, insurance and employee benefits status. Finally, at the appropriate time we would request to speak with key suppliers and customers.
Q:
How is an investment decision made within Quad-C?
A: Quad-C is a fairly small organization and our partners have worked together for over a decade. We do not have any external parties that need to approve our transactions. As
such, we can make decisions quite rapidly. Most often, after the completion of our due
diligence process, the team working with the company presents the investment opportunity
to the whole firm. We debate the issues, suggest follow-ups and shortly thereafter make a
final decision on the investment.
Q: What is the normal breakdown between the amount of debt and equity used to fund the investment?
A: We use a combination of debt and equity in most of our investments, but we like to capitalize our investments conservatively in order to allow for growth and provide a cushion in the case of a downturn. Therefore, depending on the nature of the business, we usually provide 30% - 50% of the total capital in the form of equity.
Q: How can I be assured Quad-C will be able to secure the debt financing for the deal?
A: Over the years, we have developed strong relationships with a number of banks and mezzanine debt funds, and we have never had to pull away from an investment because we were unable to raise the debt financing. Nonetheless, as a protection for our Limited Partners, our investments are typically contingent upon raising a reasonable amount of debt financing.
Q: How is the management compensation package structured?
A : We compensate management via a salary and bonus structure, where the annual bonus is based on achieving agreed upon earnings targets and can be a substantial part of the total annual compensation. In addition, management is given the opportunity to invest alongside Quad-C in the company and to participate in a performance based stock option program.
Q: How does a roll-over investment in the company get taxed?
A: This depends on the acquisition structure used, but in many cases the seller can roll over all or a portion of their current equity ownership into the new company on a tax-deferred basis.
Q: How much does Quad-C expect senior management to invest in a transaction?
A: Each situation is assessed uniquely and so there is no pre-set dollar amount or percentage ownership that we seek to achieve. However, in order for the management team’s and our interest to be completely aligned, we prefer to have managers invest a “meaningful” amount in the company.
Q: Who makes the day-to-day decisions after Quad-C makes an investment?
A: Although we generally are the majority shareholders in the companies we invest in, we leave the day-to-day operations to the management team and add our value by focusing on corporate and strategic development at a Board of Directors level.
Q: How long does Quad-C typically hold onto its investments?
A: We usually hold our investments for 4 to 6 years. However, in the past, we have held investments for as long as 12 years and as short as 2 years.
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