Investment Strategy

Cardinal has identified and executed an investment arbitrage strategy by acquiring later stage, lower middle market companies, and through value-added services, growing them to position for an exit to either industry buyers or larger participants in the investment community.

Over the last 20 years, lower middle market buyout firms have outperformed the overall private equity industry and have produced the highest rates of return of any private equity submarket. This is primarily due to the following dynamics:

• Limited Competition

  Bigger private equity funds tend to not focus on lower middle market transactions because of the difficulty in deploying large amounts of capital and the high degree of investor involvement.

• Attractive Valuations

  Because of this limited competition, companies within this market can be acquired at attractive EBITDA multiples, typically ranging from 4-7 times.

• Multiple Expansion

  Valuations for larger size companies tend to be significantly higher (7-12 times EBITDA) than those in lower middle market companies because of the increasing flow of capital to the private equity industry.

Cardinal follows a disciplined investment approach that leverages its extensive expertise in acquiring and growing lower middle market companies to realize long-term capital appreciation. The foundation for this approach is based on the following fundamental concepts:

• Exceptional management teams
• Stable and profitable businesses
• Understandable business models
• Leading market positions
• Exit opportunities