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They also tailor investment strategies around syndicated and publicly listed debt vehicles, including loans, high yield and CLOs. Furthermore, they invest in selected strategic secondary market transactions, structure alternative credit hedge fund strategies and invest in property. They then structure these investments into funds to serve institutional investors’ need for alternative sources of yield.
They have €18bn of assets under management, operate around the world and have one of the longest track records in their industry.
ICG history overview
The firm’s business model has evolved since they began direct investing in 1989. Over time they have become very successful in raising third party funds and optimising the capacity of their balance sheet. In 1994 they began investing third party capital for the first time. By 2000 they were managing more third party capital than balance sheet. Today around 75% of their investable capital comes from third party investors and fund management continues to be at the heart of their business strategy.
ICG is an expert in mezzanine finance, leveraged credit and minority equity. This is what they do single-mindedly, across four continents and 11 local offices.
Each of their offices is staffed with experienced local investment professionals so that they are part of the local market. They transact in the local language and access local deals across Europe, Asia Pacific and North America working in partnership with local management teams and private equity sponsors. Their local investment professionals are critically important to origination – over 90% of their deal sources are country specific.
Since their founding as a Mezzanine House in 1989 they have become a leading asset manager investing on behalf of over 200 investors (as at May 2013) through credit, minority equity and mezzanine.
ICG highlights and key statistics
- They deploy capital on behalf of more than 200 investors through private debt, mezzanine, credit and minority equity funds specialising in mid-market transactions (typically €250m to €1 billion of enterprise value). They also invest their own capital alongside third party funds.
- They cover Europe, Asia Pacific and North America via local offices in 11 countries.
- As of 31 March 2015:
- Where they source capital: ICG plc 2.3bn Euros, third party investors 15.7bn Euros
- Where they invest capital: credit funds 8.2bn Euros, mezzanine & equity 7.0bn Euros, ICG Longbow 2.8bn Euros
At ICG they believe that environmental, social and governance (ESG) factors can positively contribute to investment performance, as well as contributing to help build a more stable, sustainable and inclusive global economy. By incorporating ESG criteria into their investment decision making and investment practices they can influence the companies they invest in to improve their performance. ICG is a signatory to the United Nations Principles for Responsible Investment (UNPRI).
ICG investment approach: the firm has a deep understanding of credit and the drivers of equity returns combined with a strong culture of credit risk management.
They invest across a company’s capital structure depending on where they find potential value. They do not apply a fixed investment structure. Instead they configure a capital solution to fit the cash flow generation of the underlying business.
As the global independent leader in mezzanine finance, they believe there are further opportunities to grow their existing mezzanine and minority equity business. The flexibility and stability of mezzanine as an asset class is recognised by investors as an attractive and less volatile complement to private equity funds. As the current environment favours long established, successful players, they intend to maintain their global leadership position in Europe, Asia Pacific and the US.
With one of the longest track records of any institution in European leveraged finance they continue to see strong interest from yield seeking investors, such as pension funds and insurance companies in their levered loan funds. They recently seeded their first dedicated high yield fund and continue to explore new fund structures and bespoke mandates to meet the needs of investors. Common to all of these asset classes is their ability to originate, assess and price risk across the capital structure of sub-investment grade companies.
ICG provides mezzanine financing to private equity buyout investors for medium to large sized buyouts up to €1 billion in enterprise value where mezzanine typically comprises around 10% of the capital structure.
ICG provides mezzanine and equity financing to private equity buyout investors, management led sponsorless transactions and companies in need of development financing or debt restructuring solutions.
Intermediate Capital Managers Limited (ICML) is the investment advisor to ICG’s five European mezzanine investment funds with aggregate funds under management of €4.0 billion (as at 30 September 2012). ICML’s mezzanine funds are structured as limited partnerships and invest alongside ICG’s balance sheet.
Intermediate Capital Asia Pacific Limited (ICAP) acts as investment advisor to ICG’s two dedicated Asia Pacific funds.
The firm’s experience translates into stability and reliability for their partners and superior returns for their investors.
Mezzanine investment philosophy
They invest alongside financial sponsors and management teams with a focus on mid-market companies.
They seek a prudent balance of risk and return for their investors and this balance determines which part of the capital structure they invest in. Returns are generated through debt coupon – cash, payment in kind, pay-if-you-can or pay-if-you-want – and through equity, either through equity warrants associated with mezzanine or standalone equity.
A key strength is their ability to adapt their financing approach to each investment opportunity. ICG has led the market through a very reactive and flexible approach, structuring adhoc solutions and products and introducing such features as pay-if-you-can, reverse toggles and unirates.
They lead, structure, underwrite and arrange mezzanine and equity investments. By controlling each instrument they invest in, they provide certainty and stability in a capital structure. If syndication is required this is typically to one of their limited partners or financing partners, but ICG is always the primary contact point for management and shareholders.
They are ‘take and hold’ investors with the intention to hold their investments to maturity, investing in the business and its management team for the medium to long term. By investing for longer periods and by having board representation, either as an observer or director, a deeper mutual understanding is generated between ICG, management and shareholders. ICG is often a serial investor in a business and management team as businesses are sold in secondary transactions. ICG represents continuity and stability to those management teams and businesses.
They believe in a local approach to investment. Their local executives originate and execute transactions and retain a monitoring responsibility throughout the life of the investment. This ensures continuity and better communication between ICG, management and shareholders.
Real estate debt investment
ICG-Longbow provides senior and mezzanine finance to established property investors to support acquisitions, refinancing and value creation strategies.
Investments will typically be in the range £5-£50 million secured on commercial real estate assets in the value range £20-200 million.
Real estate debt investment philosophy
ICG-Longbow’s funds provide preferred equity, mezzanine debt and senior loans to private and listed companies. Investments are secured across all sectors of UK commercial property. Investments focus on supporting acquisitions and recapitalisations where there is a clear value creation plan and the sponsor has material cash equity at risk.