Investcorp is adding a business development company investment advisor to its product suite as it looks to round out its credit offerings.
The New York-based investment manager has entered into a definitive interest purchase agreement to acquire a majority ownership stake of CM Investments Partners, the investment advisor to CM Finance, a New York-based BDC. The majority stake was previously held by Cyrus Capital Partners and Stifel Venture Corporation.
Investcorp will purchase newly issued common stock shares representing 5 percent of the total outstanding shares at the most recent net asset value at the time of purchase. It will also purchase an additional 5 percent of common stock in open-market transactions during the two-year period following the close.
The transaction still requires a shareholder vote from CM Finance investors and regulatory approval. It is expected to close during the third quarter.
Investcorp, which traditionally focuses on the CLO space, embarked on this search in an effort to round out its credit offerings and investor base, managing director and head of credit Jeremy Ghose told Private Debt Investor.
“We are now entering the mid-market credit space and keeping with our desire to broaden our credit offering within our existing credit space,” Ghose said. “This is Investcorp’s first entry into the BDC space. As we scouted the market, we found the overall BDC space to be an attractive one.”
Ghose said Investcorp looked for potential partnerships for more than two years and sought out firms with seasoned management teams that had a strong track record and held a competitive edge in the market. Ghose noted that it’s also a very interesting time to get involved with the BDC market.
“Over the next 12 to 24 months, we expect a lot more activity in the overall BDC space,” he said. “We absolutely want to be a part in that consolidation wave that we are seeing and are likely to see in the immediate future.”
CM Finance has more than $319 million in assets under management and invests in companies with at least $15 million of EBITDA across many industries. It has the highest concentration of assets in professional services, media and energy.
This news comes just a month after Investcorp acquired New York-based placement agent Mercury Capital Advisors.
“We are looking to expand into structured credit, distressed investments and to complement what we already have,” Ghose said. “Over the next few years, our goal remains to build out a broad, diversified global credit manager.”
Investcorp was founded in 1982 and operates strategies across private credit, private equity, real estate, hedge funds and infrastructure. The firm has more than $22.2 billion in assets under management.