M2 is focused exclusively on the small and emerging manager sector of private equity. Building on decades of deal experience, we have developed a thoughtful, sophisticated investment process by leveraging our years of proven and relevant investment and operating experience.
In evaluating small lower middle market and emerging fund managers, we frame our analysis around four key success factors: People, Strategy, Execution, and Alignment of Interests. We seek to invest in experienced teams with high integrity and a sound, attractive, sustainable value proposition. The team must be able to articulate and execute the strategy through a disciplined investment process, backed, of course, by the ability to create value. Strong alignment of interests, created by having a solid fund structure and significant skin in the game, ensures that the managers we work with and invest in operate with the same level of diligence and thoughtfulness as we do when investing capital.
Underlying Fund Characteristics
- Smaller funds typically $100 million to $1 billion fund size
- Buyouts, growth equity, and special situations
- Portfolio companies with enterprise values up to $250 million
- Fund examples include: first-time funds, specialty and niche, spin-outs, serial deal investors, regionally focused, industry focused, and minority & women managers
- Focus on less efficient markets allows for acquisition pricing advantages and multiple arbitrage
- Greater opportunity for managers to add value
- Named partners actively executing the fund's strategy
- GP and LP financial interests are better aligned
- LPs have negotiating leverage in newer funds