TORONTO, ONTARIO: FEBRUARY 09, 2012 - Bay Street in Toronto, Ontario is seen here Thursday Feb. 9, 2012. (Tim Fraser for The Globe and Mail) (For ROB story by n/a)Tim Fraser/The Globe and Mail
TerraVest Captial Inc. is back in action.
The company, better known as TerraVest Income Fund from its days as an income trust, operates like a private equity buyer, but is publicly traded. That means it buys controlling or passive stakes in private companies, and then uses the cash flow from these investments to pay dividends to its shareholders.
After restructuring, the company is now looking to strike more of these deals, aiming to write investment cheques worth between $15-million and $50-million. It is the first time the company has looked to expand since the finance crisis.
Heading into 2008, TerraVest was fraught with risk. Like many private equity buyers at the time, the company was saddled with debt and many of the companies it invested in saw their cash flows vanish almost overnight.
It took some time, but the balance sheet has since been reworked – so much so that TerraVest now owns only two oil and gas servicing businesses. And the company has new management, led by former National Bank Financial investment banker Mitch Gilbert.
But this time there are some new rules. Chiefly: avoiding as much debt as possible. TerraVest is also trying to get the word out that it is different from private equity buyers because it has looser investment timelines. Private equity buyers typically hold an asset for three to five years, and then either sell it or take the company public.
The big question is whether investors, and potential targets, will wipe the slate clean for the new management team. TerraVest's stock has plummeted since the heyday of income trusts, and investors surely still have some scars.
Tim Kiladze