Unlike many funds, Allegiance Capital is a minority investor; hence, while we provide guidance to management, we do not take an active role in day-to-day operations.

At Allegiance Capital, we believe that the key to success is investing in the right industry and the right management team.

Allegiance Capital seeks to invest in businesses which possess long-term positive trends and sustainable competitive advantages. We typically look for companies with at least 2-3 years of operating history, which are at or near breakeven cash flow. On occasion, we will also consider earlier stage transactions on an opportunistic basis, if the management team and competitive advantages offer compelling reasons to do so. We will not pursue start-up opportunities.

Allegiance Capital prefers investments in companies whose owners have substantial portions of their net worth in the venture and where management has a vested interest in the business.

Finally, we will only consider those investments that offer a potential exit (typically through IPO, sale/merger, or recapitalization).



Allegiance Capital focuses on later stage financing. We define later stage companies as those who are generating positive earnings before interest, income taxes and depreciation and amortization. The majority of our investments are in companies that are experiencing significant growth - either organic growth or through acquisitions. These companies frequently need a level of mezzanine financing to support that growth. Often, with our assistance, portfolio companies are able to leverage our capital with additional financing from banks or other senior lenders. We also provide capital to assist management in buyouts and for recapitalizations.



Allegiance Capital's investments are typically in the form of subordinated debt with detachable warrants that can be converted to a certain percentage of the subject companies equity. This type of structure provides a financing strategy that lowers the portfolio companies overall cost of capital, while maintaining a capital structure with substantial flexibility.

Whenever possible, we prefer to obtain a second lien (subordinated to a senior lender) on the portfolio company's assets.



While the target return on a given investment is a function of Allegiance Capital's analysis of the degree of risk involved, we generally seek a minimum internal rate of return of 25%+. This return is realized through a combination of a current coupon on the subordinated debenture and a return on the equity investment (via the warrant). Generally, Interest rates on subordinated debentures range from 4% to 6% over 10 year U.S. Treasuries, per annum. Our return is estimated based on financial projections.



Investment sizes vary, but in general Allegiance Capital's investments are in the range of $1 million to $3 million. Smaller investments are considered on a case-by-case basis. While our preference is to invest alone, we will also consider investing as a member of a larger syndicate, as either lead investor or a participant.