American Capital

American Capital was a U.S. private equity, specialty finance, and global asset-management firm founded by Malon Wilkus in 1986 and headquartered in Bethesda, Maryland. It built its business around supplying capital to middle-market companies, including employee-owned businesses, management buyouts, sponsor-led acquisitions, and corporate growth situations. Its investment activities included senior and mezzanine debt, direct equity, leveraged finance, structured products, collateralized loan obligations, and one-stop buyouts combining senior debt, subordinated capital, and equity. The company’s early work included financing employee stock ownership plan transactions and investing directly in employee buyouts. It expanded substantially during the 1990s and 2000s, opening offices in major U.S. markets and developing internal operating, financial-analysis, compliance, and portfolio-support teams. In 1997, American Capital completed a public offering and adopted the business-development-company structure. Its shares traded on Nasdaq under ACAS from 1997 until the company’s sale in 2017. American Capital was also included in the S&P 500 from 2007 to 2009. During its expansion, the firm created or managed several related investment platforms. European Capital provided private equity and mezzanine financing in Europe and established offices in London, Paris, Frankfurt, and Madrid. American Capital Agency, later known as AGNC Investment, was created as an agency mortgage real estate investment trust. Other platforms included American Capital Mortgage Investment, American Capital Equity I, American Capital Equity III, American Capital Senior Floating, and American Capital Energy & Infrastructure. At its peak, the broader organization reported more than $100 billion in assets under management and had invested in hundreds of companies and middle-market transactions. The global financial crisis severely affected American Capital. As a business development company, it was required to fair-value investments periodically, and market repricing reduced reported values even where portfolio companies continued to perform. Several offices were closed, the regular quarterly dividend was terminated in 2008, and the company entered negotiations with creditors after defaulting on debt obligations. European Capital was taken private and merged into American Capital in 2009. The company subsequently raised equity, refinanced debt, and rebuilt parts of its investment and asset-management platform. In 2014, American Capital proposed separating much of its investment portfolio into two new business development companies while concentrating the parent on asset management. The plan did not receive sufficient market and shareholder support. After an activist investor became the company’s largest shareholder, American Capital announced a broad strategic review in November 2015. In June 2016, American Capital Mortgage Management was sold to American Capital Agency for $562 million. On January 3, 2017, Ares Management completed the acquisition of American Capital and related businesses for approximately $4.1 billion. The transaction ended American Capital’s existence as an independent public company and integrated portions of its investment-management operations into Ares.

American Capital was established in 1986 by Malon Wilkus to provide capital to middle-market businesses. Its first investment, completed in 1990, involved the equity of an employee-owned middle-market company. Before its public offering, the firm participated in numerous employee stock ownership plan transactions and employee buyouts, helping establish its specialization in management and employee ownership situations. The firm expanded its geographic and organizational footprint during the 1990s and early 2000s. It opened offices in Chicago and Dallas in 1998, followed by Los Angeles and Philadelphia by 2000. American Capital also built an internal operations group staffed by experienced corporate executives who worked with portfolio companies. A separate financial-analysis, compliance, accounting, and information-technology team was developed to support due diligence, valuations, and portfolio-company advice. American Capital completed a $155 million initial public offering on August 29, 1997. It became one of the earliest U.S. private equity firms to access the public markets and operated as a business development company. Its investment model combined direct equity ownership with senior debt, mezzanine financing, sponsor-backed buyout financing, and structured investments. The firm later broadened its activities through specialized teams covering special situations, syndication, energy, commercial mortgage assets, leveraged finance, technology, and lower-middle-market transactions. International expansion accelerated in the mid-2000s. American Capital raised capital for European Capital, which developed offices in London and Paris and later expanded to Frankfurt and Madrid. European Capital invested in European buyouts through senior debt, mezzanine capital, and one-stop financing. American Capital also formed externally managed funds and affiliated public investment vehicles. These included American Capital Agency, an agency mortgage REIT, American Capital Mortgage Investment, American Capital Equity I, American Capital Equity III, and American Capital Senior Floating. In 2007, American Capital was added to the S&P 500. The financial crisis of 2007–2009 marked a major reversal. Quarterly fair-value requirements caused reported portfolio values to fall as comparable-market valuations deteriorated. Some portfolio companies also experienced operational stress. American Capital closed several offices in 2008, suspended its regular dividend, defaulted on debt, and began negotiations with creditors. It was removed from the S&P 500 in early 2009. European Capital also suffered from the same market conditions and was merged into American Capital after being taken private. The company pursued recapitalization and refinancing after the crisis. In 2010, it raised equity and reached an agreement with creditors under which lenders could receive cash or new secured debt. American Capital subsequently refinanced portions of its liabilities, raised additional debt, and continued developing investment platforms. It created an energy-infrastructure business, formed new investment teams, and launched American Capital Senior Floating, which invested mainly in senior secured loans and collateralized loan obligation equity. In 2014, management proposed transferring most investment assets into two new business development companies, American Capital Growth and Income and American Capital Income, while leaving American Capital focused mainly on asset management. The proposal failed to gain adequate support from the market and major shareholders. In November 2015, following pressure from an activist shareholder, American Capital announced a comprehensive strategic review. American Capital Mortgage Management was sold to American Capital Agency for $562 million in June 2016. Ares Management then acquired American Capital and related asset-management operations, with the transaction completed on January 3, 2017. The acquisition ended American Capital’s independent corporate and stock-market identity.

• 2017

  Acquired by Ares Management

  [1]American Capitalen.wikipedia.org

  Ares Management completed its acquisition of American Capital and related businesses on January 3 for approximately $4.1 billion.

• 2016

  Mortgage-management business sold

  [1]American Capitalen.wikipedia.org

  American Capital Mortgage Management was sold to American Capital Agency for $562 million on June 30.

• 2015

  Strategic review announced

  [1]American Capitalen.wikipedia.org

  American Capital began a review of strategic alternatives after shareholder resistance to its separation plan and activist pressure.

• 2014

  Business-separation proposal

  [1]American Capitalen.wikipedia.org

  The company proposed transferring most investment assets into two new business development companies and emphasizing asset management at the parent.

• 2010

  Equity raise and creditor refinancing

  [1]American Capitalen.wikipedia.org

  American Capital raised new equity and reached a refinancing arrangement that gave creditors the choice of cash or secured replacement debt.

• 2008

  Financial-crisis restructuring begins

  [1]American Capitalen.wikipedia.org

  The firm closed several offices, suspended its regular dividend, and entered creditor negotiations after portfolio valuations and financial conditions deteriorated.

• 2007

  Added to the S&P 500

  [1]American Capitalen.wikipedia.org

  American Capital joined the S&P 500 during the spring of 2007.

• 2006

  Technology investment platform established

  [1]American Capitalen.wikipedia.org

  The company created a dedicated technology investment team with offices in Boston and Palo Alto.

• 2005

  European Capital expansion

  [1]American Capitalen.wikipedia.org

  American Capital raised €750 million for European Capital, which opened offices in London and Paris and expanded the group’s European financing activities.

• 1997

  Initial public offering

  [1]American Capitalen.wikipedia.org

  American Capital completed a $155 million IPO on August 29 and changed its operating and tax status to a business development company.

• 1990

  First employee-owned-company investment

  [1]American Capitalen.wikipedia.org

  The firm made its first investment in the equity of an employee-owned middle-market company.

• 1986

  American Capital is founded

  [1]American Capitalen.wikipedia.org

  Malon Wilkus founded American Capital to provide capital and investment support to middle-market companies.

A multi-strategy private-capital and asset-management institution serving middle-market companies, financial sponsors, and institutional investors.

• Alternative investments · 1986

  Private equity and direct equity

  American Capital invested directly in middle-market companies and supported sponsor-led buyouts, management buyouts, employee ownership transactions, and corporate growth. It could act as a controlling investor or provide equity alongside debt financing.

• Private credit

  Senior and mezzanine financing

  The firm supplied senior secured debt, subordinated or mezzanine capital, and other leveraged-finance instruments. Its one-stop buyout model combined senior debt, mezzanine financing, and equity in a single capital solution.

• European private capital · 2005

  European Capital

  European Capital was an externally managed private equity and mezzanine platform serving European buyouts and other middle-market transactions. It operated from offices including London and Paris and later expanded into continental Europe.

• Mortgage REIT management · 2008

  American Capital Agency

  American Capital Agency was an agency mortgage real estate investment trust created and externally managed by American Capital. The platform became a significant part of the group’s asset-management strategy.

• Business development company · 2013

  American Capital Senior Floating

  American Capital Senior Floating was an externally managed business development company focused primarily on senior secured debt issued by middle-market and larger U.S. companies, along with equity tranches of collateralized loan obligations.

• Infrastructure investment · 2012

  American Capital Energy & Infrastructure

  This platform invested in energy and infrastructure assets globally and was led by executives recruited from the infrastructure and energy sectors.

• 2017

  Accepted acquisition by Ares ManagementM&A

  Background

  After the unsuccessful separation proposal and a strategic review, American Capital evaluated alternatives for the company and its asset-management operations.

  Action taken

  Ares Management acquired American Capital and related businesses, completing the transaction on January 3, 2017.

  Aftermath

  American Capital ceased to operate as an independent publicly listed company and its operations were integrated into Ares Management.

  Acquisition value. $4.1 billion (January 3, 2017)

  Source

• 2014

  Proposed separating investment assetsStrategy

  Background

  American Capital sought to reorganize its portfolio and emphasize asset management at the parent-company level.

  Action taken

  It proposed transferring most investment assets to American Capital Growth and Income and American Capital Income.

  Aftermath

  The proposal lacked sufficient market and shareholder support and was followed by a broader strategic review.

  Source

• 2008

  Responded to the financial crisisStrategy

  Background

  Market repricing and portfolio-company stress reduced asset values and placed pressure on the company’s debt and dividend policy.

  Action taken

  American Capital closed offices, suspended its regular quarterly dividend, and negotiated with creditors.

  Aftermath

  The company was removed from the S&P 500 in early 2009 and later pursued recapitalization and refinancing.

  Source

• 1997

  Adopted the business-development-company structureOther

  Background

  American Capital prepared for its public offering and changed its operating and tax status.

  Action taken

  The firm completed its IPO and operated as a publicly traded business development company.

  Aftermath

  The structure gave American Capital public-market access while requiring periodic fair-value reporting of its investment portfolio.

  IPO proceeds. $155 million (August 29, 1997)

  Source

1. 1American Capitalen.wikipedia.org
2. 2American Capital official websiteamericancapital.com