Overview of Investment Securities
Midwest Investment Ventures (MIV) provides private equity and mezzanine debt financing to middle market companies in a variety of industries throughout the United States. Our goal is to build a diverse portfolio of debt and equity investments that will provide shareholders with both current income and capital appreciation. An overview of our investment securities is provided below.
Private Equity Investments
With respect to our private equity investments, we principally focus on companies that demonstrate strong internal growth dynamics and that we also consider to be good candidates to achieve growth through selective acquisitions. We also favor equity investments in private companies that we believe can achieve the necessary size, profitability, management depth and sophistication to become public companies or candidates for acquisition.
Our private equity investments typically range in size from $1 million to $5 million. We generally structure our private equity investments as participating preferred stock with an 8% to 10% dividend yield that accumulates and is paid upon a liquidity event. Our equity investments typically provide for at least one seat on the company's board of directors and contain provisions that give us significant influence in corporate governance issues. We generally expect our private equity investments to achieve liquidity within three to five years.
Mezzanine financing is typically provided to later stage companies that have strong cash flows. In terms of seniority, it is junior to a company's senior debt and senior to its equity holders. With respect to our mezzanine investments, MIV focuses on private companies that have demonstrated predictable and sustainable cash flows from operations, strong tangible assets, reasonable financial leverage relative to cash flows from operations, and reasonable prospects to retire at least 50% of their senior indebtedness within three years of our investment.
Our mezzanine investments typically range in size from $1 million to $7 million. MIVís mezzanine debt investments are typically in the form of a subordinated note with a fixed rate of interest from 12% to 18% and an "equity kicker" such as a warrant or option to purchase the company's stock at a minimal price. The maturity of these securities is typically five to seven years. The terms of the note include loan covenants that protect our interests in the investment.