Breakwater Management specializes in providing flexible debt and equity capital to growing lower middle market companies. We are a relationship-based firm and work in close partnership with our borrowers to deliver value-added solutions that are tailored to meet individual borrower needs. Our Managing Partners have over 35 years of private company investing experience and have built the firm on a deep commitment to partnership, integrity and growth.

Credit Strategy

Breakwater’s Credit Strategy fills a capital void brought about by bank consolidation and regulatory constraints. We provide cash flow and enterprise value loans to fast-growing lower middle market companies in the United States. Our investment objective is to generate both current income and capital appreciation through structured debt investments with equity participation.

We partner with both owner-operated and sponsor-backed companies and will typically invest $5 million to $25 million in each principal transaction. In addition to capital commitments, Breakwater will provide strategic advisory and operational expertise to support these growing companies in building world-class enterprises.

Investment Criteria

Our direct lending strategy is focused on companies with the following financial criteria:

  • Revenue up to $150 million; EBITDA up to $20 million
  • Predictable and growing revenue
  • Attractive margins and strong free cash flow conversion
  • Substantial equity base, asset base and enterprise value
  • Moderate pro forma leverage and strong credit metrics

Industry Focus

We have a generalist investment approach, but the following industry categories represent particular fields of interest:

  • Food & Beverage
  • Branded Consumer
  • Specialty Retail / Restaurants
  • Software / Information Services
  • Business Services
  • Media & Entertainment
  • Healthcare / Health & Wellness
  • Specialty Manufacturing & Distribution

Transaction Types

We seek investment opportunities that serve the long-term growth and liquidity objectives of suitable lower middle market companies. Our flexible investment approach provides capital in a variety of opportunistic financing structures, including:

  • Organic Growth
    Capital support for business plan and expansion initiatives
  • Acquisitions
    Capital support for a merger or acquisition
  • Buyouts
    Senior and junior capital support for private equity acquisitions
  • Refinancings / Recapitalizations
    New financing to improve a capital structure or provide shareholder liquidity

Transaction Terms

The general parameters for a typical investment include:

  • Investment Size:  $5 million to $50 million
  • Security Type: Senior secured first lien and unitranche term loans, and selectively junior debt, structured with equity participation
  • Interest Rate: Senior debt at 7% to 10% and junior capital at 10% to 14% per annum, payable in cash and in kind, monthly or quarterly
  • Maturity: 3 to 5 years
  • Amortization: Variable, ranging from fixed-line amortization to bullet maturity (100% of principal due at maturity)
  • Equity Features: Warrants for common stock, conversion features (from debt into common equity) and/or equity co-investments

Equity Strategy

Breakwater also provides growth capital to highly promising lower middle market consumer-facing businesses in the United States. Our Equity Strategy’s investment objective is to make substantial minority as well as majority controlling equity investments in leading lower middle market companies, primarily in the branded consumer products, retail and media/services sectors.

The target investment size is $10 million to $30 million, and this will often be the first institutional capital invested into the portfolio company. We will make growth equity investments in situations where capital and expertise can unlock value.

Investment Criteria

  • Revenue up to $150 million; EBITDA up to $20 million
  • Attractive industry niche with clear competitive advantages and asset-light/capital-efficient business model
  • Demonstrated market penetration but lacking the capital to realize full growth potential
  • Proven, scalable business model with exceptional long-term growth prospects and viable options for realizable exit event
  • Experienced management team with an excellent track record

Industry Focus

Our primary focus is on growth equity opportunities in the following sectors:

Branded Consumer

Personal care
Apparel and accessories
Consumer durables
Food and beverage


Bricks and mortar
Healthy living


Content and distribution
Information services

We take an opportunistic approach towards other promising high-growth industries.

Transaction Types

We will actively consider a wide range of transaction opportunities that meet our investment objective. These may include:

  • Growth Capital
    Equity to accelerate sales and profitability, either through organic growth or an accretive strategic acquisition
  • Control Buyout
    An acquisition with moderate leverage to support “next level” growth
  • Dividend Recapitalization
    Partial liquidity to shareholders ahead of second, greatly appreciated liquidity event
  • Deleveraging Transaction
    A capital infusion into a good company with a bad balance sheet to reduce debt burden and unlock value

Transaction Parameters

The general parameters for a typical investment include:

  • Investment Size: $10 million to $30 million
  • Structure: Control or significant minority equity position
  • Geographical Reach: United States, with a particular focus on California and Western U.S.
  • Target Situations Where a capital event and/or Breakwater’s operating expertise drives:

     o Strong revenue growth through investments in product development,
        category extension, sales and marketing, infrastructure and working capital
     o Geographic and channel expansion
     o Margin appreciation via economies of scale
     o Merger and acquisition activity