Our Approach

Lower middle market Approach

Drum Capital believes the lower middle market offers a robust opportunity set and target universe for private equity investors, as this segment of the market contains the largest number of private companies and only a fraction of available capital from private equity investors.

We believe the inefficiencies in the lower middle market can lead to attractive entry multiples, revenue growth rates, and operational improvements, while benefiting from underlying supply and demand imbalances. Our Investment Team relies on specialized expertise and relationships to navigate the large, but relatively arcane lower middle market, where our value based approach seeks to generate superior cycle agnostic returns.

Primary Fund Investment approach

Drum Capital’s primary fund investment vehicles employ a co-mingled investment strategy; deploying a majority of each funds’ investments to select third-party fund managers and a minority, yet meaningful portion of the portfolio (up to 30%) to direct and co-investments in controlled operating companies. Our co-mingled approach provides differentiated exposure and has a proven track record of delivering significant alpha generation to Drums Funds.

Primary Fund Investment Criteria:

  • Primary Fund Capitalization: $250M - $1B

  • Value oriented investment principles

  • Primary fund investments with predominantly existing General Partner relationships

  • Geography: North America

Primary Fund Manager Investment Strategies: Control-oriented investments, including:

  • Deep Value Buyouts: Buyout funds with a particular focus on value entry multiples and downside protection (asset coverage) and the ability to identify significant operational improvements where the active manager and business operators act as the value creation catalyst.

  • Special Situations: Corporate carve-outs, turnarounds, forced sales, generational exits, broken auctions, etc. Typically allows for a discounted purchase price below intrinsic value and public market comparables

  • Opportunistic Distressed: Company restructurings due to operational, financial, or other challenges. Typically enter through debt with the ultimate goal of debt conversion for equity control

Direct & Co-investment approach

Drum Capital leverages industry relationships to source best in class opportunities from a broad network of General Partners, existing direct company officers, industry intermediaries, independent sponsors and previous executives of operating companies. Our Investment Team has broad experience in numerous industries and reviews hundreds of direct investment and co-investment opportunities each year. We remain highly selective, investing in less than 3% of our direct deal flow.

General Direct Investment Criteria:

  • $5M - $20M of EBITDA

  • $25M - $100M of Enterprise Value

  • Control oriented direct investment opportunities, managed by Drum Capital

  • Geography: North America

General Co-Investment Criteria:

  • $20M - $100M of EBITDA

  • $50M - $750M of Enterprise Value

  • Co-investments opportunities alongside existing GP relationships

  • Geography: North America