Business development company (BDC) specializing in providing capital to middle-market companies.
Capital Southwest Corporation, based in Dallas, Texas, operates as a versatile business development company specializing in credit, private equity, and venture capital investments primarily in middle market companies. Founded in 1961, the firm's investment strategy focuses on a diverse range of sectors and investment stages, excluding startups and publicly traded entities. Instead, Capital Southwest targets mature and growth-oriented companies in industries such as industrial manufacturing, healthcare products and services, specialty chemicals, and technology-enabled services including SaaS models.
The company's investment approach encompasses various financing structures including unitranche debt, subordinated debt, senior debt, first and second lien debt, preferred and common equity. Capital Southwest typically engages in non-control investments and often co-invests equity alongside its debt investments, demonstrating a balanced approach to supporting portfolio companies. Its investment size ranges from $5 million to $50 million for equity investments and $5 million to $20 million for debt investments, with the ability to participate in transactions up to $40 million.
In addition to its primary focus on the lower middle market, targeting companies with revenues above $10 million and EBITDA below $15 million, Capital Southwest opportunistically invests in the upper middle market where EBITDA exceeds $50 million. The firm also allocates capital to syndicated first and second lien term loans in the upper middle market, guided by specific criteria such as EBITDA size and investment yield thresholds. With a commitment to long-term value creation, Capital Southwest Corporation employs a patient investment strategy, often holding investments for extended periods and actively participating on the boards of its portfolio companies to drive strategic growth initiatives.