CEDA’s Equity Funding supports high-growth ventures with citizen participation, requiring a solid business plan, skilled management, and a 15% owner contribution. Investments range from P4M to P50M, with CEDA holding a 26%-49% minority stake for 5-10 years. Funding covers start-ups, expansions, acquisitions, and restructuring, with board representation and capital in equity, mezzanine, or debt.

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Overview

CEDA’s Equity Funding considers several criteria, including a well-defined business plan with a clear success strategy and a highly skilled management team. As an empowerment vehicle, CEDA requires citizen participation in both ownership and management. Promoters must contribute at least 15% of the funding requirement, demonstrating personal risk. The agency prioritizes high-growth ventures with a minimum internal rate of return (IRR) of 25%. Eligible companies must have a funding size between P4 million and P50 million, with CEDA holding a minority equity stake of 26% to 49%. Investments typically last 5-10 years and cover start-ups, early-stage investing, expansion capital, mergers and acquisitions, restructuring, turnarounds, and management buyouts or buy-ins. CEDA maintains oversight by securing board representation and uses various capital classes, including equity, mezzanine, and debt (when holding an equity stake).

CEDA’s selection criterion takes the following into account:

Business plan
  • A clearly defined and realistic business plan giving a clear strategy for its success.
Management
  • The business should have or provide for a highly skilled and committed management team.
Citizen empowerment
  • Being an empowerment vehicle CEDA requires that the businesses it finances have citizen participation. This translates to having citizens forming part of both the ownership structure of the business including participation in the management of the business.
Owners contribution
  • The promoters are required to take personal risk in their projects and will make an equity contribution which equates to a minimum of 15% of the funding requirement.
Growth potential and returns
  • The Agency is interested in ventures with exceptionally high growth potential capable of providing financial returns commensurate with the level of risk taken. The investment must achieve a minimum internal rate of return (IRR) of 25%.
Size of target company
  • P4 million to P50 million.
Ownership requirement
  • CEDA requires that it holds a significant but minority equity stake i.e. a minimum of 26% but not more than 49% of the Investee Company’s ordinary shares.
Typical holding period to exit
  • 5-10 years.
Types of transactions
  • Start-ups or green fields.
  • Early stage investing.
  • Expansion capital.
  • Mergers and acquisitions.
  • Restructuring and turnarounds
  • Management buyouts and buy-ins
Monitoring
  • As a rule, CEDA seeks representation on the Board of Directors of our Investee companies.
Classes of capital used
  • Equity capital (ordinary shares)
  • Mezzanine capital (preference shares, debenture notes, options and warrants)
  • Debt (provided CEDA has an equity stake in the company)