2010 Annual Report - Harbert Management Corporation

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Mezzanine Capital We’ve seen steady improvement in 2010 within the financial markets. We saw the senior credit markets improve for large businesses at the beginning of the year, and this began trickling down to smaller businesses during the second half of the year. In direct correlation to this, the merger and acquisition market came back to life this year as well. These market improvements have an impact on our funds in two primary ways: we’ve seen both the number of potential exits of current portfolio companies and the number of financing opportunities increase significantly during 2010, especially in the second half. We have exited five portfolio companies this year and we have an additional three companies in various stages of negotiations with prospective buyers, which we anticipate exiting during the first half of 2011. From a new deal perspective, we funded two new investments during the first three quarters of 2010 and four new investments during the fourth quarter. Throughout the economic downturn, we were more flexible in where we played in the capital structure – moving up to take the senior role normally played by banks or moving down to play the equity role – without altering our underwriting guidelines. While this resulted in fewer deals being funded, we feel confident that the deals we financed will be successful investments for HMP II. A database of mezzanine loans maintained by one of our institutional investors going back to 1990 indicates that historically transactions done during or right after a recession typically have higher returns. We are hopeful this will be the case with our recent, pending and future transactions, as we are approaching deals with caution, skepticism and conservative capital structures. We’ve seen both the number of potential exits of current portfolio companies and the number of financing opportunities increase significantly during 2010, especially in the second half. Harbert Management Corporation 34
Robert A. Bourquin Managing Director ’10 in Review John S. Scott Managing Director Brent g. Ray Managing Director • In 2010, HMP I and HMP II closed six new transactions and made seven add-on investments for a total of slightly more than $39 million. • The team exited five portfolio companies either through a sale of the business or a refinancing transaction. In all cases, the loans were repaid and warrants were sold. • Four other companies repaid all or a majority of our loans while the equity components remain outstanding. • The Funds ended the year with $232 million in combined investments. John C. Harrison vice President & Senior Managing Director Harbert Management Corporation 35
Page 1: Connections Harbert Management Corp
Page 4 and 5: Harbert Management Corporation Fund
Page 6 and 7: Corporate Profile Harbert Managemen
Page 8 and 9: 2010 The Year in Review Letter to P
Page 10 and 11: After the four-month engagement, wh
Page 12 and 13: We have transitioned all finance an
Page 14: Real Estate Connecting investors to
Page 17 and 18: Alan C. Fuller vice President & Sen
Page 19 and 20: Mixed-Use Properties Charleston Cig
Page 21 and 22: tor v. tveitane Principal ’10 in
Page 23: Ostfildern (Fleet), Germany - 175,0
Page 26 and 27: Private Equity Our private equity f
Page 28 and 29: 2010 Private Equity Portfolio HPeFi
Page 30 and 31: Venture Capital The exit market for
Page 32 and 33: Active HVP I & II Portfolio Compani
Page 36: 2010 Mezzanine Transactions new inv
Page 39 and 40: Wayne B. Nelson iii President & Chi
Page 41 and 42: Managed Assets Bridgewater (40% own
Page 43 and 44: Jeremy e. Steele vice President & S
Page 46: Absolute Return Strategies Connecti
Page 49 and 50: ’11 introduction Since 1997, Greg
Page 51 and 52: Robin Y. Yang Director of investmen
Page 53 and 54: John H. Frank Director of investmen
Page 55: Zachary P. turnage Director of inve
Page 58 and 59: Investor Services and Risk Manageme
Page 60 and 61: Legal and Compliance Our commitment
Page 62 and 63: Investor Relations HMC’s number o
Page 64 and 65: Harbert Realty Services, Inc. It ma
Page 66 and 67: Harbert Employees Reaching Out (HER
Page 68 and 69: Management EXECUTIVE OFFICERS Raymo
Page 70: Harbert Management corporation SM 2

2010 Annual Report - Harbert Management Corporation

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