With capital becoming the lifeblood of businesses in the novel coronavirus pandemic era, Sygnus Deneb Investments Limited (Deneb) has become a crucial partner in leading the recovery of Caribbean firms hard hit during the crisis.

In doind so, Deneb has established itself as the private equity arm in the Caribbean’s leading alternative investment platform of the Sygnus Group.

Deneb was formally launched in February 2020 after raising US$15 million in a private placement.

Deneb focuses its investment in the key growth industries, turnaround and buyout capital for a varied array of businesses. Deneb targets its investments at medium-sized businesses with revenue ranging from US$5 million to US$50 million. Deneb’s launch came on the success of its affiliate Sygnus Credit Investments Limited (SCI) and Sygnus Real Estate Finance Limited (SRF), both of which received strong reception by investors.

“Sygnus identified the need for significant equity capital within companies through the region, at the growth or mature stage of their business cycle, and sought to bring another well-aligned capital solution to assist entrepreneurs. Some companies in their growth endeavour are at their capacity with debt as seen by their debt-to-equity ratio and are at the maximum of sustainable leverage. As such, they need equity capital to grow and execute their business strategies over the medium to long term. Sygnus Deneb partners with these companies that have a great affinity to generate positive cashflow or already generating significant cashflow within their industries,” said the Sygnus Group co-founder, executive vice-president and chief operating officer, Dr Ike Johnson, in an interview with the Business Observer.

Deneb has a strong pipeline in the areas of energy, distribution, manufacturing, hospitality and financial services and is looking to close at least one new investment by the end of third quarter of this year.

“Entrepreneurs want to monetise a part of the value in their company as they get ready to settle down after running it for decades. As such, Sygnus Deneb with its equity capital can provide the owner with a great exit opportunity. Generally, Deneb prefers to take a minority stake with a targeted exit timeline of five to seven years. As a minority owner, it allows for better alignment of our interest and that of the entrepreneur who oftentimes remain as the majority. Alternatively, when you own the majority of a business, the exit becomes a lot more challenging. There are situations where the owner of the business desirous of a full exit or retaining a minority interest. In this case, the objective would be for Sygnus to identify a suitable partner with the requisite industry knowledge and experience to operate the firm, while Deneb adopts the role of the financier. As a private equity investor, Deneb develops two or three clear exit strategies before it executes an investment. This is a key pillar of private equity investment and requires great focus and discipline,” Dr Johnson explained.

Deneb has a target return on equity of 18 per cent with a potential dividend pay-out ratio of up to 85 per cent of net profits. As a St Lucian International Business Company, shareholders who are resident in Caricom countries would benefit from their dividends being tax free. Deneb’s only investment to date was a 40 per cent stake in Aruba, Wine and Dine which it paid US$8 million to acquire. Though the business was affect by the pandemic, like most businesses in the Caribbean, with Aruba reopening its borders combined with the strong leadership team in the company, Sygnus remains very pleased with the performance of the investment and the future outlook.

“Sygnus Deneb is a regional PE company, and we look for opportunities across the Caribbean. A number of these opportunities are generated from referrals through our credit portfolio companies funded by SCI, our investment banking clients and our regional network. We have developed an excellent relationship with our credit, portfolio companies, so much so that they come to us and ask if we are interested in an equity stake in their businesses to take advantage of group opportunities. We’ve been in investment banking for quite a while and we’ve established relationships across the entire Caribbean. At the moment, Jamaica has a very strong economy compared to other countries in the Caribbean, and where we invest depends on the particular opportunity,” stated Dr Johnson.