Ga. private-equity firm scouting new deals in Baltimore

Ga. private-equity firm scouting new deals in Baltimore

Ga. private-equity firm scouting new deals in Baltimore

  • August 11, 2015
  • William Heyman
  • Comments Off on Ga. private-equity firm scouting new deals in Baltimore

Originally posted by Baltimore Business Journal

Screen Shot 2015-08-11 at 3.35.29 PMAn Atlanta private-equity firm targeting small businesses in low-income urban neighborhoods is scouting Baltimore-area companies for investments.

Diamond Ventures LLC sees Greater Baltimore, with its busy port, federal agencies and research coming out of universities such as Johns Hopkins, as prime ground for investment, said C. Earl Peek, the firm’s managing partner. Diamond Ventures’ investment targets will include manufacturers, government contractors and retailers.

“Baltimore is definitely an area we will be investing in quite a bit,” Peek said.

The firm’s efforts were boosted in November when it settled a seven-year legal battle with the Small Business Administration. Diamond Ventures sued the SBA in U.S. District Court in Washington, D.C., in 2003. It alleged that SBA discriminated against the minority-owned firm when it rejected Diamond Ventures’ application for a license to participate in the SBA’s Small Business Investment Company program.

Under the program, the SBA invests money in private-equity firms, which in turn invest the money in small businesses.

Diamond Ventures’ lawsuit alleged that the SBA’s requirements for a license kept firms owned or managed by African Americans from qualifying.

“They got cut off in the application process without even getting an interview,” said Franklin Lee, a partner at Baltimore law firm Tydings & Rosenberg. He andWilliam Heyman, another Tydings & Rosenberg partner, represented Diamond Ventures.

Under the terms of the settlement, Diamond Ventures can proceed with the process for getting an SBIC license, enabling it to start raising money for its private-equity fund. SBA also agreed to pay about $1.6 million in Diamond Ventures’ legal fees and costs.

The settlement came after U.S. District Court Judge Gladys Kessler in March rejected SBA’s bid to have the case dismissed. A trial was scheduled for February 2011.

Hayley Medvin, an SBA spokeswoman, declined to comment on the case beyond a statement the agency put out when it announced the settlement Nov. 24.

“Through his agreement, the parties have now agreed to move forward together to provide access to capital for small businesses, including those in underserved segments of the small-business community,” the federal agency said.

Diamond Ventures plans to raise $100 million to invest in companies in the Southeast and mid-Atlantic, Peek said. About $50 million will be invested through the SBA’s SBIC program.

Under the program, the SBA puts in $3 for every dollar a private-equity firm raises on its own. That means that if Diamond Ventures is approved for the program, its $50 million investment would be matched by an additional $150 million from SBA.

Peek said he plans to talk to wealthy individuals, insurance companies and pension funds, including Maryland’s state pension fund, about investing in Diamond Ventures’ fund. He also plans to solicit investments from banks, which are obligated to invest in low-income neighborhoods through the federal government’s Community Reinvestment Act.

Peek said he hopes to close the fund by next June and start making investments before the end of 2011.