An emerging Black-led investment fund, Apis & Heritage Capital Partners (A&H), intends to raise $50 million to build its pipeline of acquired companies to help close the nation’s racial wealth gap.
Started on Juneteenth 2021 by founding partners and Morehouse College graduates Todd Leverette and Phil Reeves, they hope to compile the money this year. Plans call for prioritizing the potential purchase of Black-owned businesses with a workforce of at least 40% Black or brown employees.
The Washington, DC-based social impact private equity firm raised $30 million last June, the first close of its flagship Legacy Fund I. The firm’s business model focuses on buying closely-held businesses “seeking a return on their life’s work” and cherishing their legacy. A&H converts the companies into 100% employee-owned businesses.
Leverette explained employee stock ownership plans have been building wealth for workers for over 40 years, but mostly for white workers. He says A&H is taking something old and directing it where it hasn’t been deployed before, but where there is the greatest opportunity and the greatest need.
This month, A&H used an undisclosed amount of the $30 million to convert Denver-based Apex Plumbing Co. and El Paso, Texas-based Accent Landscape Contractors Inc., making them the first companies to use its concept. Leverette expects A&H to do eight to nine transactions by 2025, turning 500 or more workers into employee-owners and creating long-term savings and wealth for them and their families.
The company hopes to raise $35 million to $50 million. Leverette expects the round to be closed to new investors as of Juneteenth 2022. He added the firm is now finalizing its last tranche of that investment and hopes to complete it later this year. “While we’ve been excited about the level of investor interest in our strategy and vision, it has truly pained us to have to turn some investors away.”
He explained once A&H completes its employee-led buyout, the acquired companies’ workers become the new owners, and the previous owners retire. A&H then transfers the ownership of Black-owned businesses to their employees, and when the workforce is predominantly minority, the businesses stay minority-owned.
A&H, Leverette says, looks for companies with $1million to $6 million in profit and at least $10 million in revenue. It also pursues companies that have been profitable for several years. It seeks firms where 50% of the employees are low income, making under 80% of the Area Median Income where they work.
“As such, we are able to achieve our desired impact of attacking the racial wealth gap regardless of who owns the company,” Leverette says. “Statistics show that Black and brown business owners tend to employ more Black and brown workers, and we want those owners to know that this model can work for them.”
The Rockefeller Foundation’s Zero Gap Fund invested $3 million into the A&H Legacy Fund I. The Zero Gap Fund reportedly seeks to support innovative financing vehicles that have the potential to mobilize private capital for impact.