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Venture firm expects round of mergers; Rand could cash in on likely exits from mature investments

Rand Capital Corp. President Allen F. "Pete" Grum is ready to start cashing out.

With the merger market humming, Grum is expecting a flurry of deals in the not-too-distant future involving the companies that the Buffalo venture capital firm has invested in during the last five years or so.

"I think we're going to have some significant exits," Grum said following Rand's annual shareholders meeting on Friday.

More than half of the 14 companies in Rand's investment portfolio have been part of the venture capital firm's holdings for at least five years. That's a long time in investment years, although the deep recession has extended the process as the portfolio companies first had to weather the downturn and then recover from its effects.

"Our core portfolio is relatively mature," Grum said. "I would expect some of those will be sold, and we'll recognize the results of our hard work."

Those results could generate millions in additional cash for Rand, which already is flush after reaping more than $7 million in gains last year from the sale of its stakes in GridApp Systems, a New York City automated database firm that was acquired by BMC Software, and Innov-X Systems, a Massachusetts-based company that was purchased by Olympus Corp.

In all, Rand has nearly $12 million in cash on its books, which works out to more than half of the company's $22.9 million in net assets. "That's high for us," Grum said.

Grum said Rand continues to look for new investments, although the strengthening economy has given companies a little more bargaining power in shaping the terms of a deal with investors.

Grum said Rand is continuing to look into the possibility of using some of that cash -- likely $5 million or more -- to open a second small business investment fund through the U.S. Small Business Administration.

Adding a second fund would give Rand access to even more capital by allowing it to tap into $2 of SBA funds for every $1 it invests. It also would allow for a transition as the investments of Rand's current SBIC fund wind down, mainly between 2014 and 2020.

e-mail: drobinson@buffnews.com

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