FOR IMMEDIATE RELEASE:
January 28, 2008

Contact
Kimberly Reed, Principal (310) 806-6280
Brian Martin, Vice President (310) 806-6280
Brian Maney, Director, Corporate Communications (301) 951-6122

AMERICAN CAPITAL INVESTS $66 MILLION IN AVALON LABORATORIES

Bethesda, MD – January 28, 2008 – American Capital Strategies Ltd. (Nasdaq: ACAS) announced today that it has invested $66 million in Avalon Laboratories Inc., a leading supplier of disposable cardiopulmonary vascular cannulae, medical devices that provide connections between patients and life support machines.  American Capital’s investment will be used to fuel Avalon’s growth and takes the form of a senior term loan, senior subordinated debt and convertible preferred and common equity.  American Capital is also providing a revolving credit facility.  Robert Foster, Avalon Founder, CEO and Chairman, will maintain an ownership interest and continue his role at Avalon.

“We are excited to work with Mr. Foster and the rest of the talented team at Avalon to help them further enhance the business,” said Darin Winn, American Capital Regional Managing Director. “American Capital’s investment in Avalon will bring fresh capital to a company with an excellent track record in the medical device industry.”

American Capital invested directly and through its funds under management approximately $11 billion in 2007, approximately $4 billion from June 30, 2007 to December 31, 2007, and over $2 billion in the fourth quarter of 2007.  Not including funds under management, American Capital invested approximately $8 billion in 2007, over $3 billion from June 30, 2007 to December 31, 2007 (representing approximately 31% of its June 30, 2007 investments outstanding at fair value) and approximately $2 billion in the fourth quarter of 2007.  Not including funds under management, American Capital received approximately $5 billion in total amortizations, prepayments and exits in 2007.  American Capital assisted in the refinance or syndication of approximately $2 billion of senior debt for its portfolio companies in 2007 and approximately $1 billion from June 30, 2007 to December 31, 2007.  For more information about American Capital’s portfolio, click here.

“Over the last 17 years, Avalon has developed a solid reputation for the quality and dependability of its mission critical products,” said Kimberly Reed, American Capital Principal.“The Company’s broad product line has built a loyal customer base among cardiopulmonary vascular OEMs.”

“Avalon holds the leading position in its niche market, supplying over 75 percent of spring-reinforced cardiopulmonary vascular cannulae used globally,” said Brian Martin, American Capital Vice President. “The Company has achieved impressive manufacturing capabilities and has substantial growth opportunities with its recently expanded product offerings and the emerging lung support market.”

Founded in 1990 and headquartered in Rancho Dominguez, CA, Avalon Laboratories is the leading supplier of cardiopulmonary vascular cannulae in the world, manufacturing more than three-quarters of all wire reinforced venous and arterial cannulae used globally.  Cardiopulmonary vascular cannulae are critical disposable components that connect patients to heart and lung machines and other support devices.  Avalon combines science, technology and innovation to provide the highest quality cannulae to help medical professionals deliver superior health care and save lives.

“I look forward to partnering with American Capital and continuing to develop life savings products,” said Mr. Foster, Avalon Chairman and CEO.  “American Capital values our experienced management team and we look forward to working with them as they help Avalon continue to innovate and expand into growing medical device areas. The knowledgable team of professionals with financing experience in the medical devices industry and the ability to invest throughout the entire capital structure have made American Capital our trusted partner.”

American Capital’s portfolio of life sciences and medical technology companies includes, in addition to Avalon, ECA Medical Instruments, V alue Plastics, HAL T Medical, J-Pac and Axygen.  Avalon is the sixth invesment in the life sciences and medical technology industries made by American Capital’s Los Angeles office.  Companies interested in learning more about American Capital’s life sciences and medical technology portfolio should contact Kim Reed, Principal, and Brian Martin, Vice President, at (310) 806-6280.

ABOUT AMERICAN CAPITAL

American Capital is the only alternative asset management company in the S&P 500. With $20 billion in capital resources under management¹, American Capital is the largest U.S. publicly traded private equity fund and one of the largest publicly traded alternative asset managers.  American Capital, both directly and through its global asset management business, is an investor in management and employee buyouts, private equity buyouts, and early stage and mature private and public companies.  American Capital provides senior debt, mezzanine debt and equity to fund growth, acquisitions, recapitalizations and securitizations.  American Capital and its affiliates invest from $5 million to $800 million per company in North America and euro 5 million to euro 500 million per company in Europe.

As of December 31, 2007, American Capital shareholders have enjoyed a total return of 452% since the Company's IPO, an annualized return of 18%, assuming reinvestment of dividends.  American Capital has paid a total of $2.1 billion in dividends and paid $26.16 dividends per share since going public in August 1997 at $15 per share.

Companies interested in learning more about American Capital's flexible financing should contact Mark Opel, Senior Vice President, Business Development, at (800) 248-9340, or visit www.AmericanCapital.com or www.EuropeanCapital.com.

¹Capital resources under management is an estimate of internally and externally managed assets and available capital resources as of November 30, 2007 and does not include any fair value adjustments subsequent to September 30, 2007.

Performance data quoted above represents past performance of American Capital. Past performance does not guarantee future results and the investment return and principal value of an investment in American Capital will likely fluctuate. Consequently, an investor's shares, when sold, may be worth more or less than their original cost. Additionally, American Capital's current performance may be lower or higher than the performance data quoted above.

This press release contains forward-looking statements. The statements regarding expected results of American Capital are subject to various factors and uncertainties, including the uncertainties associated with the timing of transaction closings, changes in interest rates, availability of transactions, changes in regional, national or international economic conditions, or changes in the conditions of the industries in which American Capital has made investments.

This announcement is neither an offer to sell nor a solicitation to buy securities.
This announcement appears as a matter of record only.