Focus on big (over US$20 million) deals |
|
- The periods and the costs of closing a deal are significant: excessive dissipation of resources is unjustified.
- Large companies, as a rule, are more sustainable financially and operationally.
|
|
Purchase of a controlling or major interest |
|
- Control is required for: (1) guaranteed implementation of selected investment strategy; (2) protection against bad management risks.
- Control means: (1) the ability to initiate sale of the company; (2) the ability to replace management; (3) control/veto of big decisions at board meetings.
|
|
Project implementation period – 2 to 5 years |
|
- As a rule, investor capital and initiative speeds up growth of the company and/or its capital stock value. Complete realization of potential requires time.
- A company needs to be sold when the potential for growth of the capital stock value is exhausted.
|
|
Taking aim at projects with clear prospects and outcome |
|
- Sale to a strategic investor is the principal option; public share offering is an alternative.
- Determination of the alternatives and project leaving parameters prior to closing the deal.
- Creation of business for a strategic investor, alliances.
|
Validity and feasibility of investment strategy |
|
- Three basic ways to increase the value of invested funds:
(1) company growth – organic or through takeovers and mergers; (2) restructuring: cost reduction, liquidation of secondary assets, resolution of corporate conflicts; (3) purchase with the use of "financial leverage".
- Selection of a potential company is based on the possibility and feasibility of implementing these strategies, which often come together in practice.
- As a rule, cost reduction can be attained more easily than increases in income. The strategies based on company growth should be totally rational.
- The strategies for purchase of undervalued assets do not work in efficient markets.
|
|
Proactive role of the investor in the creation of value |
|
- The proactive role of the investor is a mandatory condition of success for the majority of projects.
- As a rule, an investment strategy is based on carrying out transformations/initiatives where the investor often plays the leading role. One needs to evaluate realistically one's capabilities as an investor.
- Availability of top-quality management is the key factor of success. An investor cannot and should not substitute management.
|
|
Investment in companies in different phases of their development |
|
- Portfolio companies can be in different industries in different phases of their development: from the creation of green-field business to the re-capitalization and restructuring of large enterprises at the maturity stage of their business models and markets.
- When investing in new companies, practicability of a business plan is of key importance. It is required to have strong management in the company so that an investor can function proactively in the area of strategic management.
- Selection of projects must be based on a rational investment strategy.
|
