Investment approach BECAP12 Fund LP
Investment process
The following describes the investment process that the BECAP12 GP will follow with respect to
investments of BECAP12 Fund LP.
Deal origination and initial screening
The BECAP12 GP will aim to identify and source potential investment opportunities from its own
activities and from opportunities identified by the Consultant (among other sources) and to
initiate preliminary information gathering and further due diligence (through a variety of sources
and service providers, including the Consultant where appropriate) on such potential investments.
When examining an opportunity, as a general indication, the BECAP12 GP will analyse various
factors in relation to the business in question:
- Does it fit the size criteria?
- Is it experiencing significant operating issues?
- Is there associated financial distress?
- Is there a core income stream?
- Can it be restructured?
- Does the restructure allow for viability with only the core income?
- What downside protection exists (e.g. asset security)?
- Is the business reliant on external uncontrollable influences?
The BECAP12 GP will then be able to consider whether a value creation opportunity exists.
Initial Approval By THe General Partner
The BECAP12 GP will seek to identify investment opportunities in which it has identified methods
to resolve the existing issues and thereby position the business on a firm platform to create
significant equity value. The BECAP12 GP will draw on such services of the Consultant or others
as it may require, and will apply both its transactional and operational skills to assess how value
can be created through each situation. Unless it is clear as to the path to value creation and the
risks associated, it will not pursue the opportunity.
If the BECAP12 GP believes that a value creation opportunity exists, the BECAP12 GP will create
an outline paper setting out the basic parameters of the investment case which shall be presented
to the board of the BECAP12 GP for its approval or rejection.
Follow-up information gathering
If the outline proposal is approved by the BECAP12 GP, it draws upon such services of the
Consultant or other parties to carry out appropriate research and information gathering. Usually
time constraints dictate that this is limited and focused on specific issues.
Proposal To Invest
The BECAP12 GP will conduct an analysis of potential for risk mitigation and value creation.
This detailed investment analysis will cover the commercial, financial and strategic rationale for
the proposed investment and shall be considered by the board of the BECAP12 GP and subjected
to careful consideration and scrutiny.
Portfolio monitoring and optimisation
The BECAP12 GP will be responsible for ensuring that portfolio businesses have appropriate management and resources available to maximise the opportunity.
Generally, this means:
- clear, quantifiable action plans to deliver a turnaround;
- energetic implementation of the critical actions to return to profitability;
- a proper management team with appropriate incentives is put into place. The BECAP12 GP will procure that its representatives (who may be principals or associates of the BECAP12 GP or of
the Consultant) are in place until new management arrive and become effective. It will also often be necessary to reinforce the management team in the most intense phases of turnaround; - strong financial systems are implemented to ensure effective management and tight cash control;
- regular strategic reviews and consideration of potential acquisitions or disposals with research and information gathering assistance provided as needed by the Consultant to optimise exit values; and
- resolution of legacy issues such as legal and tax disputes.
Exit planning and process
Following acquisition, the route to exit and the steps necessary to maximise value will be regularly
considered and progressed. Issues and uncertainties that would deter buyers will be resolved. Actions that could make the investment more attractive to likely buyers will be identified and implemented.
Once a turnaround has been achieved, typically where sustainable profitability has been demonstrated, the BECAP12 GP will move towards determining a suitable exit strategy for the investment. In this context, the BECAP12 GP will ask the Consultant or others to gather for it certain relevant information. If the BECAP12 GP decides that an exit is feasible and appropriate, the BECAP12 GP will affect the exit process, drawing on such services of the Consultant or others as it may require.