Our Strategy

Knowledge-Based Investing

As described in Investment Strategy, we have developed a rigorous six-step process to create value. The cornerstone of this process is the extensive research of industries with above average economics. We work closely with CEO Partners to create an effective investment team with a high degree of industry knowledge. We have employed this approach in all of our past investments and we believe this approach respresents a competitive advantage.

The 6 steps to exceptional returns for investors
1. THE RIGHT INDUSTRY & CEO PARTNER History of industry profitability High operating margins Strong, consistent cash flow Recurring necessity demand Reasonable growth prospects Good consolidation opportunities Recession-resistant Low business risk	2. THE RIGHT COMPANY Excellent historical financial performance Strong management team Sufficient size to be industry platform revenue > $50 million ebitda > $5 million Defensible competitive advantage Diversified customer base Attractive to public markets
3. EXHAUSTIVE DUE DILIGENCE Retain leading industry executive Financial review Operations review Customer audit Legal review Engineering and environmental reviews Risk management and insurance reviews HR and compensation benefit reviews Develop strategic plan	4. THE RIGHT TRANSACTION Reasonable free cash flow multiple Use prudent leverage Acquire equity control Provide equity incentives to management Optimize fund equity Limit investor liability Flexible financing
5. ONGOING VALUE CREATION Best possible management team Industry-relevant board of directors Public governance while private Comprehensive strategic planning Linked strategy, management objectives, budgets and performance-based incentives Follow-on acquisitions	6. THE RIGHT LIQUIDITY EVENT Liquidity events: IPO Merger with existing public company (exchange of shares) Leveraged recapitalization Sale to a strategic buyer Sale to another private equity firm Timing – 3 to 7 years post acquisition Preferred liquidity events: Non-taxable Option to hold for long-term

We believe our knowledge-based investing approach allows us to operate like a strategic buyer due to the in-depth understanding of selected industry niches. We believe this approach has particular merit where we need to get ‘up-to-speed’ quickly to understand possibilities for long-term value creation.