1 SG2X PLAYBOOK FUND MANAGEMENT SOP | QUICK REFERENCE GUIDE PRE-INVESTMENT MILESTONES SEQUENTIAL OUTPUTS TIMELINE FROM THE DATE THE COMPANY IS ADDED TO THE PIPELINE 1. First Interview Form (FIF) completed Week 1 2. Legal approves prospect Week 1 3. IM Team approves prospect to sourced Week 2 4. Sourced company attends PE Investment Seminar Week 3 to 5 5. Deal Screening Form (DSF) completed Week 4 6. IIC approves to active pipeline Week 4 7. Management starts The Gender-Smart Exec’s Program Week 5 to 8 8. LOI signed Week 5 9. Analysis (commercial due diligence light) completed Week 7 10. e-CIM (business case) completed Week 7 11. Draft Term Sheet approved by IIC Week 8 12. Term sheet signed by pipeline company Week 10 13. [FUND NAME] IC approves for diligence Week 10 14. Term Sheet fully executed by [INV./FUND MANAGER NAME] Week 11 15. Formal due diligence completed Week 13 16. Final CIM completed Week 14 17. Gender-Smart First 180-Day Project Plan developed by SGS Week 14 18. Information packet sent to External IC Week 14
2 SG2X PLAYBOOK FUND MANAGEMENT SOP | SEQUENTIAL OUTPUTS TIMELINE FROM THE DATE THE COMPANY IS ADDED TO THE PIPELINE 19. Final [FUND NAME] IC approval to close Week 15 20. Management completes The Gender-Smart Exec’s Program Week 15 to 18 21. Legal agreements executed Week 17 22. Deal closed Week 18 – the full process takes 4.5 months POST-INVESTMENT MILESTONES SEQUENTIAL OUTPUTS TIMELINE FROM CLOSING 1. Gender-Smart First 180-Days Project Plan finalized and approved by [FUND NAME] IC (Note to Reader: This is when gender-smart actions are identified and incorporated into the company’s investment / growth plan) 4 weeks prior to close 2. Kickoff meeting with management to review GenderSmart First 180-Days Project Plan Week 1 3. SGS management team and departments formalized: Signs updated Position Agreements (PAs) with all management team; updates corporate documents Week 1 4. All Hands meeting held with staff to introduce SGS team Week 2 5. Gender-Smart First 180-Days Project Plan implementation completed Month 6 6. Management team mid-year review completed, CXO Training completed, and apprenticeship started Month 8 7. Revised financial model, growth plan, Year 2 AMP and budget approved by IIC Month 13 8. Annual management team evaluations completed; Month 13
3 SG2X PLAYBOOK FUND MANAGEMENT SOP | SEQUENTIAL OUTPUTS TIMELINE FROM CLOSING gender-equal compensation plans finalized 9. Tranche 2 approved by [FUND NAME] IC Month 13 to 24 10. Tranche 2 closed Year 2 11. Executive team completes apprenticeship Year 2 12. IIC approves SGS transition plan to gender-balanced executive team Year 2.5 13. Tranche 3 approved by [FUND NAME] IC Year 3 14. Tranche 3 closed Year 3 15. Full transition of management to local, genderbalanced team Month 36, End of Year 3 16. Monitoring and evaluation (including gender-smart actions per the First 180-Days Project plan) Ongoing; Starts at closing and quarterly 17. Hold or exit Discussions start in Year 4
● Complete First Interview Form (FIF): Screening is moving a deal from prospect status to sourced status. It involves using the FIF to first evaluate if the company is legally open for investment, and if it meets the basic investment criteria. The RM must pitch the company to the IM team and, if passed, completes the Deal Screening Form (DSF) and presents the deal to the internal investment committee (IIC). Regular communicating with the company during this time is very important in order to manage expectations and create a trustworthy and transparent brand.
ObtainApprovalLegal Pitch Deal Internally to IM Team Include company’s gender performance Legal ApprovalIMand Complete DSF Using gender metrics from 2X criteria and collected gender and ESG information
● “Pitch” Prospect to IM Team: The RM pitches the deal to the IM team during the weekly, country-level pipeline meeting. Both Legal and the IM team must approve a deal to
OnboardTrainingand Gender-Smart Exec’s Program, GenderSmart Networking and Sourcing Trainings
Attract Prospects Using Gender-Smart TA and Unbiased Sourcing Techniques
4 SG2X PLAYBOOK FUND MANAGEMENT SOP | STAGES SUMMARIES
● Onboard and Train: Learn the investment process and standards. This SOP is the main tool used for onboarding and training of the IM, AM or SGS team.
Complete First Interview Form (FIF) Using gender metrics from 2X Criteria and collecting gender lens information
● Obtain Legal Approval: The RM emails the FIF to the legal team (country or regional counsel) to obtain legal approval for the deal.
STAGE
Present Deal to IIC for ActiveApprovalPipeline Include overview of genderparametersequality ApprovedforActivePipeline
● Attract Prospects: Prospecting begins with having a strong sourcing network. These are relationships (i.e., with professional organizations and individuals that are in regular contact with potential investment opportunities) that are cultivated through regular touchpoints and by bringing value to the interaction. Once established, the networking, marketing and public relations work helps attract investments into the pipeline. Using the investment criteria is key to efficiently rule out companies that might not make it through the unbiased screening and analysis process. Note to Reader: souring networks can sometimes exacerbate traditional gender bias in deal sourcing; the fund manager needs to make sure their sourcing networks are gender-smart and ensure diversity in sourcing and non-biased access to the universe of prospects.
This SOP is organized into six STAGES, which are outlined in detail below. 1 SUMMARY: PIPELINE MANAGEMENT
Emphasize the importance of employing gender-smart policies and practices Create Active Pipeline Project Plan and Setup Folders Ensure all ESG and genderfocused activities are completed and supporting documents gathered Sign Letter of Intent (LOI) Conduct CDD and prepare the financial model, draft gender-smart terms and eCIM Provide detailed overview of gender equality and ESG narrative Negotiate & Sign GenderSmart Term Sheet (TS) Ensure terms are not discriminatory or biased in nature Obtain First External IC Approval
ApprovedforDueDiligence
● Complete Deal Screening Form (DSF): The RM holds successive meetings with the company to complete the DSF. This should take no longer than one week. The DSF is presented to the IIC.
Run The Gender-Smart Exec’s Program Training
● Present Deal to IIC For Active Pipeline Approval: Once a company moves into the active pipeline (A-Pipe), the firm invests time and resources to evaluate it for an investment. The IIC is responsible for deciding whether a deal is advanced to the A-Pipe. The investment management team must pitch the deal to the IIC and provide evidence that the deal meets the investment criteria and is a strategic deal for the portfolio.
● Conduct Commercial Due Diligence (CDD) Light and Prepare the Financial Model, Draft Terms and e-CIM: To move deals efficiently and effectively through the analysis stage, resulting in an executive confidential information memorandum (e-CIM).
5 SG2X PLAYBOOK FUND MANAGEMENT SOP | advance to the next stages – discussing during the weekly, regional pipeline meeting and completing a DSF.
● Negotiate and Sign Term Sheet (TS): If no major “deal killers” presented themselves during the due diligence light step, then the team can advance the deal to term sheet
STAGE 2 SUMMARY: ACTIVE PIPELINE MANAGEMENT
● Create Active Pipeline Project Plan and Setup Folders: To ensure [INV./FUND MANAGER NAME] is able to manage expectations with investors and the promoters; and to ensure every team member is clear about their assignments and timeline to complete key tasks and deliverables.
● Sign Letter of Intent (LOI): To ensure the promoters understand the non-negotiable requirements of receiving an investment from [INV./FUND MANAGER NAME].
● Run The Gender-Smart Exec’s Program Training: To begin training management on the management systems that will be built in the Value Creation Stage.
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● Prepare The First 180-Days SOW and Project Plan: SGS and RM update the 180-day project plan based on DD findings.
● Conduct Further Market Research & Enhance Commercial DD: Enhance the commercial DD that has been completed to date with a deeper look into the financial assumptions. Confirm or update those by completing primary market research.
● Prepare Final CIM: Pulling the information found during due diligence and building upon the e-CIM drafted during light due diligence to write the final CIM that will be used by the IIC and [FUND NAME] IC to vote on the investment.
● Obtain First External IC and MAC Approvals: The Asset Management and Legal teams need to schedule and send documents (i.e., e-CIM, term sheet and financial model) to the [FUND NAME]’s external IC and MAC committees for review and vote.
● Prepare for Due Diligence: Review what has been done to date, update the DD checklist, assemble the team and develop the schedule.
● Conduct Management Interviews: The SGS team and RM meet with management and employees to further understand the business and to inform the growth plan.
Prepare for Due Diligence Use DD Request List and Checklist, which gathers documents that speaks to the state of gender equality and ESG at the company ReviewDocumentsGathered Review Operational and HR documentation; Complete Gender-Smart Assessment using SEAF GES
Conduct Further Market Research & CommercialEnhanceDD ConductInterviewsManagement Use a interviewgender-smartguide;ensureequalparticipationofgenders
SG2X PLAYBOOK FUND MANAGEMENT SOP | negotiations; using [INV./FUND MANAGER NAME]’s standard term sheet templates is key here to limit the legal complexity of the deal.
● Review Gathered Documents: Once key DD documents have been gathered from the company, review them for any red flags or issues (e.g., lawsuits, harassment, genderbased violence, etc.). Finance and legal teams should review audit reports, legal and corporate documents, finance records and accounts (assets and liabilities), HR policies, contracts, etc.
ApprovedforClose
STAGE 3 SUMMARY: DUE DILIGENCE
Prepare Gender-Smart First 180-Days SOW and Project Plan Include corrective actions that will result in a higher gender-smart score Prepare Final CIM Using gender metrics from 2X criteria and collected gender and informationESG Obtain Final External IC Approval
SG2X PLAYBOOK FUND MANAGEMENT SOP
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Onboard and Build Implement Gender-Smart First 180-Days Project Plan Operate Demonstrate how a well-run, gender-smart company operates; Implement gendersmart tools Transfer Company run by genderbalanced management team Hold or Exit
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● Prepare Draft Legal Agreements: Done in parallel with formal DD activities. Preparing the updated corporate agreements, share purchase agreement and other legal documents required to close the investment.
● Implement Closing Checklist: Sign updated corporate documents properly admitting [INV./FUND MANAGER NAME] managed investment vehicles as a shareholder to the company and wire the agreed upon investment tranche to the business.
STAGE 4 SUMMARY: DEAL CLOSING
STAGE 5 SUMMARY: PORTFOLIO VALUE CREATION
● Onboard and Build: The SGS team will initially work alongside the team, as their managers, to build the proper systems outlined in the SG2X playbook. These include the reporting, finance and accounting, gender-sensitive HR policies and procedures, management, operating, sales and marketing systems that are standardized to a large degree across all companies and promote women’s economic empowerment.
● Obtain Final External IC and MAC Approval: Obtain final external IC and MAC approval for the investment.
Prepare for AgreementsLegal ImplementChecklistClosing ClosedDeal
● Operate: For a period of two years (Investment closing to end of Year 2), the SGS team will be accountable to [FUND NAME] for building and operating the SG2X management systems. The SGS team will also work with management to take them through an extensive training program, [INV./FUND MANAGER NAME]’s internal training system. The combination of the classroom training, on the job oversight, coaching and apprenticeship offered to the local team by the SGS team is a key part of the [FUND
STAGE 6 SUMMARY: MONITOR & EVALUATE
● Collect Impact Data: Collect the agreed upon impact data from portfolio companies; this might take the form of the 2X Criteria and/or harmonized GIIN IRIS+ metrics or other well-known, industry standard metrics that evaluate the positive (or negative) impact the portfolio company and thereby investment is generating. Note to Reader: we recommend Fund Managers add a specific gender-lens for this activity. The 2X Criteria have been harmonized and integrated into the GIIN IRIS+ metrics (see link above). If other industry standards are used, they should be complemented with the 2X Criteria and underlying indicators.
● Transfer: Once the local team has been through a full two years of working under and alongside the SGS team and completing the extensive training program, they will begin to own and manage the key roles of the company, and by the end of Year 3 they will be evaluated. If they pass evaluation, the local team will formally be promoted to their role on the executive team. At this point, [INV./FUND MANAGER NAME] will assume a M&E role and work on distributions of dividends and exits.
Kick Off Internal M&E Process (Quarterly) Collect Financial Data & Commentary from Portfolio Collect 2X Criteria IRIS+ Impact Data from Portfolio Use the 2X Criteria harmonized IRIS+ metrics to assess performancecompany’sagainstagreedupongendermetrics
● Collect Financial Data: Collect financial operational data (i.e., accurate and final financial statements), as well as management commentary that follows the provided template from the fund’s portfolio companies.
8 SG2X PLAYBOOK FUND MANAGEMENT SOP | NAME] value addition to portfolio companies, resulting in gender-smart SMEs run by gender-balanced management teams.
Enter Data into Portfolio Company Dashboards; Conduct Evaluation and Analysis Conduct comprehensive analysis of financial, gender, and impact performance Draft ExternalReportsInvestor Include final evaluation of financial, gender, and impact performance; Showcase SME’s stories of impact Finalize and Send External Reports Hold or Exit
● Update Portfolio Company Dashboards & Evaluate Results: Using the provided tool, the IM team is expected to update the internally maintained portfolio company dashboard to
● Kick Off Internal M&E Process: Kick off the financial and impact reporting internal process with IM team using the provided templates, tools and resources to complete external reporting by the fund’s required deadlines (e.g., 30 days from quarter-end).
● Decide to Hold or Exit (Year 4+): Starting Year 4, the AM team will decide the best course of action regarding the fund’s portfolio – either holding or exiting its position. As part of this step, the team will focus on collecting and distributing dividends or capital gains from sale of shares, or liquidation proceeds to shareholders.
25% gross IRR. SOP DEFINITIONS
● Cluster: A group of SMEs that have the potential to be pulled under a platform company.
● EBITDA: Earnings before interest, taxes, depreciation and amortization. A proxy for cash flow and often used to calculate the company’s value.
Eight to 10 deals closed across the region (three countries), or three to five deals closed per year, per country.
● Draft External Investor Reports: Using the provided template, the IM team will draft the external investor report. While the provided tool creates a report for each portfolio company, this can be revised to present the portfolio results at the fund level.
HIGH-LEVEL SAMPLE TARGETS
SG2X PLAYBOOK FUND MANAGEMENT SOP | create standardized financial statements across the fund’s portfolio (this can be used in lieu of an ERP software solution). Once entered into the tool, the IM team can then conduct its evaluation and analysis on the portfolio’s results and draft its own valueadded commentary/narration for the external investor report.
2.5% conversion rate – top of funnel to closing (RENEW suggests a 2.5% conversion rate).
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Pipeline management efficiency sample targets across the fund (Note to Reader: These targets are to be tailored to your firm’s / fund’s investment strategy; the below targets are based on a fund size of $50M investing across three countries):
Four to five months from FIF to deal closing.
36 months to fully transition leadership from SGS to gender-balanced executive team.
● Finalize and Send External Investor Reports: Once drafted and reviewed the IM team, the external investor reports will be copyedited by a member of the fund’s team; preferably an individual who has not worked on the reports and has native-level proficiency of English.
● Resource Providers (RPs): An individual or organization that helps SMEs access resources – technical or financial. This could be brokers, associations, banks, professional firms, etc.
● Post-NDA Heading to DSF Sourced: A sourced company for which the IM team has obtained a signed NDA and for which they are working to build a DSF.
● New-NDA Sourced: A sourced company that has been sent an NDA but has not yet signed.
● “New” Prospect: A new prospect at the regional level, but it has been sourced by the country team.
10 SG2X PLAYBOOK FUND MANAGEMENT SOP |
● Promoter: The owners of the company.
● Prospect: A prospect is a company that has been identified either from research, a referral from a network partner, or has attended an investment seminar and is entered into the pipeline, but the team has not yet formally had a first discussion with the company.
● Screened company: A screened company is a company on which a full DSF has been completed and it has been presented to the IIC.
● Platform Company: An initial company invested by [FUND NAME] in a sector that can acquire other SMEs in the sector, or an umbrella company setup to consolidate portfolio SMEs in a sector, to maximize the collective asset value of the SMEs through shared management services and enhanced value creation for customers.
● SME: A small and medium enterprise with EBITDA of less than $2M.
● Sourced Company: A sourced company has been interviewed by a team member and a first interview form (FIF) has been completed and saved in company’s shared drive; the company has been presented to the country team during the weekly pipeline meeting.