PIPELINE MANAGEMENT TOOL | 1 DEAL SCREENING FORM (MULTIPLE MEETINGS) OPENING SUMMARY Three to four paragraphs summarizing: Brief history of the company; when founded, by whom, motivation Company structure, owners Products and services Brief summary of historical financial performance (sales, profit and growth) Current state – main challenges and opportunities Investment need and purpose How the potential investment fits into what [INV./FUND MANAGER NAME] is building –why this is being recommended? FIF TABLE OR SNAPSHOT Cut and paste FIF Table or Snapshot here COMPANY BACKGROUND DOCUMENTS AVAILABLE DOCUMENT AVAILABLE (MARK WITH X) GATHERED (MARK WITH X) LINKS Business plan Audited CorporateFinancialstatementsfinancialmodeldocuments
Executive Team:
vacant needs?immediatepositionsexecutiveorhiring
QUESTION FILLED IN BY [INV./FUND MANAGER NAME] Do they have a Board? Who is on the board? is the records/minutes?havemeeting?WhentheHowcomposition?genderfrequentlydoesboardmeet?wasthelastDothey
PIPELINE MANAGEMENT TOOL | 2 GOVERNANCE AND ORGANIZATION
Board:
What
Org Structure: Do they have structure?organizationalanCan they provide a copy of it? Who are executivestheand their positions? What is the composition?gender Any
Business or Growth Plan: Does the company have a Five-Year Strategic Plan? When was it created? How was it developed? Is it
KPIs: Are KPIs are the key metrics tracked by they provide copy of : Does the company employ genderequal pay? Is there a
copyCanused?developed?created?Whenmanagementannualplan?wasitHowwasitIsittheyprovideaofit?
dashboard?reportingtheir Compensation
operating
a
team?modelbasedperformance-compensationforexecutive
the CEO? Can
PIPELINE MANAGEMENT TOOL | 3 QUESTION FILLED IN BY [INV./FUND MANAGER NAME] Canused?they provide a copy of it? ManagementAnnual Plan: Does the company have an
tracked? What
PIPELINE MANAGEMENT TOOL | 4 PRODUCTS AND SERVICES QUESTION FILLED IN BY [INV./FUND MANAGER NAME] What are delivery?smartservicesproductsAremonth?produced/soldHowcost?Whatprice?WhatanysourcedmaterialWherematerialWhatand/orcompany’stheproductsservices?aretherawinputs?aretherawinputsfrom?Areimported?istheunitistheunitmanyunitsperthecompany’sand/orgender-indesignand
PIPELINE MANAGEMENT TOOL | 5 MARKETQUESTIONOVERVIEW FILLED IN BY [INV./FUND MANAGER NAME] Market overview: size, trends, supply, Whodemandistheir target Whomarket?istheir
companyWhatthreeWhoofIsplacement.promotions,packaging,4-Pmarketinggender-smartDotheyWhatnewHowspecific,customer(s)?biggestGetifpossible.dotheyacquirecustomers?marketingdocurrentlydo?theyemploytactics?Analysis:price,thereseasonalitythesales?aretheirtopcompetitors?makestheunique
PIPELINE MANAGEMENT TOOL | 6 QUESTION FILLED IN BY [INV./FUND MANAGER NAME] from channels?distributionWhatcompetitors?aretheir OPERATIONS ANALYSIS QUESTION FILLED IN BY [INV./FUND MANAGER NAME] Do they have a factory? Where is it? Is it separate from their head office? What offices do they Whathave?is the quality of the workplace / factory? Is it safe, orderly and clean? Have there been complaints and/or incidences of sexual violencegender-basedrisks,specificDoesplace?systemsocialenvironmentalhaveDoesharassment?thecompanyanandmanagement(ESMS)initaddressgendersuchasand
What is their current operating
What(GBVH)?harassmentarethe steps?
management.trackedThedistribute?HowrawsourceSuppliertheymanualWhattheyassets/machinesWhattheWhatthey?assetstheoperations?criticalWhat(explain)?capacityisthemostequipmentforWhatisqualityofthe–howoldareisthecostofmainassets?newdoneed/want?arethemainsteps?Areautomated?Analysis:andcostsofmaterials.dotheymainKPIsby
PIPELINE MANAGEMENT TOOL | 7 QUESTION FILLED IN BY [INV./FUND MANAGER NAME]
main production units? What are the main production
PIPELINE MANAGEMENT TOOL | 8 GROWTHQUESTIONPLAN FILLED IN BY [INV./FUND MANAGER NAME] Five-year growth Maintargets.initiatives to achieve these Investmenttargets. need Investment(USD). use (working cap %, opex, capex, etc.). Investment urgency – when do they need this Why?investment? FINANCIAL ANALYSIS HISTORICAL FINANCIAL REVIEW FIELD PAST YEAR -4: YYYY PAST YEAR -3: YYYY PAST YEAR -2: YYYY LAST YEAR -1: YYYY Sales (USD) YoY MarginGross(USD)GrossGrowthSale%ProfitProfit%
PIPELINE MANAGEMENT TOOL | 9 FIELD PAST YEAR -4: YYYY PAST YEAR -3: YYYY PAST YEAR -2: YYYY LAST YEAR -1: YYYY Operating Profit EBITDA(USD) (USD) Net Profit (USD) Net Profit Margin YoY% Net Profit Growth % Asset MethodEBITDAValuation(USD)NetDebt(USD)Values(USD)BookValueMultiple Multiple: Valuation: PROJECTED FINANCIALS FIELD YEAR 1 YEAR 2 YEAR 3 YEAR 4 YEAR 5 Sales EBITDASG&AUSDGrossUSDProfitUSDUSD
PIPELINE MANAGEMENT TOOL | 10 Net FINANCIALIRRNPVRateDiscountEmployeesUSDProfitQUESTIONS1.Anyredflagsfrom the historical financial review? 2. Any red flags with the forecasted financials? 3. What are the top five assumptions driving the financial model? PICTURES Add compelling photos that convey the company’s background, products and services, business plan, etc.
ANSWERS
SMEs, generally, welcome the idea of a professional team coming in to help them manage the company. This could be because they are looking to exit, have no successors, or (in most cases) have run into challenges with their business.
Guidance: This should be presented as “how [INSERT INV./FUND MANAGER NAME] works with companies” as part of the firm’s introduction. The inv./fund manager should explain the reasons why the firm takes this approach and the benefits for business owners.
This should be completed immediately after meeting the management and conducting a site visit.
QUESTIONS
1. Are they open to control?
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In order to do this right [INSERT INV./FUND MANAGER NAME] has found that it needs influence on and/or control of decisions to modernize a company. In return, the owners will receive the benefits of a professional, gender-balanced management team, realizing a greater long-term value from their investment.
2. Is the deal being offered at an attractive value? Guidance
RELATIONSHIP MANAGER’S OPINION
The company’s valuation is attractive as calculated by one of these methods: Less than 6x EBITDA (24-month trailing average); Less than 1x sales; Less than book value. The inv./fund manager should describe to the owners how the firm values investments during the introduction of the meeting - one way would be to say something like... “just
3. Are there addressable challenges [INV./FUND MANAGER NAME]’s investment and SGS/ value creation team can fix?
The inv./fund manager should be able to articulate to the firm’s Investment Committee what the current operating capacity of the company is and what the max capacity would be, why they are operating below capacity and a general opinion about what the bottlenecks are and how the inv./fund manager would address those. And if [INSERT INV./FUND MANAGER NAME] is able to address those bottlenecks via some blend of management, operators and capex.
The inv./fund manager should be able to present to the firm’s Investment Committee an estimate of the value of the business using this method, and that the owners are open to this valuation approach.
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so you know, we look to invest in companies at an attractive price, usually below book value. I cannot present a deal to my firm’s Investment Committee unless the valuation is below one of these valuation methods. The reason is that for us to be successful, we need to invest in companies at a good price, add value to them, and realize a good return. If we start too high, it makes this strategy very challenging to implement.”
QUESTIONS ANSWERS
Guidance: There are likely clear bottlenecks in the operations and management of the prospective SME that are causing the company to operate below capacity, and [INSERT INV./FUND MANAGER NAME] can address these.
The prospective SME should be able to deliver attractive gross and net profit margins within 24 months following the initial investment. Again, no Excel work needed. The inv./fund manager should be able to articulate the price and cost of the goods or services to derive the gross margin, and the expected operating margin and net margin to get to the net profit if operated and managed well. Attractive margins depend on the industry the company operates in. A quick search on the Internet or looking at a comparable company in the target SME’s country other frontier markets should give the inv./fund
The company can grow to [$ USD value] or more in revenue within [number] years.
This should not require any complex Excel work. Just a calculator and the inv./fund manager’s ability to articulate the simple assumptions underlying the firm’s belief in the SME’s ability to grow to [$ USD value] revenue target within [number] years. The firm should be prepared to articulate this to the Investment Committee. It is also recommended that the firm is prepared to share the target market, the size of the target market, the percentage of the market the SME can realistically capture, the volume sold to the market per year at full capacity, and the unit price.
5. Does the company have a good Guidance:brand?
PIPELINE MANAGEMENT TOOL | 13 QUESTIONS ANSWERS
4. Do you believe there is a big growth opportunity/market in front of this Guidance:deal?
manager a benchmark value for comparison.
QUESTIONS ANSWERS
Guidance: The company should be able to sustain attractive margins throughout the anticipated holding period as a result of the company having or developing a clear competitive advantage.
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The inv./fund manager should be able to explain to the firm’s Investment Committee what competitive advantage it thinks the investment would build in the target SME, or that the company already has. Please be specific.
Guidance: The total investment needed is between [$ USD value of investment] delivered over [number] tranches.
How does this fit into the [INSERT INV./FUND MANAGER NAME]’s overall portfolio strategy? Why is this deal perfect for consideration? How will it maximize the value of the firm’s other portfolio companies?
6. Does the company have a clear competitive advantage?
9. What’s the strategic fit with the Guidance:portfolio?
7. Is the company reliant on forex? Does it generate forex?
8. Is the company seeking the right investment size?
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PIPELINE MANAGEMENT TOOL | 16 ICICVOTEMEMBER NAME VOTE AND RATIONALLE