PRINCIPLES

minimum, in a worst-case scenario if something goes wrong, the company cannot walk away with your funds as your signature will be required on withdrawals. Finally, be prepared for closing to take twice as long as you might think it will, particularly depending on the jurisdiction. Build in ample time to ensure all closing steps are completed and hold daily huddles with key team members to ensure closing activities are being executed in proper order. Regular communications with the promoter are also important to ensure no delays are created from their side. Often the promoters might bring in their own legal counsel at this stage. This can create further delays. Ideally, the promoter had already hired a lawyer earlier in the process, so that this stage is not disrupted by new actors.

SCOPE OF STAGE

Negotiation and drafting of the definitive investment agreements will take place concurrently with latter portion of the formal due diligence review in Stage 3, so that the investment agreements are finalized (subject to any comments from the IIC or External IC provided during their final approvals) concurrently with presentation of the due diligence findings and Final CIM to the IC. In addition, certain items that can be prepared in advance for the closing process can be started while formal due diligence is ongoing. The actual investment closing steps take place after final IC approval. Once formal due diligence has been completed, the investment agreements are negotiated and ready for execution, and the IIC and External IC have given final approval, the closing process commences. It covers the period of time from final IC approval through the company receiving the investment and completing any in-country registrations or approvals that may be necessary.

PRINCIPLES

The following principles are non-negotiable standards that must be adhered to during the deal closing stage: ● Use an investment closing checklist. See an example closing checklist for a Ugandan equity investment below. ● Engage a local legal counsel to advise you and to help navigate the closing process with any local government offices and regulatory bodies; each country is different.

FILES AND FOLDERS

[INSERT RELEVANT FILE PATHWAYS]

ACTIVITIES: SAMPLE CLOSING CHECKLIST

NAME LINK

Sample Closing Checklist Tool - Sample Closing Checklist

USE

Note to Reader: Below is an example closing checklist used by the RENEW team for closing equity investments in Uganda. Each jurisdiction and each type

NAME LINK USE

of investment (e.g., debt, equity) will require a closing checklist tailored to that specific jurisdiction’s rules and regulations. Consult local counsel to develop the checklists and continually refine them after each deal closing to incorporate lessons learned.

STAGE 5: PORTFOLIO VALUE CREATION

READ FIRST

Note to Reader: Portfolio value creation is the work required to increase the value of the portfolio. Different investors use different approaches to add and unlock value in their portfolio – some are passive, some are active. RENEW’s approach to value creation is active, and can be summarized as a build, operate and transfer (BOT) model. We use this approach for a few reasons: 1) After ten years of SME investing in East Africa, we have learned that most SMEs struggle to implement their growth plans because they need stronger management systems and teams to execute the plan; 2) There is a dearth of affordable local middle management that has the experience needed to run management divisions of a company as it aggressively scales; 3) Training helps but a more hands-on approach to, where classroom training is reinforced with on-thejob implementation support accelerates adoption of best practices and speed of execution; 4) SMEs as standalone companies may be challenging to exit. Rather, by using a shared growth team (SGS team) across a cluster of complementary SMEs under a platform, an experienced shared growth team can work across multiple companies and help integrate them into a larger company that may be more profitable and attractive to larger investors. In our approach to portfolio value creation, the SGS team act like a managing partner (e.g., investor-operator, buy-build investor, business partner), and assumes management of key departments of the company for a period of time. The current management is trained and tested and if retained, become the deputy Chief Experience Officer (CXO) and begin an apprenticeship period under the SGS leadership, along with receiving regular trainings. The value creation stage can be broken down into three phases: 1) Build: When SGS builds the management systems of the company; 2) Operate: When SGS runs departments of the company and trains and apprentices a local gender-balanced exec team; 3) Transfer: When SGS formally transfers the management over to the trained, local, gender-balanced executive team. At the end of the three-year value creation stage, the goal is for the company to have hit its growth plan targets and is being run by a skilled gender-balanced, local executive team. As much as possible, the SGS team must use a systematic approach to building the management systems and apprenticing and training the gender-balanced exec team. This not

QUICK REFERENCE GUIDE: VALUE CREATION

 Objective: To build the management systems and team that maximize likelihood of successful growth plan execution, and company integration with other portfolio companies  Targets: 100% implementation of the

First 180-Days Project Plan  Indicators of Success: Completion of the checklists  Scope: Building the management systems of the company within the first six months  Tools: First 180-Days Statement of

Work; First 180-Days Project Plan;

The Exec’s Program tools  Time commitment: 50% of SGS team’s time  Main Activities: Checklist implementation; training; apprenticeship; coaching and transition  Accountable: SGS COO  Best Practice: Company management see the SGS team as their managers