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What is a Venture Capital Investment Thesis?

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❶Our Investment Manager uses its experience, including proprietary data and analytic capabilities, to apply these tools to prudently and significantly reduce the time required for us to reach and maintain a full investment level. We call this the investment thesis.

What is a Venture Capital Investment Thesis?

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First, the local market sales force that is already in place to sell radio ads can now sell outdoor ads to many of the same buyers, and Clear Channel is uniquely positioned to sell both local and national advertisements. Second, similar to the radio industry twenty years ago, the outdoor advertising industry is fragmented and undercapitalized. Clear Channel has the capital needed to "roll up" a significant fraction of this industry, as well as the cash flow and management systems needed to reduce operating expenses across a consolidated business.

Note that in Clear Channel's investment thesis at least as we've stated it , the benefits would be derived from three sources:. Note also the emphasis on tangible and quantifiable results, which can be easily communicated and tested.

All stakeholders, including investors, employees, debtors, and vendors, should understand why a deal will make their company stronger. Does the investment thesis make sense only to those who know the company best? If so, that's probably a bad sign. Is senior management arguing that a deal's inherent genius is too complex to be understood by all stakeholders, or simply asserting that the deal is "strategic"?

These, too, are probably bad signs. Most of the best acquirers we've studied try to get the thesis down on paper as soon as possible. The perils of the "transformational" deal. Some readers may be wondering whether there isn't a less tangible, but equally credible, rationale for an investment thesis: Such transactions, which became popular in the exuberant '90s, aim to turn companies and sometimes even whole industries on their head and "transform" them.

In effect, they change a company's basis of competition through a dramatic redeployment of assets. Perhaps that list alone is enough to turn our readers off the concept of the transformational deal. We keep wanting to put that word transformational in quotes. But let's dig a little deeper.

Sometimes what looks like a successful transformational deal is really a case of mistaken identity. But when you actually dissect the moves of such industry winners, you find that they worked their way down the same learning curve as the best-practice companies in our global study.

DuPont was similarly patient; it broadened its product scope into a range of chemistry-based industries, acquisition by acquisition. In a more recent example, Rexam PLC has transformed itself from a broad-based conglomerate into a global leader in packaging by actively managing its portfolio and growing its core business. Beginning in the late '90s, Rexam shed diverse businesses in cyclical industries and grew scale in cans.

Then it bought U. In other words, Rexam acquired with a clear investment thesis in mind: The collective impact of these many small steps was transformation.

But what of the literal transformational deal? You saw the preceding list of companies. Our advice is unequivocal: Stay out of this high-stakes game. Recent efforts to transform companies via the megadeal have failed or faltered. The glamour is blinding, which only makes the route more treacherous and the destination less clear. If you go this route, you are very likely to destroy value for your shareholders. By definition, the transformational deal can't have a clear investment thesis, and evidence from the movement of stock prices immediately following deal announcements suggests that the market prefers deals that have a clear investment thesis.

In "Deals That Create Value," for example, McKinsey scrutinized stock price movements before and after corporate transactions over a five-year period. On average, McKinsey reported, deals of the "expansionist" variety earned a stock market premium in the days following their announcement. Translating these findings into our own terminology:. In order to gain investment from one of our funds, a company needs to demonstrate the ability to grow and grow quickly.

Growing rapidly is a plus, but just as important as rapid growth is scaling effectively. Apt to Dominate — Market dominance is typically defined as the strength of a given product, service, or brand, relative to competitive offerings. Businesses in line to receive an investment from Venture Funds must be able to clearly demonstrate these strengths. Businesses who are poised to dominate their given market usually can fall into three categories: The business may be a Market Leader, with a brand new product in a new market.

Firms may even dominate by being a Market Specialist, where they completely fill a niche market. Given Market — Companies seeking investment should clearly understand their customers and the competitive landscape. Display an Exit Potential — As with any investment, the potential to make a return on that investment is the key determining factor. The Fund does not invest in what are known as lifestyle businesses, where the aim of the business is to sustain a particular income level for the founder.

A return on investment for our Fund is typically produced by having a liquidity event. Sensitivity tables jesus christ this is not a CIM. Thanks Woozy seems pretty detailed. Whiskey5 anything to add? Or delete in your opinion? Popular Content See all. PE Resources See all.

Upcoming Events See all. Recent Jobs See all. Private Equity Investment Memo's Here's the basic structure of a private equity investment memo as laid out by a certified private equity user. Attachment Size investment memo pdf Log in or register to post comments. Members that upload a resume get 2. Aug 22, - 7: Aug 24, - 6: Aug 25, - 7: Competitive landscape Detailed growth strategy e. Aug 25, - 1: Aug 28, -


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Private equity firms in particular usually develop an investment thesis for every potential acquisition before a letter of intent is issued. The thesis allows the deal captain who is promoting the investment to articulate the rationale behind the transaction and why it makes a good investment.

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Our Investment Manager has over 30 years of experience in private equity investing, including private equity funds (primary and secondary investments) and co-investments. Investment strategy decisions are made by the Investment Committee, whose members have over .

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The investment thesis proved a resounding success. Operating profit jumped to 15 % of sales in On the strength of its turnaround, Wesley-Jessen completed a successful initial public offering in , creating a fold return on equity in less than two years. Private Equity Origination and Investment Thesis Research 1. Egis employs an Industry Targeted sourcing strategy, a highly proactive approach to deal origination.

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Private Equity Leon Capital Group T+ Who We Are The Private Equity Group at Leon Capital Group (LCG) is made up of partners with operating experience that focus on growing great businesses alongside entrepreneurs and management teams. Aug 25,  · Private Equity Investment Memo's Here's the basic structure of a private equity investment memo as laid out by a certified private equity user. attached is an investment memo from blue point capital group.