What is our investment matrix?
We apply a disciplined approach to investing through rigorous evaluation, in-depth analysis and review from concept to final investment proposal. Once an investment recommendation is made, we consistently negotiate terms, work diligently with the owners and managers of the target business, and gauge the terms of our investment, in each case to maximize value to shareholders, including planning the exit route at the time of the entry.
What is our investment approach?
Each business we partner has an EV in the range of $50 million to $200 million; a management team of proven ability; a distinct position in the market and clear prospects for growth. In return for our investment, we typically hold a significant minority stake (25-50%), have proportionate board representation, and insist on ‘equal voting’ in an ExCom that decides on all fundamental and game-changing matters of the business. This structured approach defines our ‘influence rights’ despite our minority position. We will only invest in a business when our interests are aligned with the founders-managers.
There are several forms for our direct equity investments in platform/target companies, including:
- Growth capital investments: injecting equity capital to fund well-designed expansion plans including, the financing of organic, and more often, of inorganic growth initiatives, including value-accretive acquisitions. This form of investing represents the bulk of Growthgate’s capital allocation process as it complements the management team’s skills in implementing a ‘Buy and Build’ strategy, and is most suitable to the investment landscape of the MENA region.
- Payout investments: the owners of a well-capitalized business may decide to unlock the value built-in over the years, by selling a portion of their shareholding whilst remaining fully committed for building further value. In such instances, Growthgate invests via quasi-equity instruments such as preferred convertible shares and other forms of hybrid securities that offer capital-secured features in addition to an equity ‘kicker’ at exit.
- Restructuring investments: facilitating the passage of a business from one generation to the next, or from a single-family culture to a corporation, in preparation of a future public listing. Such businesses are on the lookout for an institutional investor to ease the passage from a fully privately held structure into a public company. In such cases, the founders-managers of the business and we, follow a well-charted course to reach the liquidity event and unlock value for all within a prescribed time limit.