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Further analysis by the Investment Committee

The Investment Committee is a body constituted by the Board to examine potential investments. The committee includes:

• TIP Group's CEO and CFO
• Seven Selected Shareholders
• One member of the Board

The Board delegates the following duties to the Investment Committee:

• Examining and assessing the financial performance of a potential investment

• Investigating whether management appears to be a suitable partner for investment by the Group, including:

  • A review of the moats of the potential investment

  • A review of key risks of the potential investment

  • A review of key management personnel of the potential investment

  • Assessing the receptiveness of the potential investment to the Company’s investment philosophy

  • An assessment of whether investment in the potential investment would meet the Company’s investment goals.

• Identifying industry or company specific headwinds or risks and whether these are acceptable given the potential returns offered by the potential investment.

• Assessing whether an investment by the Group is feasible.

The SMaRT Meeting

The SMaRT meeting is a full day opportunity for Selected Shareholders to discuss the potential investment and meet management. The day runs for approximately six hours and includes two question and answer sessions with management along with detailed round-table discussions among Selected Shareholders. In particular, the SMaRT meeting focuses on:

• Understanding the strategy of the potential investment

• Identifying and scoring the moats of the potential investment

• Identifying and scoring the risks relevant to the potential investment

• Assessing if the potential investment’s management is a suitable partner for investment by the Group.

In addition, the SMaRT meeting also examines where and how it would be possible for the Group to add value to the business should we proceed with an investment.

The SMaRT meeting adds a further level of rigor to the deliberations of management and the Investment Committee by incorporating the views of Selected Shareholders with significant business experience.

Due Diligence 

The due diligence process involves a two-stage approach managed by the Investment Committee.

The first stage involves commercial due diligence undertaken by the Investment Committee and any Selected Shareholders they believe are appropriate on a case-by-case basis. The commercial due diligence committee is delegated the responsibility of verifying the existence of the moats identified in the SMaRT meeting, that the risks identified are no worse than identified in the SMaRT meeting, that no significant risks have been overlooked and that management of the potential investment are capable of adequately participating in an intensive due diligence process.

These factors are critical for the success of any investment:

• Without moats a business cannot preserve its competitive advantage

• Misunderstood or significant risks have the potential to damage the performance of an investment

• If the potential investment’s management are incapable of constructively completing the due diligence process, they are unlikely to be suitable partners for investment by the Company

If commercial due diligence is successfully concluded, a potential investment will proceed to the second stage, traditional due diligence. Traditional due diligence involves detailed legal, accounting and (where applicable) tax due diligence. The second stage is conducted by external legal, accounting and tax advisers reporting to the Investment Committee. We believe it is important to conduct a detailed review of all legal, accounting and (where applicable) tax matters prior to committing to make an investment in a business. Traditional due diligence is conducted after commercial due diligence because we must first determine that commercial benefits and value exist in the potential investment before incurring the expense of engaging external advisers.

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Ongoing Management

Successfully managing the Group's investments is as important as making the decision to invest.

The ongoing management of our investments is handled:

• On a day-to-day basis, in respect of business operations, by the management team of the portfolio company

• At an individual portfolio company level, in respect of capital oversight and strategic planning level, by the board of the portfolio company

• At a strategic Group level, by the Strategy Committee in conjunction with TIP Group’s Board and management.

We usually invest in companies where the existing management intends to remain in place and the daily operations will not change substantially post investment. This ensures that the already successful business practices are continued.

It is at the portfolio company board and strategic level that we seek to add value. All portfolio companies have a board that includes both representatives of the founder/management, and directors nominated by TIP Group who are Selected Shareholders (TIPReps). It is noted that the board composition of each Portfolio Company may differ due to specific company factors.

TIPReps are selected by the Board of TIP Group and are sourced from Selected Shareholders. TIPReps are responsible for acting as directors of a portfolio company, providing mentorship to management and representing the interests of the group. TIPReps are paid an honorarium and are encouraged to step down from their board role once the value they can add has been achieved. In this way, each portfolio company can access a wide range of skill sets from Selected Shareholders.

The Strategy Committee is the final formal management structure outside of TIP’s management and Board. The Strategy Committee reports directly to the Board and comprises seven members:

• Four selected Shareholders
• One Member of the Board
• TIP Group's CEO and CFO