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Due Diligence

There is no substitute for careful and exhaustive due diligence—regarding not only investment prospects, but also the market and the market opportunity available to the candidate portfolio company. When a prospect proceeds to due diligence, the process involves an investment team led by one of our general partners.

Our analysis includes multiple meetings with management, rigorous analysis of the company’s historical financial statements, and careful analysis of detailed financial projections, with a strong focus on assumptions, necessary capital expenditure programs, the capital structure, operating margins, and projected growth. Further analysis includes the company’s management team (background checks and reference checking), its products or services (supplier and customer analysis and interviews), and its competitors (market share analysis and trends, cost structure analysis). Moreover, we make a critical analysis of the company’s business plan and the likelihood of the company achieving its financial objectives. Review of the company’s business plan includes an analysis of the market opportunity available to the company, the necessary market share for it to achieve its projected financial performance, and the ability of the company to penetrate and defend that market.

During the due diligence process, we also carefully evaluate the exit opportunities available to the investment prospect, and the projected time frame and performance needed for a successful liquidity event.

Due diligence normally takes 30–45 days, but may take longer when we encounter ambiguities or difficulties in building a case. At the end of the process, we make a decision whether to proceed with preparing a term sheet for an investment. All investments must gather the unanimous support of all the general partners.