Investment Partner Strategy

22 Sept

Summary

Deecon were engaged by DELTEQ / COMTEQ to lead their Investment Partner Strategy. This included defining the investment case and strategy, researching potential investors and completing due diligence on investment options to find the best target investors for DELTEQ / COMTEQ.

Situation & Approach

Following Deecon’s three-month engagement with DELTEQ / COMTEQ to complete due diligence on the companies and produce supporting materials, Deecon were engaged to lead the investment partner strategy.

The investment case had been defined in the previous engagement – DELTEQ and COMTEQ (the Group / DELTEQ) had experienced high growth of revenue over the last three years and were seeking continued growth through expansion both within the telecoms markets and external markets such as EV. The Group had recently formed ‘EVlution’, an EV business aimed at end-to-end EV charging solutions. Given this growth potential, the Group was now looking to raise capital through equity investments of a third party.

The first stage of the investment partner strategy was to align with DELTEQ as to their criteria for an investment partner. This included discussions around the amount of investment they were looking for, potential future management structures and the purpose of investment.

Deecon then compiled a long-list of potential investors to research into. Given the capital DELTEQ were seeking, this was likely to be a Private Equity firm, but VC firms and Industry Investors were also included on the long-list.

Deecon devised a three-stage assessment, which would funnel a long list of potential investors down to a well-suited target list.

The strategy Deecon devised is outlined below:

Level One

The first stage of the criteria assessed:

Investment – What does the investor typically invest?

Portfolio – What is the investor’s current portfolio?

Life stage – Where in a company’s life cycle does the investor typically look to invest?

Location – Where does the investor operate / target?

Size – What size company does the investor currently invest in?

Runway – What potential does the investor have for further future investment?

Activity – Is the investor currently active in the market?

For each of these individual criteria, the potential investor was assigned a score between 1-5 dependent on fit to DELTEQ’s specifications. 5 implied a very strong fit with DELTEQ, whilst 1 meant that there was not a fit between the investor’s actions and DELTEQ’s specifications. Deecon set a minimum threshold of 30 which investors had to pass to reach level 2.

Level Two:

If potential investors passed to Level 2, they were next assessed on the following criteria:

Approach – How does the investor tend to treat its portfolio companies?

Knowledge – What knowledge does the investor have of DELTEQ’s industry?

Portfolio Success – What is the investor’s current network?

This allowed us to further refine the list and identify 8 target investors for DELTEQ.

Level Three:

For the 8 target investors that Deecon identified for DELTEQ, Deecon completed in depth due diligence on these companies. The criteria set asked:

Management – How does the investor interact as a board member to its portfolio companies?

Strategy – What are the future plans of the investor?

This funnelling strategy allowed Deecon to identify targeted potential investors for DELTEQ who fit with the Group’s specification. The three-level strategy meant that information that was critical, yet easy to identify, e.g. the sectors a PE firm invests in, was researched first. This meant we could quickly refine the long list for DELTEQ. Additionally, the team worked in parallel meaning that Level 2 research was completed as Level 1 continued so that we could identify targets for DELTEQ as efficiently as possible.

Following this, Deecon produced three detailed reports for DELTEQ on key target investors. These reports included an analysis of the investor’s management, values, portfolio success, financials and realised portfolio.