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THL relies on its senior investment professionals’ extensive experience in each phase of the investment process to effect superior execution from the inception to the realization of each investment.
Creating Proprietary Investment Opportunities
Our goal in sourcing new transactions is to review every opportunity relevant to our investment strategy. THL’s reputation, combined with a network of contacts and corporate relationships developed over 30 years, have greatly enhanced our ability to generate high-quality deal flow. As a result, we are often considered a preferred buyer by both sellers and management teams.
THL’s relationships, proven achievements and strong reputation have led to numerous proprietary opportunities from a variety of sources. These include direct approaches from corporations, owners and management teams looking for an experienced, value-adding financial partner as well as pro-active opportunities created by our senior professionals who have developed deep, long-standing relationships with various institutions and corporate leaders. THL’s brand recognition, deep relationships and demonstrated ability to consummate transactions often result in “first and last looks,” even within a competitive sale process. We also believe selective participation in competitive sale processes can offer attractive investment opportunities.
Analytically Rigorous, Highly Iteractive Investment Process Draws on Decades of Experience
Sound investment judgment is the cornerstone of our buying activity. Investment judgment is the product of experienced professionals, thorough due diligence and a team-oriented investment process.
THL emphasizes analytically rigorous due diligence performed by its team of senior, highly seasoned investment professionals. At the inception of a new opportunity, a transaction team, carefully formed to include typically two or three senior partners and two or three other investment professionals, begins to assess the merits of an investment opportunity. The analytically rigorous, bottoms-up due diligence process is carefully designed to gain a thorough understanding of each company’s business fundamentals such as revenue drivers, cost structure, cash flow characteristics, points of operating leverage and competitive positioning. The team’s analysis is driven by primary research and is typically augmented by a network of outside experts with specific industry or company knowledge. Investment teams regularly update our other professionals on a transaction’s progress through both formal and informal discussions and memoranda. In turn, THL professionals not working directly on the particular deal bring their extensive experience to bear on a transaction in order to question, challenge and assist the deal team in its evaluation and execution. This team-based and iterative interaction enables all of our professionals to express opinions pertinent to the deal on a “real time basis” so that the ultimate investment decision represents a consensus based on a continuous information flow from the inception of an investment opportunity to its consummation. Because due diligence is conducted by our senior professionals, the final investment decision is the product of judgments, insights and approaches tempered by years of investment experience.
Value Enhancing Ownership
Continuously striving to enhance the value of a portfolio company is critical to the ultimate success of any investment. THL seeks to increase the value of its portfolio companies by working with and building industry-leading management teams, helping companies develop sound and efficient operating strategies and executing attractive acquisitions and financings. During the due diligence process, THL develops with our management partners a detailed strategic growth plan which outlines the steps to be undertaken, with a particular emphasis on the first two years of ownership. This allows the transaction team and management to begin implementing the agreed upon plan immediately upon closing. We emphasize a hands-on approach to managing investments, with at least two senior partners and two other investment professionals typically involved with a company from the start of the due diligence process throughout its holding period. This enables THL to gain an intimate understanding of a company’s business and prospects over many years. Our senior investment professionals are active members of the Board of Directors, serving as advisors to our management on key strategic, operating, financial and personnel decisions. We also pro-actively participate in identifying cost saving opportunities. To further THL’s strategy of long-term value creation, we have historically utilized our extensive network of talented and experienced operating executives for purposes of due diligence, Board membership and assisting portfolio company management teams in the execution of their strategic operating plans. THL formed the Strategic Resource Group to make this capability even more accessible to both deal teams and portfolio companies, a natural, evolutionary step in our value-added approach. This group consists of full-time professionals and operating executives, who enhance our ability to maximize the value of each investment by helping portfolio companies implement successful business strategies, maintain cost discipline and pursue profitable growth.
THL believes a critical contribution to the ongoing success of a growth company is ensuring that the proper management talent is in place. We seek to build industry-leading management teams, incenting them properly and augmenting them where necessary. When appropriate, THL adds to a company’s executive team to provide the necessary human resources to manage effectively the rapid growth often experienced by its portfolio companies. These management additions often provide the incremental expertise that enables a company to realize its full potential. THL has learned that proper management incentives over the holding period of an investment are vital to managing growth company investments. In every transaction, management teams make significant equity investments, thereby ensuring a proper alignment of management’s interests with those of the equity investors. A carefully designed incentive stock program with vesting tied to both tenure and performance is also typically part of the management team’s compensation package.
Achieving Exceptional Exit Value
As part of our portfolio management function, we constantly evaluate the timing and method for harvesting our investments. While the planning horizon for each investment is typically five years, we have held investments for varying lengths of time. THL’s strict adherence to its focus on growth companies enables us to enjoy several alternatives for realizing value from our investments. Throughout our 30 year history, we have relied upon a full range of exit alternatives, including outright sales, public offerings, recapitalizations and joint ventures, with a company’s business prospects and the prevailing economic and capital market environments the most important factors in determining the optimal exit.
