The 3Rs that can tell you a lot about a company
Our approach to assessing candidates: Right Business, Right Leadership & Management, and Right Financials & Valuation
How do we define the Right Business?
We further break it down to 4 different areas that we look into: Functionality, Adaptability, Sustainability, and Scalability (FASS for short).
Functionality defines how this business function in the context of society and the world it operates in. What the company does should go beyond just making money by providing a product or service. What problem does the company solve and what value can the company add to the society, these are some of the points that we look out for. There should be a deeper purpose to it.
A business also needs to be adaptable. In today’s business world where both structural and cyclical changes are in abundance, there is a need to recognize these changes and their impact accurately and quickly.
Sustainability is the endurance of systems and processes. While investing in private businesses, we look for sustainable business operation, because without a sustainable business operation, the business will flounder overtime. Financial prudence and management is crucial for a business to sustain in the long term and more importantly, how the various parts in the business interact and operate will determine efficiency and effectiveness of the business.
We are constantly on a lookout for Growth Champions. One major factor in determining if a business is worth investing in is its ability to scale. While many businesses can survive and even prosper when relatively small, the way to great financial results is through scale. It is hard to justify investing in a business without some inkling of how to scale up, which brings about its own set of complexities. We are looking for small and medium “local” enterprise that can scale up to become regional and even global champions.
Right Leadership and Management
The importance of leadership and management skill-sets cannot be over-emphasised. Without the right leadership and management, the business will deteriorate and crumble over time. Many a time, wise leadership can often determine the difference between success and failure, even in similar tough circumstances. It’s therefore crucial that in our selection of business, we must stay focused on picking the right leadership and management who will build the right culture in the company.
In most cases, we invest in business which is growing and profitable as well as cash generating. We will evaluate each business on its own merits and its performance and likely future prospects. If the company is fundamentally sound and healthy, and likely to grow well in the future, a fair or even undervalued price has to be secured for it for the acquisition to make sense for the group.