A moat is a characteristic that either provides a barrier to entry against competitors or enables the business to extract greater value from customers. We call these strengths “moats” to distinguish them from the more common investment term “sustainable competitive advantage” as often a moat is not unique to a single business. Just like in medieval times where many castles had moats to add to their defence, the simple presence of a moat is often not unique. Nor does it make a business invulnerable. But it protects its shareholders more than a business without a moat.
We have a five-stage investment process that draws on a collective model developed over many years. In our view, this enables us to better ‘sort the wheat from the chaff’, and to ensure that once a great portfolio company is identified, we can continue to add value in order to deliver outstanding investor returns.
John West famously used the advertising slogan “it’s the fish we reject that make us the best” and the Company seeks to emulate this principle by rejecting the vast majority of potential opportunities.
Seven Selected Shareholders
One member of the Board
The Chief Executive Officer and the Chief Financial Officer of TIP
The SMaRT meeting is a full day opportunity for Selected Shareholders to discuss the potential investment and meet management. The day runs for approximately 6 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:
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 rigour to the deliberations of management and the Investment Committee by incorporating the views of Selected Shareholders with significant business experience.
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:
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.
The ongoing management of our investments is handled:
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 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 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:
The scope of the Strategy Committee’s mandate is to:
The Strategy Committee has been delegated the following powers by the Board:
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