Investment Approach
The hallmarks of our investment approach are as follows:
- Intensive fundamental research. We pride ourselves on the depth and quality of our investment research. In every investment we make, our goal is to understand the industry and business better than other investors. Our investment review process is disciplined and thorough. In addition to a detailed financial analysis, we perform a comprehensive top-down and bottom-up review of the industry and company, which will be supported by significant—and often proprietary—primary field research. In addition to extensive discussions with management, we will, as appropriate, interview and/or survey customers, suppliers, competitors, employees (current and former), and other relevant industry participants and experts.
- Proactive investment idea generation. We take a proactive approach to investment idea generation. At any given time, we are pursuing five to six major investment "themes," looking for great businesses that stand to benefit from larger economic or industry trends or that may be associated with a larger sector that is "out of favor." In addition, we will pursue one-off investment ideas generated through our own research or through our extensive global network of business and investment relationships, which includes relationships with current and former executives, investors, industry consultants, and investment bankers. We are constantly evaluating companies and meeting with executives in pursuit of attractive investment opportunities.
- Patient and disciplined investor. We are extraordinarily selective and may evaluate numerous investments before finding one that satisfies our stringent criteria. We may maintain an on-going relationship with a company for years before deciding to invest. We believe that one of our strongest competitive advantages is our ability to be a patient and disciplined investor.
- Concentrated, actively managed portfolio. When we do find an attractive investment opportunity—attractive based on intensive fundamental research and as measured against a stringent set of criteria—we invest with conviction, and look to build a sizeable position over time. Our portfolio is concentrated: we seek to have ten to twelve core positions at any given time. We actively and diligently monitor our portfolio and regularly meet with management, not only to understand recent performance but also to proactively offer suggestions—strategic, operational, financial—based on extensive, fact-based analysis. We also regularly monitor key industry trends and explicitly benchmark the performance of our portfolio companies versus both competitors and our own expectations.
- Long-term investors. We maintain a long-term focus. We typically will not invest unless we anticipate that the holding period of such investment will be three to five years or longer. We believe that the ability to look "beyond" quarterly performance and short-term price fluctuations is one of our key competitive advantages. All aspects of our business—our culture, the experience and background of our investment team, our investment process, our internal and external communications—are aligned with and reinforce our long-term investment strategy.
- Collaborative partnership with management. Our investment team has substantial experience working with some of the world's best management teams to drive shareholder value. Messrs. Gilhuly and Stuart have served collectively on 34 corporate boards of directors, working actively with these companies on a variety of strategic, operational, and financial issues. This real-world executive experience—which differentiates Sageview Capital from the majority of public market investment firms—enables us to engage substantively and constructively with the companies in which we invest.
Our approach is never hostile, and we do not look to publicize any of our discussions with management or a company's board of directors. We believe that over time, our franchise is best served by maintaining our reputation for integrity, discretion, and real-world, practical executive experience. We want to be viewed as long-term shareholders—true partners—with a differentiated ability to work collaboratively and constructively with management teams over time to drive value.
Target Investments
We seek to invest in great businesses at attractive valuations. Our target investments share the following core characteristics:
- High returns on capital
- Business models that generate substantial free cash flow
- Attractive growth opportunities
- Sustainable barriers to entry
- Strong management teams with a commitment to creating shareholder value
We have the flexibility to pursue the best risk-reward opportunities across a broad spectrum of investment types.
- Public investments. We seek to acquire large, non-controlling interests in publicly traded companies over time through either open market purchases or privately negotiated transactions. Typically, we will seek to be a substantial shareholder of the company. We are focused primarily on public companies in North America and Europe with a market capitalization of between $500 million and $3 billion, but will also explore compelling opportunities that are based in other geographies or that have a market capitalization in excess of $3 billion. When appropriate and only on a friendly basis, we will seek board representation. These are typically situations in which we and the company believe that our participation at the board level will add substantial value based on our long-term mindset and our track record working with similar companies.
- Control investments. Given our unique network within the private equity industry, we continue to evaluate proprietary private equity deal flow. Our investment team has over forty years of cumulative experience in private equity investing, with substantial experience sourcing, structuring, and executing private equity transactions. We rarely participate in typical auction-based private equity processes, but will selectively pursue attractive private investments when we believe we have a meaningful "edge."
We also carefully evaluate our public investments as potential take-private opportunities. For some companies, there are real advantages to executing their long-term strategic initiatives in a private context, without the distracting pressure of quarterly reporting and managing an often short-term focused shareholder base. In addition, in the private context, we can frequently add substantial value by working more directly with management teams. We will only engage in a take-private transaction with the support and endorsement of a company's board of directors. - Structured investments. We also have the flexibility to consider structured investments into public companies and investments in non-equity securities. Given our global relationships with investment banks and our deep capital markets expertise, we will work with boards of directors to help structure such investments optimally for the company.