Ethos has consistently demonstrated an ability to remain disciplined and stick to the investment strategy. The sweet spot is to identify entrepreneurial companies with good growth potential that can be accelerated. Ethos’ world-class value creation capability enables us to support management teams with major initiatives run by the Value Add team. Our Value add depth has also facilitated a broadening of our origination range to include opportunities that have an optimisation thesis, (businesses that achieve good profitability but that have substantial upside potential if they were operating efficiently).
Good recent examples were Neopak and Twinsaver, two businesses that Fund VI acquired last year from Nampak, a major South African corporate. Both of them were regarded as non-core by the previous owner for some time, Ethos’ extensive due diligence confirmed that they had significant efficiency improvement potential resulting in Ethos carving both entities out from Nampak to become autonomous businesses.
The Value Add team’s strategic involvement is carefully scoped during the due diligence process of each investment. We engage with portfolio companies by applying an engagement framework.
An outline of this framework is illustrated below:
The objective of Ethos’ Value Add model is to optimise growth across the Firm’s portfolio of investments. With a core team of five professionals, Ethos focuses on building capacity within portfolio company management teams (i.e. hiring top talent to supplement existing executive capabilities) to enable them to own and sustain the required growth initiatives. Ethos also engages fit-for-purpose service providers to provide additional, specialist capacity that accelerates delivery of value.
Ethos has experience in working with a broad range of service providers on the various elements of the team’s Value Add growth model (strategy, delivery of performance and leadership). The team’s role in working with these providers is to tightly scope required projects, run a structured process to select the most appropriate provider, and then manage the provider throughout the delivery of their scope (in Steering Committees, project team meetings and working sessions).