Minority investors with a high level of expertise and flexibility
Direct Investments are only made as a minority investor, based on AP6 being an investment partner, not a competitor. This is appealing to those involved in buyout. The minority role generates access to high-quality direct investment opportunities.
AP6 has more than 20 years of experience evaluating and analyzing companies (approximately 280 direct investments). It has enabled the company to develop highly effective and efficient processes and working methods. This also gives the investment organization an ability to act with a great deal of flexibility.
It can do so early in the process, using expertise and resources to get involved already during the initial assessment of a potential acquisition, as an active co-investor. It can also do so late in the process by quickly familiarizing itself with the facts and making quick decisions, when necessary.
Besides its flexibility, AP6 has both expertise and decision processes for managing a variety of roles. These include its role as an active co-investor and its role as a more passive minority investor.
Outreach activities and assessment
Sourcing of potential investment opportunities primarily occurs through AP6’s network. Potential partners and investments are identified based on AP6’s requirements and investment strategy. AP6 systematically contacts selected partners and other stakeholders in order to identify attractive collaboration areas. When there is alignment of interests, proposals for investment projects are drawn up.
AP6’s assessment of potential investments relies on traditional due diligence efforts. In other words, a review is conducted of the commercial, legal, financial and sustainability conditions. A wider assessment is also made based on AP6’s criteria for direct investments.
Criteria for direct investments
Assessment of a direct investment covers three main areas, each of which is comprised of several specific analysis areas and criteria.
AP6’s portfolio and strategy
The potential investment’s fit with AP6 is assessed based on such things as the transaction’s structure (holding, governance, ownership structure), the effect on diversification of AP6’s portfolio (by sector, geographic location, etc.) or other concentration risks.
Assessment of the co-investor
AP6’s strategy of being a minority investor together with experienced funds and other private equity investors, requires a specific evaluation of the potential investment partner.
Factors assessed include the experience and expertise that exists for the specific investment. An evaluation is also made of the completed assessment and the investment approach. Another important aspect is how well collaboration has been functioning between AP6 and the partner, or, if it is a new relationship, how well we expect future collaboration to function based on alignment of values and the similarity of processes used by each partner.
If the partner is a private equity fund that AP6 has invested in, the prior fund assessment provides the foundation for the analysis. However, it may need to be updated and expanded, based on the current situation.
The company’s attractiveness
Based on a traditional due diligence of the company (made by AP6, by the partner, or jointly), an assessment is made of the investment’s return potential based on the company’s position, potential for value creation and the results of a specific sustainability assessment.