Investment Criteria
Staley Capital’s strategy was refined by its partners in their respective roles and affiliations with THLPV. The strategy is also informed by deep experience operating “in the trenches” within companies that closely resemble the firm’s investment focus. Growth-stage business services companies that ultimately create substantial value share common key success factors (“KSFs”) that are summarized below:
- Rapid revenue growth
- Recurring revenue stream
- Strong Gross Margin trend with transaction-based business models and evidence of defensible pricing
- Strong EBITDA Margin trend/evidence of operating leverage
- Strong Cash Flow generation with solid Working Capital and declining CapEx as a % of sales
- Manageable revenue concentration
- Improving client level profitability
- Consistent revenue growth and contribution margins by top customers
- Lengthy duration of customer relationship
- High degree of repeat business
- Demonstrable value proposition and customer ROI (proven, quantifiable cost savings and revenue contribution)
- Favorable trend in onshore and offshore headcount mix
- Multiple offshore locations
- Quality metrics over time/evidence of continuous improvement
- Improving Utilization and Efficiency metrics
- Attrition rates better than peer group
- Improving salesforce productivity and account planning
- Revenue per sales representative
- Duration of sales cycles
- Expanding average size of new customers
- High rates of closure and rates of movement from one step in the funnel to the next
- Defensible pricing model
- Evidence of technology IP as a barrier to entry in some business lines
- Strong internal productivity growth
- Faster turn-around times for clients
- Evidence of more efficient/redesigned workflow for customers
This template is intended to illustrate how Staley Capital evaluates prospective investments and monitors portfolio company success on an on-going basis. It is not intended to be exhaustive. Our experience in the business services sector has proven that focusing on and generating improving trends in the KSFs highlighted above are the critical drivers of value over time. Our experience working with and inside these types of companies also helps to identify opportunities for value creation and to attract management teams who seek to collaborate with value-added investors.
Therefore, a typical investment for Staley Capital has the majority of the KSFs tracking well but requires specific investments, insights and/or managerial capabilities to accelerate progress on some number of them. For example, a prospective investment may have a demonstrable value proposition but require focused investments in solution packaging, new vertical markets, lead generation programs and sales resources to build a repeatable distribution model. Another prospective investment may not have a global delivery footprint to capitalize on cost savings opportunities and improve delivery cycle times for customers. Another may require specific investments in technology – potentially infrastructure or software platforms used to provide value for customers.
We have succeeded here before. Fundamentally, the Staley Capital team has a proven record of accomplishment of creating value with technology-enabled business services companies with a global delivery footprint and explosive growth potential.