Investment Criteria
When we look for new investments, sensibly priced companies that complement our existing portfolio businesses catch our eye. We’re particularly attracted to companies with:
• Sustainable competitive advantages
• Meaningful barriers to entry
• Strong market share
• Non-cyclical business models
• Substantial EBITA margins and free cash flow
We also invest in businesses involving The Allegro Philanthropic Foundation’s charitable objectives (‘program investments’) if our normal financial investment criteria cannot be met.
Our flexible, generalist approach to evaluating opportunities is guided by the Allegro Investment criteria:
Market Opportunity
Does this company have clear room for substantial growth, organically or otherwise? What market trends or structural changes can this company capitalize on?
Sustainable Competitive Advantage
Can this company build and sustain a winning position? Does it have barriers to entry, access to inputs, unique market position and or specialized expertise or intellectual property?
Capable Management
Is the management team talented and committed? Do they have proven experience and embrace good basic values? Do we believe they will grow with the company? And do we believe they can turn plans into reality?
Investment Size
Does this investment allow us to participate meaningfully in its success? With a preferred size of $10-50m per transaction, we expect to be the lead investor in our deals.
Turn Around Situations
Does this business need ‘fixing’? We are not usually attracted to businesses that need turning around, except possibly as an add-on to existing investments.
Management Interaction
Will this partnership be enjoyable? Will we have a relationship built on trust and collaboration? Is management flexible and willing to change?
Financial Considerations
What are the capital expenditure requirements? Is there proven high product value, or high volume? Our focus is growing profitability rather than sales.
Investment Structure
We like established companies. But we will also invest in other types or structures, including relatively early-stage start-ups, buyouts, recapitalizations, consolidations and via participation in growth financings.
