Virtually every institutional investor uses some form of investment committee (IC) to guide their approval process.
When it all boils down to it, the IC are the real decision makers. They are the ones that decide whether or not to invest in a business.
So, what are the key things you need to know about how they operate?
Virtually every institutional investor uses some form of investment committee (IC) to guide their approval process
What do I need to know as a seller?
Members of the IC are less likely to be involved in the day-to-day management of the investment process (which is the primary role of the deal team), but what we like to see at Clearwater is IC member involvement or engagement from an early stage in the transaction. While not always the case, having a member of the committee involved early on demonstrates that, not only are they interested, but they are taking any possible deal very seriously.
Again, this can vary depending on the size of the fund. It also doesn’t mean that you won’t get the deal if someone from the IC isn’t engaged from the outset, but it is certainly an encouraging signal from a prospective investor.
Who makes up an IC, and how often do they convene?
It’s often the case that most ICs will be comprised of senior partners of the private equity (PE) fund, albeit the composition and number of members will vary depending on the size of the fund.
Again, the size of the fund often dictates how often they convene to discuss investment opportunities. For larger funds that are continuously appraising a large number of investment opportunities, it is likely that the IC will meet regularly, often weekly. For smaller funds, meetings are likely to be a lot less frequent or even on an ad-hoc basis.
While the exact format of an IC meeting varies depending on the fund or stage of the deal under discussion, they typically involve deal teams presenting their due diligence findings and transaction progress to the IC for their feedback, input and approval to proceed. Deal teams will typically update ICs at various stages throughout the investment process, sharing increasing levels of detail and culminating in a final IC meeting shortly prior to finalising the investment and drawing funds.
What’s the role of an IC?
The IC is responsible for ensuring the deal team has been adequately challenged, the investment decision making process has been adhered to and documented correctly, and making the final decision on whether to invest in a business or not.
The role of an IC, therefore, is critical in any deal-making process. From making the initial decision to pursue an investment, to providing oversight and holding the deal team to account, they are involved at all key stages of the process.
Who makes up an IC, and how often do they convene?
It’s often the case that most ICs will be comprised of senior partners of the private equity (PE) fund, albeit the composition and number of members will vary depending on the size of the fund.
Again, the size of the fund often dictates how often they convene to discuss investment opportunities. For larger funds that are continuously appraising a large number of investment opportunities, it is likely that the IC will meet regularly, often weekly. For smaller funds, meetings are likely to be a lot less frequent or even on an ad-hoc basis.
While the exact format of an IC meeting varies depending on the fund or stage of the deal under discussion, they typically involve deal teams presenting their due diligence findings and transaction progress to the IC for their feedback, input and approval to proceed. Deal teams will typically update ICs at various stages throughout the investment process, sharing increasing levels of detail and culminating in a final IC meeting shortly prior to finalising the investment and drawing funds.
What’s the role of an IC?
The IC is responsible for ensuring the deal team has been adequately challenged, the investment decision making process has been adhered to and documented correctly, and making the final decision on whether to invest in a business or not.
The role of an IC, therefore, is critical in any deal-making process. From making the initial decision to pursue an investment, to providing oversight and holding the deal team to account, they are involved at all key stages of the process.
What do I need to know as a seller?
Members of the IC are less likely to be involved in the day-to-day management of the investment process (which is the primary role of the deal team), but what we like to see at Clearwater is IC member involvement or engagement from an early stage in the transaction. While not always the case, having a member of the committee involved early on demonstrates that, not only are they interested, but they are taking any possible deal very seriously.
Again, this can vary depending on the size of the fund. It also doesn’t mean that you won’t get the deal if someone from the IC isn’t engaged from the outset, but it is certainly an encouraging signal from a prospective investor.
Knowledge
We don't hide behind jargon and complexity. Instead, we aim to open up the black box of M&A, illuminating the path with clear insight, simplifying the process, and delivering valuable information.
