Approach

Type of Investments

The Aruba Growth Fund will focus on acquiring companies that can leverage the investment team’s expertise in driving operational improvements to create value. While the fund is sector agnostic, the investment team has built thorough knowledge and networks in a variety of industry sectors including: business and financial services, energy, food, telecom, tourism, banking, insurance, international trade, manufacturing, processing and health care.

The investment team believes the following sources of deal flow will create attractive investment opportunities for the fund:

• Privately held and/or family-owned businesses
  Privately held or family-owned businesses are the source of a significant portion of buyout deals in Aruba. Typically, the owners of these companies are seeking a successor, liquidity or a partner to assist with significant expansion, as the company becomes a regional or national market leader. Some of these businesses may be operating in a relatively immature industry that is ripe for consolidation and can have strong potential to expand locally, regionally or internationally. Others are characterized by a need to professionalize the management in order to facilitate ambitious expansion strategies to enhance value and improve exit prospects.
• Corporate carve-outs
  Sales of businesses by corporate parents could be a source for buyout deals in Aruba. Corporate parents often seek to divest healthy business units as a result of strategic refocusing, corporate restructuring, or in response to an increasing focus on shareholder value. The investment team believes that these businesses are often characterized by significant potential for investment as a stand alone company, and often require supplementing existing management teams, installing management accounting systems and provision of significant strategic guidance.
• Foreign companies or developments
  As Aruba is a stand-alone economy, introduction of new developments and technologies is not an organic process. A foreign or local company has to take the initiative to prepare, implement and promote such new economic activity (i.e. mobile telephone networks, internet, time-share, digital television). The managing directors, with their international background and reputation, will be in a good position to recognize innovation opportunities, find the right partners and implement.
• Proven-technology projects
  Aruba will require additional development of infrastructure and energy production to facilitate and stimulate local economic development. Particularly in the EU, but also in the region, it is becoming common practice to develop and finance this type of project in a public private partnership. The investment team, with its experience in project finance and energy, believes there might be good opportunities to create interesting investment alternatives in cooperation with the government or with public entities.
• Corporate restructuring
  Generally, the managing directors do not believe distressed situations should be the target of private equity investors. However, in small island economies companies are sometimes getting in trouble for reasons that would not lead to a distressed situation elsewhere. It is sometimes harder to find sufficient financing, good management or the right strategic partner in a small economy. The network and long-term view of a private equity investor might overcome this handicap and turn a local restructuring situation into an attractive investment opportunity.

Investment Criteria

The Aruba Growth Fund will seek to invest in well-established, high quality businesses characterized by:

1. proven and sustainable earnings, cash flows and returns,
2. (potential) market leadership in attractive niches, 
3. sustainable competitive advantages, 
4. (potentially) strong management teams, and 
5. clear exit potential. 

The fund will also consider investments in: 

1. renewable energy projects, 
2. public private partnership projects and enterprises, 
3. other venture capital (all three provided they are based on proven technology and business models) and 
4. distressed/turnaround situations. 

Investments in real estate are not part of the fund’s mandate.

Because of the fund’s size, typical investments will have a minimum value of AWG 5 million over time. This means that the fund focuses on medium- and large size companies, and not on small businesses.

Investment Process

The Aruba Growth Fund employs a transparent, thesis-based investment process that provides checks and balances throughout the process. Upon identification of a potential investment opportunity, a preliminary investment review, including a discussion of the opportunity and key issues, is openly and actively discussed in the weekly meeting involving all members of the investment team. The fund operates a thorough and disciplined due diligence process to assess a potential investment, incorporating the advice of specialist domestic corporate and tax lawyers, accountants and management consultants with whom the investment team has built good working relationships over the past twenty five years. Throughout the investment process, from the early review stage through to the discussion of the final investment proposal, each team member is encouraged to dissent and proactively identify any issues on any deal. Subject to team consensus, the managing directors elect whether to allocate further resources to engage in due diligence. The final investment memo is thoroughly discussed within the full team prior to being taken to the investment committee comprising the managing directors. At the end of the consensus-oriented investment process, the decision to invest is taken unanimously by the investment committee.

Value Creation

After making an investment, the fund acts as an active and involved investor, and the investment team has experience in leveraging control positions to enhance portfolio company value. The investment team keeps in close contact with the company following closing in order to promote a smooth transition for the management and ensure that a strong framework is in place for executing the strategic, operational and financial plans for the company. The investment team also maintains contact with the portfolio companies over time through one or more supervisory board positions, investor meetings, and delegated management functions. It supports a company-wide promotion of best practice private equity standards, and world class operating and management techniques at each portfolio company.

The fund maintains a disciplined monitoring process through the life of an investment, with detailed company-wide reviews of portfolio company progress on a semi annual basis. Specific portfolio company issues are also raised on a weekly basis during investment team meetings. In addition, the managing directors seek to visit each portfolio company very regularly to enhance transparency and facilitate incremental sharing of expertise. The investment team will be closely involved with the creation of growth strategies, and will have a hands-on approach in steering the related time lines and implementation programs.

Unlike the management of many other private equity funds, the investment team has significant operational management experience, in addition to investor- and private equity experience. The experience of the investment team includes, but is not limited to:

• Developing, analyzing and profitably implementing detailed business plans;
• Building and managing management teams;
• Human resource management and recruitment;
• Strategic planning and management;
• Establishing and building operating companies, including all operational management (in 4 continents, with up to 3,000 employees);
• Sourcing, transport, storage and processing of raw materials globally;
• Production and processing in small and large industrial facilities;
• Project management and building of industrial facilities;
• Transport, storage, quality control, marketing and distribution of finished goods globally;
• Auditing and reporting;
• Building and managing legal strategies (corporate, M&A, and capital-related);
• Financial management, including price risk management, foreign exchange management, insurance and extensive private equity reporting;
• Raising and managing debt and equity capital for operating companies from local and international financial institutions;
• Assessing risk and structuring debt transactions that mitigate these risks on behalf of lending institutions;
• Tax planning;
• International cooperation and partnerships;
• Cooperation with governments and public institutions, and analysis and influencing of regulations.

Based on this hands-on operational experience in a full range of management fields, the investment team is in a position to advise and support management of portfolio companies not only with their strategic challenges, but also with their more day-to-day operational issues. On a more strategic level, the investment team expects to add value in the following areas:

Creating and implementing strategic plans
The investment team has significant experience in helping companies develop and execute strategic plans to grow company revenues and profitability. These include business portfolio optimization plans and industry consolidation strategies.

Supplementing and building management teams
Where appropriate, the investment team actively ensures that a portfolio company management team is effective and has the right skills to support business growth.

Improving organizational efficiency
The investment team has significant experience in rationalizing costs and optimizing the organizational structure of and working capital management at portfolio companies and implementing financial controls to improve management of business units.

Introducing innovation
The investment team understands how innovation through adding new business activities or improving existing business activities can create value. With its international experience, network and perspective the investment team is in a position to push for innovation in an ambitious but realistic manner.

International expansion
Local businesses have a tendency to focus primarily on their existing market. The investment team naturally looks at the international (also Asia and Brazil) and regional environment for growth- and cooperation opportunities. Its international network will allow it to assist portfolio companies with sensible expansion plans abroad, and with connecting with foreign partners that can add value through various forms of cooperation, including outsourcing and market development.