A thematic approach
Unlike many management companies that wait for opportunities from investment bankers, STG takes a proactive, thematic approach. Bill Chisholm explains that their process begins by identifying specific themes that will guide their investments. This allows STG to focus on sectors in which they have expertise and can add significant value. By basing their investments on well-defined themes, STG can target opportunities with greater precision and consistency, ensuring better alignment with their strategic objectives.
The development of transaction channels including carve-out operations
With its 60 professionals, STG has worked hard to build strong relationships with large companies, facilitating carve-out transactions. Around two-thirds of STG 's transactions are carve-outs, acquiring non-core divisions or business units of large companies. This strategy not only diversifies their sources of transactions, but also enables them to find high-quality assets at attractive prices. This transaction channel is a significant source of opportunities for STG, giving it a distinct competitive edge in the private equity market.
A rigorous due diligence process due diligence a disciplined valuation framework
STG also STG for its rigorous valuation and due diligence processes. Chisholm emphasizes that his team does not invest in a company unless they can acquire it at a price that is effectively equal to or less than 10 to 12 times pro forma EBITDA. This discipline in valuation ensures that the firm pays a fair price to maximize the potential return on its investments. In addition, STG in-depth “voice of the customer” research through interviews and surveys with existing customers, which can sometimes involve engaging more than 1,000 customers in a single transaction. This detailed approach helps identify potential shortcomings within a company with the goal of minimizing risks and maximizing opportunities for a successful transformation.
Operational transformation by leveraging our strategic assets STG
Finally, the American firm with $5 billion under management is highly selective about the types of risks it is prepared to take, and has substantial strategic assets and resources to help transform businesses. One example is STG Labs, STG's outsourcing center, based in India.
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