4G Management Due
Management Due Diligence

                         Pre Deal                                           4G helps accelerat...
Management Due Diligence


        1. Two relevant studies can be found at
        the links below

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Management Due Diligence - Four Groups


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Four Groups has developed a new model for understanding and predicting relationships and team dynamics called 4G. One of the areas of application for 4G is management due diligence and ongoing portfolio management within the private equity industry.

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Management Due Diligence - Four Groups

  1. 1. 4G Management Due Diligence Linking Behaviour to Bottom Line Performance Management Due Diligence Four Groups has developed a new model for understanding and predicting relationships and team dynamics called 4G. One of the areas of application for 4G is management due diligence and ongoing portfolio management within the private equity industry. The Problem With the focus on gathering informa- small change in team composition can tion on key individuals, these methods significantly change the dynamics and There have been a number of studies fail to quantify other key intangible fac- effectiveness of a management team. that have pinpointed quality of the tors such as the quality of relationship senior management team as the most and communication within the man- The key variables, when looking at important variable in the relative or agement team, the quality of relation- relationships that impact team per- success of a private equity invest- ships and communication with the GP formance include; ment1. Arguably the effectiveness of and the cultural suitability to the task the management team is even more i.e. does the management team have a • Relationships with investors important in current times. However, suitable cultural outlook to execute the • Performance under stress despite the maturity of the private required strategy. • Internal relationships and dynamics equity industry in the UK, General • Cultural suitability to the proposed Partners (GPs) are still relying on insuf- Assessing the strength of the manage- strategy ficient or incomplete data and gut feel- ment team is a notoriously imprecise ing to make a decision to back a partic- and time-consuming task. This is exac- 4G supports the existing management ular management team. erbated by the unique variables and assessment and due diligence process complexities of each transaction mean- by providing systematic information in Quality of management refers not just ing that there is no simple formula for these key areas. By understanding the to the abilities or experience of team success. Indeed, a team that may have underlying relationships within the members but to the team’s ability to performed well in the past may strug- management team, 4G makes it is pos- effectively collaborate and work gle given new strategies or priorities. sible to take more informed decisions together. For private equity, GPs need Likewise, assembling a team of highly based around traditionally intangible to know the potential and quality of capable and experienced ‘stars’ is also variables. 4G also provides information team dynamics prior to investing. no guarantee of success. Even with regarding any likely areas of tension or highly talented individuals, without interpersonal conflict and abilities to Underlying this is the fact that existing positive relationship dynamics, the function under stress. By informing any methods of conducting management results could be less than the sum of potential problems, steps can taken to due diligence such as rigorous refer- the parts. There is further complexity mitigate against these outcomes ence checking, aptitude testing and when one takes into account the evolv- before any difficulties or problems dissecting past performance are notori- ing relationship between the manage- emerge. ously poor indicators of future success. ment team and the GPs. In short, a
  2. 2. Management Due Diligence Pre Deal 4G helps accelerate the process of on- boarding and understanding the inter- 4G sheds light on the following issues; nal dynamics of the board room, mean- ing that relationships become produc- • Understand the cohesiveness of key tive quicker than would normally be relationships within the executive team the case. • Underlying relationship strengths and weaknesses The Process • How to improve existing relationships • Underlying cultural attitudes and suit- 4G can be deployed very quickly, ability to particular strategies requiring an hour or so to complete an • Understanding the likely implications online questionnaire. This is then fol- of any culture or strategy change lowed up with a 30 minute feedback • A team’s ability to adapt and be flexi- session to confirm the results. Given ble the time constraints in such situations, • Likely causes of stress or tension with- Four Groups would aim to deliver in the team results within 48 hours of the first brief- ing. Post Deal Reports are delivered in hard copy and Once a deal has been completed, 4G clients are also able to take advantage can also be used to help develop and of the 4G Visual Team Builder software optimise the ongoing relationship that allows for the dynamic modelling between GP and the management of relationships and interactions within team. Particularly during times of stress the team, enabling GPs to answer or change, this relationship is likely to “what if” questions prior to taking any come under pressure. 4G provides the action. explicit insight and strategies on how best to manage these key relation- ships. Furthermore, in situations where the GP is able to appoint a Non-Executive Director to the board, 4G can provide key information on the likely impact of any candidates on existing team mem- bers. Once a decision has been made, Four Groups Ltd 5 St. Johns Lane London EC1M 4BH, United Kingdom Tel: +44 (0) 20 7250 4779 Email: contact@fourgroups.com http://www.fourgroups.com © 2009 Four Groups Ltd, 5 St. Johns Lane London EC1M 4BH, United Kingdom. All rights reserved. No part of this document may be reproduced without Company Number: 4650494 express written permission from Four Groups Ltd. VAT Number: 817 7962 85 Registered in England and Wales
  3. 3. Management Due Diligence Footnotes 1. Two relevant studies can be found at the links below http://fourgroups.com/link/?84 http://fourgroups.com/link/?85 About Four Groups Four Groups has developed a new approach called 4G to understanding behaviour, relationships and culture. 4G provides its users with insight into per- sonal characteristics, how relationships develop within teams and groups and how culture can be best defined and managed. 4G provides organisations with infor- mation on how best to deploy and opti- mise the performance of their people. It also enables preventative measures to be taken which prevent the more negative aspects of interaction and group dynamics such as minimising personal friction and reducing misun- derstanding between colleagues. 4G represents a systematic approach to managing previously intangible aspects of organisational life. The methodology is easily replicable and can be imple- mented quickly and efficiently.