Our investment management process begins with our unique approach to sourcing transactions in our focus industries. The key component to our sourcing methodology is an industry insider approach: our management expertise and operational involvement in fast moving consumer goods (FMCG), apparel, accessories, specialty-retailing and related sectors provides us with the ability to identify and capitalize on opportunities sourced from multiple channels.
We focus on Chinese consumer businesses, and approach peers and competitors of our portfolio companies, as well as upstream suppliers and downstream distributors, in search of new investment and acquisition opportunities. These opportunities can serve as investments for Lunar funds or as bolt-on acquisitions to our existing portfolio – provided synergies are clearly identified and cash flows can support the expansion. Our focused strategy allows us to leverage other direct and indirect stakeholders in our businesses as a source of potential transactions, including government entities, banks and legacy shareholders, and to further build synergy within our portfolio.
As an example, Yonghong Foods and Joysun are already yielding potential acquisition opportunities for Lunar thanks to relationships with suppliers and distributors. In the case of Yonghong, the local government in the company’s home city has introduced a non-carbonated beverage brand that wants to bring in professional management. Meanwhile, Joysun’s legacy shareholders have alerted us to opportunities in food packaging. As a result of our ongoing working relationships with these stakeholders we are viewed as a trusted partner of choice.
When approaching existing owners of a company, we emphasize our value-add track record of appointing high caliber professional management teams, building synergies within our existing portfolio where possible and ultimately increasing value for all shareholders. This is crucial in winning the owners’ trust and convincing them that they will ultimately gain more from ceding control and retaining a minority interest than by bringing on board a minority investor with limited operational involvement. If an owner does not buy into this kind of value proposition then the deal is unlikely to be consummated.
We believe our investment management process leverages our creativity and entrepreneurial energy. Leveraging the business platforms we control has yielded bargaining power in our negotiations with target pipeline companies. While there are no secrets, we feel confident that are approach to sourcing is genuinely proprietary. We are not following the herd. This is evident not only from the manner in which we source transactions, but also the sellers’ rationale for working with us and the level of control and operational involvement we achieve.
