Management Presentation

A teaser and an information memorandum tell a fund what a company says about itself on paper. The management presentation is where the fund meets the people who will have to deliver it.

In the workbook's description, at an appropriate stage "the bankers arrange meetings between the investment team and the key management team of the investee company to be able to understand their perspective (known as the 'Management Presentation')". The management team presents an overview of the company, while the deal teams on both sides engage in technical discussions to build a better picture of the business case, the numbers presented, current performance and all associated aspects.

It matters because the initial assessment, in the workbook's words, is largely about two things: the business opportunity, and whether the founders' vision, competence and drive match what is needed to turn that opportunity into value creation. A document can show the first. Only a meeting shows the second.

Where it sits (sections 7.1.1 to 7.1.3):

1. Teaser from the company's investment banker.
2. NDA signed; Confidential Information Memorandum received.
3. Business due diligence — industry research, talking to advisers, a preliminary financial model built on management's projections, and meetings with the investment bank on financing requirements, type of financing and probable deal structure.
4. Management presentation, arranged by the bankers.
5. After reviewing the presentation and initial discussions, the investment team prepares a brief (2–3 page) investment proposal for its Investment Committee.
6. The Committee meeting may simply alert the Committee to a potential deal, or start the first stage of formal approval — a go-ahead to negotiate. Where deal processing needs out-of-pocket expenses, a cost-cover may also be approved.
7. Negotiations with the company and its bankers, then the preliminary investment memorandum and term sheet.

What each side is doing in the room. Management presents the overview. The deal teams — the fund's investment team and the company's bankers and finance team — get into technical discussion of the business case, the numbers, current performance and associated aspects. The fund is testing both the story and the people telling it.

What it is not. It is not due diligence review. The formal DDR — business, financial and legal, run on the virtual data room — does not commence until the term sheet has been executed by both parties.

Illustrative figures. After receiving the CIM for Nagpur Agro Foods, Deccan Consumer Fund II's team spends three weeks on business due diligence and builds a preliminary model on management's projections of revenue growing from Rs 640 crore to Rs 1,100 crore in four years.

The bankers then set up a half-day management presentation in Nagpur. The founder-CEO walks through the brand strategy; the CFO and the plant head take technical questions from the fund's team:

The fund leaves persuaded by the business but unconvinced on the second-line management. Its 3-page investment proposal to the Investment Committee records both points and asks for a go-ahead to negotiate, plus a cost-cover of Rs 25 lakh for a market study and travel. The Committee approves both — with the management-depth concern flagged for the term sheet.

Chapter 7 (Investment Process and Governance of Funds) describes the management presentation at 7.1.2 (Business Due Diligence), immediately before the investment proposal to the Investment Committee and the negotiations at 7.1.3. Expect a sequencing question placing it after the teaser, NDA, CIM and business due diligence but before the term sheet and the due diligence review.

• The bankers arrange it, and the investee company's key management team presents.
• It comes before the term sheet. The formal due diligence review starts only after the term sheet is executed.
• The proposal that follows is brief — 2–3 pages — and goes to the Investment Committee either to alert it or to seek a go-ahead to negotiate.
• A cost-cover is an approval for out-of-pocket deal expenses, and is separate from approving the investment.
• It is not the preliminary investment memorandum. The PIM comes later, before signing the term sheet, to get authorisation to sign.