Our approach to pricing risk: Some of the biggest challenges in the industry are around assessing risk and pricing it appropriately, if at all! Some assets are cheap for a reason and some carry binary risk where the outcome is so unpredictable that it takes either a conviction view or leave of your senses to make the investment. At Sullivan Street Partners, we believe that every challenge can be priced adequately if the key factors are understood as well as potential opportunities, risks, and mitigants being sufficiently balanced. Well, almost every challenge…
Investors commonly back a central base case that they have convinced themselves of, following input from management, various diligence advisers, and experts. In reality, these cases are rarely correct, because any forecast case is rarely correct.
Zeina Bain, Managing Partner: “We are somewhat more fluid and conviction-led in assessing an investment. We consider what can go right, what it takes to get there, who can make it happen, and the extent of possibilities. We then compare that to what could go wrong, the potential gaps in the organisation, and its capabilities, positioning as well as its processes and systems. The next question is – do those inputs and outputs add up to an opportunity to make an exciting return for our investors? Are there sufficient mitigating or offsetting opportunities to those negative factors to still produce an attractive investment?”
As operationally-minded investors, we see performance as the aggregation of daily actions and decisions. The key consideration is whether they can be pointed in the right direction and adapt constructively to their environment.
At Sullivan Street Partners, we are committed to always ‘pricing the risk’ when approaching situations. “Rather than shying away from the potential challenges – we lean into assessing them – be that end market headwinds, operational complexity, opaque financials, legacy liabilities, or similar.” We quickly prioritise the key issues and concerns while figuring out the upside potential. We take a conviction view thanks to our extensive experience engaging with similar situations as well as applying both operational and financial perspectives.
We believe there is always a deal that can be done in any situation and will always back ourselves when navigating these circumstances – no matter how complex.