Philosophy

Investment Approach

We have a rigorous investment approach, extensive due diligence focus, global reach, substantial transaction and financing expertise and focus on operational improvement and oversight. The following are some of the core investment principles of our corporate private equity funds.

Multi-Strategy Expertise

Strategic Management Group, Inc. takes a flexible, opportunistic investment approach that is not anchored to any single geography, industry, transaction structure, or size. Rather, we opportunistically and selectively direct capital to the most attractive investment prospects, united by a common focus on situations where our investment can facilitate a value-creating strategic transformation at a business. We have developed over time a multi-dimensional approach with respect to transaction structures, which include large public-to-privates, large private transactions, small & medium size buyouts, distressed investments/rescue financings, platform buildups and industry consolidations, minority stakes, structured equity, growth equity and startups. This versatility has and we believe will continue to allow us to maintain a robust level of investment activity and capital deployment globally over the life of the fund and across a variety of investment environments. We seek to direct our capital towards situations where in connection with our investment we can both influence and support our companies to drive change that maximizes their strategic and operational potential.

Corporate Partnerships

Corporate partnership transactions, transactions in which we invest capital alongside a major corporation, represent a signature form of private equity investing for us. As of March 31, 2009, we had invested over $80 million of equity capital, or approximately 25% of total corporate private equity capital invested or committed by Strategic Management Group since 1997, in 48 corporate partnerships.  We believe that teaming up with corporate partners enables us to benefit from access to their knowledge base and anticipated synergies and to compete more effectively against other bidders.

Sector Expertise

Our corporate private equity investment professionals have expertise in most major industries. In addition, we have access to the sector expertise of a broad array of former senior corporate executives with whom we have established informal and formal proprietary advisory relationships and who work closely with our private equity professionals, helping us to source and analyze potential investment opportunities.

Out-of-Favor, Under-Appreciated Industries

We tend to be a contrarian private equity investor. We try to avoid being influenced by swings in conventional wisdom about the relative attractiveness of industries. Instead, we seek to identify out-of-favor, under-appreciated industries, and we have successfully invested in industries such as high technology laboratories, manufacturing, distribution,construction, real estate, engineering, insurance products, software technology and health care among others when they were generally perceived to be out of favor with the markets. We also try to identify developing industry trends in order to capitalize on them before they become widely appreciated and to pursue opportunities to change the structure and profit potential of specific industry sectors through consolidation.

Global Scope

We believe that private equity investing outside the United States provides attractive opportunities, and we are therefore pursuing private equity opportunities throughout the world. We rely on senior advisors who reside in various European countries to assist our private equity professionals. We plan on using a similar approach to expand our reach in the greater China region and other Asian countries with our companies in Hong Kong and Beijing, as well as in India. We believe we are one of a limited number of private equity firms with the advantage of access to a full range of cross-regional opportunities. We also believe our global reach helps us to better assist our portfolio companies in dealing with developments across various regions of the world, sourcing add-on acquisition opportunities, entering new markets and outsourcing operations to reduce costs.

Distressed Securities Investing

We believe that we have a competitive advantage in periods of weaker economic conditions or uncertainty in the debt or equity capital markets. Through our restructuring and reorganization advisory business, we have access to investment opportunities and expertise regarding companies in financial distress that many of our competitors lack. We have deployed capital across a number of distressed investments to capitalize on periods of severe capital market dislocation, when the debt securities for many quality companies in industries we knew well were trading at significant discounts.

Significant Number of Exclusive Opportunities

In recent years we have been able to consider and execute a number of transactions that were either presented exclusively to Strategic Management Group or were offered to only a very limited number of private equity firms. Indeed, of the deals announced through March 31, 2009, 85% were exclusive to Strategic Management Group or situations where Strategic Management Group prevailed despite a higher bid. We believe this principally resulted from our strong relationships with major investment banks and other financial intermediaries, our extensive network of senior advisors, our leading position in corporate partnership transactions, our ability to avail ourselves of the resources and relationships that reside in all of our firm's different businesses and our ability to arrange the acquisition of very large capitalization companies.

Superior Financing Expertise

We believe that the broad expertise of all aspects of the capital markets—debt, equity, real estate financing, derivatives and commodities—that resides across all of our firm's businesses enables us to obtain a lower cost of capital for our portfolio companies, reduce risk and uncover hidden asset value.

Alignment of Interests

Recognizing the importance of aligning the firm’s interests with those of its partners and investors, Strategic Management Group’s employees own most of the equity of our company-owned entitities and the firm and its employees have invested substantial capital in these companies.