During 2013 InduStreams worked with a large, global terminal operator to expand its pipeline of investment opportunities in certain emerging market geographies.
Large terminal operators and financial investors with port sector appetite are facing three major challenges in their pursuit of new investment opportunities:
- All the low-hanging fruit has been picked: The last two decades has seen the rise of a number of large operators with global footprints and large organizations to support them. Coupled with the big entry of financial investors taking minority and majority stakes and increasing divestments from shipping lines and mining companies the world has largely been combed through and non-public opportunities as well as attractive tenders or deals with few takers are hard to find.
- Many formerly attractive markets have cooled off: Over the last two decades enormous sums have been allocated to markets that currently attract fewer growth-focused investors and have fewer capacity expansion opportunities in the short term, markets such as China, Vietnam, Korea, Brazil, Russia and parts of Western Europe. For the many strategic and financial investors, who now shy away from these markets, the world of opportunities is a lot smaller.
- Processes not set up to face the new realities: Many global operators are developing their pipeline the old fashioned way: identify opportunities through local and regional organizations using standard market monitoring, evaluate and progress opportunities through standard processes and pursue opportunities with good strategic match and attractive returns. These operators often lack an edge versus their competitors and are not taking advantage of new technologies and more creative approaches to find opportunities and to manage the pipeline development process. Among financial investors and smaller operators there is often a lack of a clear pipeline process and the resources to run it. Essentially, many smaller players are approaching pipeline development, which is time-consuming and requires “kissing a lot of frogs to find a prince”, like a series of sprints rather than a marathon.
We work with clients both on the sprints as well as the marathons helping them find specific opportunities, but also implementing better process management tools like the War Room and thinking more creatively about the pipeline development process.
In this particular case, we agreed with the client on the following approach:
- Understand the client’s historic approach and already evaluated targets.
- Identify screening criteria such as prioritized target countries, asset type, ownership preferences and minimum deal size.
- Agree on unique value proposition towards potential sellers and partners i.e. what can the client offer.
- Agree on approach specifically who can be contacted and how, what information can be shared and at what stage does the client become involved.
- Reach out to relevant people inside and outside InduStreams’ network
- Comb through each relevant country port by port, company by company including conglomerates, logistics firms, industrials, advisors such as law firms, bankruptcy listings, high-potential sellers such as those with strategies to divest or with struggling assets and consider opportunities.
- Share gross list of new targets with the client, prioritize targets and adjust the approach as needed.
- Ultimately, develop a focused list with a smaller number of new high-potential targets judged by attractiveness and feasibility.
After a three-month period the outcome was a shortlist of eight new, feasible, high-potential targets that the client added to their pipeline and independently explored further.