K2's Investment Process
K2 invests its time and expertise in return for a minority equity interest or success fee to ensure it has a stake in the success of your Company. While our investment might also involve injecting cash to achieve strategic objectives, this will always be as a loan. Our approach is intended to ensure an alignment of interests between you and us.
K2 has relationships with a number of private and corporate investors. Where we identify the need for investment in growth, we will introduce appropriate investors when necessary.
To reassure you that you are dealing with us, you will only ever deal with a K2 Partner who is listed on our website and we all have a K2 email address with the same domain name as our website.
To reassure you about the protection of your Confidential Information we are happy to sign a Mutual Non-Circumvention Non-Disclosure Agreement (Mutual NCNDA) with you. If you fill in your name and email below, we’ll send you an electronic Mutual NCNDA for us to co-sign.
When booking your Free Strategy & Viability Review we will ask you to provide the following information:
- Company details;
- Contact details;
- Basic financial information;
- Details of assets;
- Opportunity for growth;
- Details of any immediate issues.
The Strategy & Viability Review will be with a K2 Partner and should be with directors who represent the major shareholders. It is done as a conference call, normally via Zoom.
The Review is wide ranging and we use it to learn more about each other and for us to learn about your company, including:
- Why we are interested in your company;
- What we can do to help you grow your company;
- Your personal objectives;
- Your objectives for the business;
- The alignment of objectives between you, the Company, the Directors and the Shareholders;
- The opportunities, threats strengths and weaknesses of the business;
- The financial situation.
Providing there is sufficient interest by both Directors and K2 to proceed, we fix a follow up meeting to discuss the next step.
We use this meeting to discuss the opportunity in greater detail and go through our Bridge Transformation Approach to growing companies.
K2 has developed a unique approach to transforming the prospects of businesses. In essence K2’s approach is to focus on two bridges:
- Balance Sheet Bridge; and
- Profit and Loss Bridge.
Both of these involve reviewing in detail each and every line item of your Company’s Trial Balance to identify the optimal outcome that can be achieved by K2 through its investment in transforming the prospects of your Company.
Once you are happy for K2 to carry out an Options Review, which is essentially the Balance Sheet Bridge referred to above, we then agree terms. The Options Review document is highly valuable as it is a document that we provide to you as the Directors and can be used as the basis for negotiations with investors, banks, HMRC, creditors and other stakeholders for delivering your preferred option.
It should be pointed out that at this stage K2 is not normally an investor or shareholder in your Company. We use the preparation of the Options Review as a means of learning more about your Company and its opportunities and develop a number of options that justify K2’s investment. We also use the Options Review to develop our relationship with you and establish your trust in us which we believe is a critical ingredient to any investment and becoming partners.
Given that the Options Review document is highly valuable for decision-making and dealing with stakeholders, we charge £2,500 plus VAT of which we expect to be paid £1,250 plus VAT up front with the balance payable after going through the Options Review document with you and providing you are happy with it.
As noted in the introduction, K2 invests its time and expertise in return for equity or success fees to ensure it has a stake in the success of its involvement in your Company. While our investment might also involve injecting some cash into your Company this will always be by way of a loan. Our approach is intended to ensure an alignment of interests for the outcome of K2’s investment
The Options Review focuses on the Trial Balance figures that make up the Balance Sheet although many of these figures are analysed in greater detail to understand pressure and the scope for improvement. As an example, the level of overdue payments will be analysed to understand any pressure from HMRC, finance companies and creditors. The purchase ledger and sales ledger will be analysed, as will bank, mortgage, lease, hire purchase and finance agreements. Charges, specific pledge security and personal guarantees will also be reviewed.
We shall request the following information but appreciate you may not have it all so do not worry as we will work with what you provide and then follow up to ask for more information if we need it:
- Last filed year end accounts;
- Unfiled/draft year-end accounts if accounts not yet filed;
- Latest management accounting information;
- Details of assets and liabilities;
- Details of any litigation and debt collection;
- Details of any KPIs and other management information you use to monitor the business;
- Any relevant budgets, forecasts, cash flow schedules and/or trading projections.
The Options Review is used to develop our Balance Sheet Bridge. The document lists each item from the Trial Balance with many being broken down into more details as necessary to paint a comprehensive picture. While the numbers come from the accounts, they are analysed to identify how each one can be transformed when applied to each possible option. Although detailed, each number should be easily understood by all Directors and the bringing together of all the numbers helps show how the prospects for the business can be transformed.
The Discovery Call and follow up meeting are wide ranging and we use them for us to learn more about each other, including among other things:
- What K2 can do for you;
- Your personal objectives;
- Your objectives for the business;
- The alignment of objectives between you, the Company, the Directors and the Shareholders;
- The opportunities, threats strengths and weaknesses of the business;
- The financial situation.
Providing there is sufficient interest by both Directors and K2 to proceed, we fix an Investment Readiness Meeting to discuss the next step.
When the Options Review Document is ready, we meet with you to go through the Options Review Document to explain how the bridge works and how each option was arrived at. Once you are happy you understand the document, we then discuss your options before considering which might be your preferred option.
- Balance Sheet Bridge; and
- Profit and Loss Bridge.
Both of these involve reviewing in detail each and every line item of your Company’s Trial Balance to identify the optimal outcome that can be achieved by K2 through its investment in transforming the prospects of your Company.
As noted in the introduction, K2 invests its time and expertise in return for a minority equity interest or success fee to ensure it has a stake in the success of your Company. While our investment might also involve injecting cash to achieve strategic objectives, this will always be as a loan. Our approach is intended to ensure an alignment of interests between you and us.
We use the preparation of the Options Review as a means of learning more about your Company and its opportunities, and use this to develop a number of options that justify K2’s investment. We also use the Options Review to establish a relationship with you and build trust between us which we believe is a critical ingredient to any investment and becoming partners.
Given that the Options Review document is highly valuable for decision-making and dealing with stakeholders, we charge £2,500 plus VAT of which we expect to be paid £1,250 plus VAT up front with the balance payable after going through the Options Review document with you and providing you are happy with it.
- K2 acquisition of majority equity
- K2 minority equity stake
- K2 success fee for delivering preferred option from the Option Review
- K2 deferred consideration
You will always have a K2 partner as your primary contact person. You should always feel free to contact them at any time since we believe that as investors we are partners with you and that we have a mutual interest in the future success of the Company.
We want to be clear about what K2 does and does not do.
K2 are not consultants, advisors or coaches. We are doers, decision-makers and implementors. We take responsibility for delivering the changes required to meet your Company’s circumstances.
K2 are not insolvency practitioners. While we may make use of insolvency procedures to solve problems such as restructure balance sheets, we do not administer insolvency processes. As directors we consider all options open and agree which best achieves the desired outcome for your Company.
K2 are not equity investors. We do not simply provide funding. We engage in the financial restructuring and operational reorganisation and where it still undercapitalised, we make it investment ready for equity investors.
K2 are not corporate finance advisors. We do not simply arrange balance sheet restructuring and/or source funding. We are involved in restructuring all aspects of the company’s business model as required to transform its prospects.
You should expect K2 to be involved with every aspect of your Company but we would normally expect to focus on those areas where we have particular experience and in particular:
- Hands on crisis management and problem-solving;
- Strategy reorientation and market focus;
- Financial restructuring;
- Organisational and operational reorganisation;
- Finance, cash management and fund raising;
- Stakeholder negotiation and dealing with key creditors;
- Sales, marketing and lead generation;
- Opportunity development and exploiting intellectual property;
- Litigation and legal matters;
- Corporate governance, processes and business systems.