Grafenia’s Acquisition Criteria

Grafenia uses specific criteria to select the companies that we seek to bring into the “Grafenia family”. Businesses may be considered if:

• they have annual pre-tax profits of at least £250k (or the equivalent in other currencies) for each of the last 3 years;
• they are consistent profitable and have sustainable sales and strong cash generation for each of the last 3 years;
• the return on equity is greater than 10%;
• they have low, or no debt (unless debt can be strategically justified);
• their proven track record is defendable for the next 10 or more years;
• key management will remain in place or have viable transition plans for their exit; and
• ideally key management will have “skin in the game”.

We are sector agnostic and only interested in opportunities to realise value for our shareholders. We will acquire both private and publically traded companies geographically based in the UK or elsewhere.

We will look at acquisitions in the same, or a complimentary, sector to companies already owned by Grafenia. In such cases we will acquire these companies to integrate them into our existing group.

We will also look at acquisitions in unrelated sectors. In such cases we will bring these companies into the Grafenia family but will rely on existing management to continue day-to-day operations.

Grafenia has a pragmatic and ethical approach that we strictly follow in the negotiation process. Businesses will only be considered for acquisition if:

• the purchase price is either fixed, or an acceptable range is agreed, early in the process (We will not waste our time, nor yours); and
• vendors must agree that the “Heads of Terms” will be honoured (We will not agree and later change the deal. We require the same of vendors).

Grafenia will not:

• engage in protracted negotiations;
• engage in a high-intensity and protracted due diligence process;
• engage in unfriendly takeovers; and
• consider long-term projections.

Although Grafenia prefers 100 percent ownership of its portfolio companies, we will buy less if the vendors wish to continue to participate in the success of their business.

Grafenia is able to offer its portfolio companies or “family members” many advantages including:

• being part of a publically listed company without the usual costs and obligations, giving management more time to focus on “business as usual”;
• a decentralised or “hands off” approach to management;
• ready access to capital to provide for strategic expansion or “bolt-on” acquisitions;
• full, or partial exits to vendors structured to meet their individual requirements; and
• patient capital with long-term ownership which thinks in terms of 10, 20, 30 years or more, not on the next set of results.

If you are a prospective vendor or are aware of interesting companies which would meet Grafenia’s strict investment criteria, you should contact acquisition@grafenia.com. Grafenia will keep all communications strictly confidential and will generally respond to enquiries within five business days.