Seeking Alignment

We love to find great investments and hate to waste time.

Choosing an investment partner is a big decision, and at Stonehouse we only want to enter into deals where both parties are aligned in their objectives. This enables win/win deals.

We have answered some common questions below to help you determine Stonehouse’s suitability as an investment partner for you and your business.

What makes Stonehouse a good buyer?

— When Stonehouse makes an offer, we complete promptly and as offered.

Evidence:

• Stonehouse has completed 100% of acquisitions where we signed a Terms sheet (see investment process page);

• we have never changed the price or terms on a Terms sheet, and;

• we have averaged less than 3 months from Terms sheet to completion.

Stonehouse treats business owners the way we would want to be treated if we were in their shoes.

Is Stonehouse a Private Equity Fund?

— No. Stonehouse is modelled on the Berkshire Hathaway system of permanent business ownership and is not a ‘Reseller’ of our businesses.

Berkshire’s Vice Chairman, Charlie Munger, spoke about his involvement with Stonehouse in this article.

Stonehouse invests on behalf of a very small and select number of families and universities. While Private Equity funds must sell their businesses within a 10 year fund life, Stonehouse’s invests from 33-year partnerships that can be further extended.

Does Stonehouse focus on any particular industries?

— No. We are industry agnostic and welcome the opportunity to engage with any outstanding Australasian business that fits our investment criteria.

Will Stonehouse invest in outstanding Australasian businesses offering an equity stake of less than 51%?

— No. A 51%+ equity stake is a requirement.

Will Stonehouse invest in businesses with forecast earnings (EBIT) of $5m?

— No. We require a history of earnings above $5m (EBIT) and look for sustainable long-term performance. The only exception is that we will consider businesses with significant revenues (>$75m) where profitability can be restored to historical levels under our ownership.

Will Stonehouse consider investing in distressed businesses who fit the investment criteria and have previously exceeded historical earnings (EBIT) of $5m?

— Yes. Our experienced and supportive team, and strong capital base, can work with management to get businesses back on track in these challenging situations.

What information does Stonehouse need to evaluate business investment opportunities?

— Relevant background information, an overview as to who your customers are and why, three years of historical statutory accounts, and a meeting or videoconference with owners and managers.

What are typical due diligence requirements?

— Stonehouse does ‘handshake deals’. We keep things simple and move quickly when we identify a business that we want to partner with.

We undertake standard commercial accounting, legal, and tax reviews, and potentially other specific due diligence if appropriate for the business.

What are Stonehouse’s typical governance practices post-investment?

— Our subsidiaries are independent, autonomously managed, private companies.

Of course we take a great interest in the performance (financial and operational) of our businesses, but our culture is to trust our subsidiary management teams to be transparent with us at all times, ask for support when needed, and continue to drive the success of their business.

Does Stonehouse offer advisory services?

— No, our sole focus is the acquisition and ownership of businesses. Providing advisory services would lead to significant conflicts of interest.

Does Stonehouse have available capital to support its subsidiaries post-investment?

— Yes. We encourage our subsidiaries to make long-term investments in organic and inorganic growth. We also understand that big outcomes don’t happen overnight.