The Right Path to Investment

The world of investments is dynamic and complex. Frequent market changes necessitate that companies seeking financial or strategic investors operate according to clear standards. Sound management and corporate governance, a high-quality and professional leadership team, and proven profitability are the foundation stones for successful fundraising. On the other side of the table, facing these companies, are investment bodies usually looking for solid returns on their capital. Each investment entity has its own set of expectations and targets, but they all share the goal of achieving worthwhile returns on their invested capital.

At Mizrahi-Tefahot INVEST, our evaluation process includes an in-depth analysis of a company's past and present data, with the aim of forming as accurate and reliable a picture as possible of the company’s value, while also forecasting its future potential. During the investment assessment, we examine a wide range of parameters that we consider central in evaluating the feasibility of the deal and understanding the company’s organizational DNA.

Many company owners ask us what the main factors are that we assess when making an investment decision. Here are several key parameters we focus on before making an investment:

Potential companies in which we consider making a minority investment must operate according to proper corporate governance principles. Structured, transparent, and high-quality conduct, supported by effective oversight and control mechanisms, is a clear indicator of a company’s seriousness and its readiness to move to the next stage. Sound corporate governance forms the foundation for maintaining the ethics of a business organization and for establishing a decision-making process that is stable, long-term, and particularly reassuring to minority investors.

We assess whether the company is managed by a single "star" or by a strong, diverse leadership team capable of collaboration and teamwork. A high-quality management team is a crucial factor in a company’s ability to execute effectively. Good ideas are not enough; they must also be practical and actionable, supported by a capable and effective leadership team.

While our routine includes meeting and reviewing dozens, if not hundreds, of companies each year, for most companies, an equity deal is a relatively rare event. For them, it is a complex situation where even a small misstep can prove costly in terms of time, money, or trust. That is why it is important for companies to be accompanied by experienced external advisors during the investment process. These advisors know how to sharpen the narrative, package the message, translate numbers into a clear presentation, and help the management team understand investor expectations.

To generate above-average returns, we look for meaningful medium- to long-term growth drivers. These can be organic growth engines, such as increased sales, geographic expansion, entry into new markets, or product line extensions, or external growth drivers, including mergers and acquisitions. The central question for us is whether a clear and long-term growth strategy is in place.

From the outset, it is important to discuss the investor’s exit strategy. We want to understand the management’s plans and how those align with the timing and path to exit, including estimated timelines. A good investment is one with a clear endpoint and a worthy return.

As mentioned, investment entities meet dozens of companies each year, so it is vital for a company’s story to stand out. We recommend presenting the company in a focused way, usually through a professional presentation. This should include a detailed explanation of the business activities, current and accurate financial data, forward-looking projections, and key growth engines. A strong presentation, beyond being a marketing tool, helps the investor understand the company’s operations and vision.