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December 12, 2005

Comments

Richard Elgin

What will this mean for the portfolio companies??

Marc Goldberg

Richard,

the scenario couldunfold as follow :

- Portfolio is sold to a secondary player who buys all the SMAC position, and steps into SMAC shoes inside each portfolio company board
- New guys come on board as a director of your company, with a different mindset (hey this is not my deal, and I’ll have a cold objective look at why we are here, and if we should stay), and a different objective (liquidity and path to exit will not be the name of the game)
- Portfolio usually gets divided into three groups: the dogs, the turkeys and the cows. Dogs are here to be exited as quickly as possible. Cow are here to be milked (i.e. maximize the return). Turkeys are under observation to decide if they are dogs or caws.

 So a secondary sale will have an impact for a portfolio company, as board behaviour will change
 If might be a good news if you are in the top third of the portfolio
 If might be a bad news is you are in the lower third.

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