UNIO’S CREDO

Underlying who we are, what we do, and how we see business and investment realities are a set of fundamental beliefs. These convictions are based on our experience with several thousand companies, over several decades, across geographies, and in different macro contexts.

“Business and investment skills combined”
Corporate performance can be meaningfully enhanced if the talents of “the business-minded investor” are combined with the talents of the business manager. Business-minded investors have macro, cross-industry, and comparative company perspective. They have a sense of history and a sense of where the future is going. Business managers have operating know-how developed from a lifetime of understanding one business or at most a few very well. They have a wealth of operating experience and a feel for opportunities in their industries. These two types of minds have typically worked apart. Our belief is that they make a far more potent combination working together.

“The business-minded investor”
“The business-minded investor“ – how we describe ourselves at Unio – is a distinct class of investor-manager, characterized by in-depth investment understanding of companies and their business economics, as well by first-hand experience running a business. Conventionally, investors fall into four camps. They are “observational” (following companies they invest in); “traditional activist” (who effect targeted or short-term changes and sell); “venture” (funding and guiding start-ups, then selling) or “private equity” (paying down a leveraged buy-out and exiting). Business-minded investors belong to a fifth category: long-term partners of business teams they invest with whose joint interest is building better enterprises for the indefinite future.

“Engaged governance”
We believe there is a place for a more productive board/management working partnership than typically occurs in private or public companies. “Engaged governance” enhances the quality and mitigates the risks of corporate decision-making, especially when times are non-routine, as they often are. The intent of “engaged governance” is to subtract nothing of value from management authority, accountability, or leadership. It slows no decisions. Its motto is: “add or get out of the way”. It simply adds – brainpower, judgment and partnership – to benefit the corporation and, with it, management’s performance and owner-shareholders’ investment.

“Culture-is-central”
The most important intangible asset a company has is its corporate culture – and that goes  for Unio’s culture and the culture of the companies it seeks to invest in, either as a majority or minority investor. Culture is the sum of a company’s values, attitudes, and practices. It is the daily reality of every company employee. It is not an abstraction. It is not a choice. Every company has a culture. Because business is ultimately about results and actions to get to results, culture is often overlooked even though it stands behind every action and every result.

Companies do better and last longer when they consciously choose their cultures, embed it in actions and results, improve it, and transmit it. Healthy cultures produce success. Unhealthy or neglected cultures produce sub-par results or failure. At Unio our “culture-is-central” focus is about making sure that actions and results stay aligned with healthy values, attitudes, and practices.

“One-view investing”
We believe in the value of using one investment approach to evaluate all investments – whether they take the form of an acquisition on the operating side of the business or a publicly-traded security on the investment management side. We understand that once an investment choice is made, operating an acquired company is functionally different from remaining invested in a publicly-traded security. But up to the point of making an investment choice, there is a clear benefit to a unified and integrated investment view: all investment intelligence throughout Unio is brought to bear on every investment decision and all future improvements to investment decision-making are shared at once by all.

“Knowledge exchange”
Despite their functional differences, we believe that the operating company side of the business has much to teach the investment management side and vice versa. These synergies, which we refer to as “knowledge exchange”, is one main reason why Unio is in two businesses to begin with.

On the one hand, those who operate companies can provide those who manage investments with an unmatched education on the realities of business economics and management challenges. On the other hand, investing in publicly-traded securities provides unparalleled intelligence to those who operate companies – on macro, cross-industry, and company-specific opportunities and risks.

“Cash-flow-centric investing”, “macro-to-micro vision”, and “price-to-value discovery”. Our way of investing is based on three simple principles:

1. Cash flows define most assets’ value;

2. Cash flows are produced by individual securities, but only fully understood by relating them to a wider economic, financial, political, and cultural context;

3. The true economic value of any cash flows is usually different from the price offered for it.

“Cash-flow-centric investing” is the name we give to the first principle – that most assets have no intrinsic value outside of their cash flow production power.

“Macro-to-micro vision” is the name we give to the second principle. While cash flow is generated by an individual entity, like a company, understanding a specific cash flow stream requires a continuous back-and-forth sweep between a macroview of global financial, economic and political realities; comprehensive asset allocation; and an evaluation of the individual security itself.

“Price-to-value discovery” is the name we give to the third principle – that the price placed on a cash flow is not the same as its economic value and that the gap between the two is what determines investability.

“The Greater Whole”
We believe that it is possible for the whole to be greater than the sum of the parts in a company like Unio, created to consist of many parts. Many human enterprises – from small teams to large nations – have proven over and over that people can do far more together than apart provided there is adherence to a healthy common culture and an appropriate structure for that culture. The result is a strengthening of purpose, energy, identity, and inventiveness that goes far beyond what the individual or group could produce on its own.

The fact that many businesses fail to produce wholes that are greater than their parts, and later break up, is usually evidence of how little attention was paid to culture and a compatible corporate structure.

“Sensible growth”
We strongly believe that assuring the persistency of a company’s cash flow growth takes clear priority over reaching for a rate of growth. While we prefer higher growth to lower growth, we would rather a company choose to grow slowly or not at all when the alternative is to take unacceptable risks to achieve growth.  In our view far too many companies set goals that exceed what they can reasonably achieve, partly because their peers are doing the same thing. Often the cost of growing too fast does not appear for years, but eventually the bill comes due, usually with harsh consequences for shareholders and employees. Our mantra is: grow, but at all times, sensibly and sustainably.

”Owner-shareholders first”
The financial purpose of any company – our own or those we acquire or invest in – is to produce cash profits and rising enterprise value for its owner-shareholders. Capital risked by owner-shareholders deserves the highest cash return possible balanced with maintaining the company’s long-term health and staying power. In addition, it is desirable for owner-shareholders to have a market price for their investment and an outlet for liquidity – which is why at Unio we believe the public company model is the preferred model.