Owning and developing best-in-class companies
Vision
To be internationally recognized as a premier investor, developing best-in-class companies and consistently creating long-term shareholder value.
Business concept
To create long-term shareholder value by owning companies with solid potential for value creation and applying our financial strength, experience, knowledge and network to make them best-in-class.
Goal
To generate a total shareholder return, sum of share price change and dividend in excess of market cost of capital over a business cycle. Market cost of capital is defined as the risk-free interest rate (average interest for ten-year government bonds) plus a risk premium.
Strategies
INVEST IN ATTRACTIVE COMPANIES
We continuously review our portfolio in order to ensure that we own companies that can sustainably generate returns exceeding the market cost of capital. We invest in sectors and geographies where our experience and skills are adding value. Listed companies are a central part of our business, but we intend to grow our unlisted investments in order to capture the potential for proprietary returns. Our flexible investment horizon and our long track record in developing international companies make us unique.
DRIVE VALUE IN COMPANIES
We work with our companies to create value for all shareholders by making them best-in-class. The cornerstone of our model is the Board of Directors. Through our significant ownership we can actively help recruit the right Board for each company. We actively support the Board to create and drive value creation plans that focus on operational excellence, growth, capital structure and industrial structure. In addition, we also support management through our expertise and network.
RIGHT PERSON IN THE RIGHT PLACE
Our experience confirms, time after time, that people build successful companies. Therefore, it is vital to have the right people in the right place at the right time. A central component in our governance model is having the right Board overseeing each company.
The Board’s most important responsibilities include ensuring that the company has the right management team, a sustainable value-creating strategy and flexible business model as well as closely monitoring performance in order to be able to proactively initiate corrective actions. It is important that the interests of the owners, Board and management are all fully aligned and, therefore, we believe that the Board and management should hold large ownership stakes and that their remuneration be linked to the value created for shareholders.
FINANCIAL STRENGTH
As an owner, we should be financially strong in order to support our holdings as they pursue strategic initiatives. We are always willing to consider injecting additional capital if it creates value for the shareholders. For this reason, it is our ambition to have significant long-term cash resources available and leverage of 5-10 percent of our total assets over a business cycle. We have the ability to increase our leverage to a maximum of 25 percent given there is a plan that will return the leverage to our target range.
EXIT HOLDINGS
We evaluate the long-term return potential of all investments. If our assessment shows that the potential of a holding does not meet our requirements, or is higher in another ownership structure, we look to exit the holding. We seek to maximize the value for our shareholders and find the best industrial solution for the company.
Active Ownership
We develop value creation plans for all of our holdings. From an owner’s perspective, these plans identify measures that can generate incremental value going forward. Our business teams, consisting of our Board representatives for each holding and in-house analysts, develop value creation plans.
On an ongoing basis, we extensively monitor the companies and benchmark their performance in relation to the plan and in comparison to competitors. The long-term goal is for the companies to be best-in-class and generate returns that exceed our return requirement. The value creation plans target four areas: operational excellence, growth, capital structure and industrial structure.
Information updated 2010-05-24 11:44:24