Within Operating Investments, we have significant ownership stakes in the holdings. We take an active role in the development of the companies and contribute our experience and expertise from our many years of developing companies. We work with clear plans for value creation.

These value-creating plans form the basis of how we want the companies to develop in terms of strengthening long-term profitability and accelerating growth in the companies. These plans include the recruitment of senior managers, the establishment and follow-up of goals, strategy, business model, profitability, growth, business development, capitalization and organizational structure.

We prioritize companies in which we can act as an owner in an unlisted environment. In many cases, value-creating measures can be achieved more quickly in unlisted companies and with better possibilities to manage risks. It is also easier to align the objectives of the owners, board and management around the company’s goals and operational plans, and to create a compensation system geared to these goals.

The objective is to build and develop a unique portfolio of companies that also forms the basis for generating cash flow to Investor. Cash flow is achieved by optimizing leverage over time and returning surplus liquidity through dividends and refinancing to us as owner. 

FLEXIBLE INVESTMENT HORIZON
Value creation plans are based on a three to five year perspective, although the investment cycle is long-term – five to ten years or longer. We therefore search for companies with a platform which will allow for long-term growth. Our flexible investment horizon allows us, for example, to remain as an owner of a holding should it be listed and develop it further as a Core Investment. In our work with the companies over the first one to three years, major investments are often made to strengthen long-term profitability potential and growth. These investments and action programs normally have a short-term negative impact on profitability, and consequently, on Investor’s net asset value. However, the measures are expected to create substantial value.

ATTRACTIVE RETURN POTENTIAL
Loan financing is being used to a growing extent to improve the return on equity in these holdings. High leverage is possible since we, as owners, are prepared to inject additional equity into the holdings as needed, for example, in connection with acquisitions or other aggressive initiatives.

Due to the leverage in the companies, combined with their limited liquidity as an unlisted holding, the investment risk is higher than in Core Investments. Given the risk profile, our return requirement, based on current interest rate levels, is in excess of 15 percent per year, measured over a business cycle. Returns are mostly generated by value creation and cash flow.

Strategy for Operating Investments

We develop existing holdings utilizing methods similar to those employed in private equity. Making additional investments in this business area is important for Investor’s ability to reach its basic objective of increasing net asset value at a pace which exceeds the market cost of capital. By growing the proportion of holdings that continue to operate as unlisted companies, we can generate proprietary returns for our shareholders. It is therefore expected that the business area will continue to expand during 2008. Our strategic priority is to grow the share of unlisted companies, although investments can also be made in listed companies.

Information updated 2008-08-15 14:44:38