Owning and developing best-in-class companies
We are a long-term owner, focusing on doing what we deem best for each company. Through our international network, strong brand name and active ownership, we create significant value.
We are committed to generating an attractive long-term total return, exceeding the market cost of capital. Our long-term return requirement is the risk free interest rate plus an equity risk premium, in total 8-9 percent annually. Our operating priorities are to grow our net asset value, operate efficiently and pay a steadily rising dividend.
- Grow our net asset value: To achieve good net asset value growth, we need to own high-quality companies and be a good owner, supporting our companies to achieve profitable growth. We also need to allocate our capital wisely.
- Operate efficiently: We maintain strict cost discipline to remain efficient and in order to maximize our operating cash flow.
- Pay a steadily rising dividend: Our dividend policy is to distribute a large percentage of the dividends received from the listed core investments, as well as to make a distribution from other net assets corresponding to a yield in line with the equity market. The goal is also to pay a steadily rising dividend.
We are a long-term owner and through our board participation, our network and industrial expertise, we focus on what we deem will create the most value for each holding. Our business model is built on substantial ownership in each holding, enabling us to impact key strategic decisions.
What we invest in
We invest in companies in industries we understand well, and in which we can utilize our experience and network as well as our financial expertise.
We have a long-term investment horizon focusing on “buy-to- build”. Our base case is not to divest holdings but rather to develop them over time, as long as we see further value creation potential. If we arrive at the conclusion that a certain holding no longer offers attractive enough potential, or that it would be better off with another main owner, we would actively drive an exit process in order to find a new good owner for the company and maximize the value for our shareholders at the same time.
We look for certain characteristics in our companies. They should have strong market positions, flexible and sustainable business models, high exposure to growth markets and strong cash flow generation. We focus on high-quality companies that we can contribute to developing further over time.
Given our long-term investment horizon, we actively support our companies in making long-term value-creating investments such as expanding their positions in growth markets, R&D and product launches and other efforts to strengthen long-term competitiveness. Attractive products and services are always the basis for long-term competitiveness and a key value driver. Our focus is on maximizing the intrinsic value of our holdings, i.e. the net present value of all future cash flow in the company. Given this, we do not refrain from taking actions with a negative short-term impact, as long as we believe that they will increase the intrinsic value longer-term.
Cash flow platform
Over the past few years, we have established a strong cash flow platform. This cash flow allows us to finance investments in both existing and new holdings without divesting other assets. It also allows us to pay a steadily rising dividend. Going forward, our capital allocation focus is to invest through our existing wholly- owned subsidiaries within Patricia Industries and finding new ones. In addition, we will continue to strengthen our ownership in selected listed core investments, and we will also continue to invest in EQT’s funds.