We will only make an investment when we are clear how we will create value
We invest in businesses where we see multiple opportunities to create value using our five value drivers. Because we do not rely on incumbent management and we look to do things differently in order to improve performance and create value, we often develop new insights and strategies.
We have a rigorous approach to value creation and plan the transformation or repositioning of a business before we acquire it. We ensure the effective implementation of our five drivers of value by being involved in our businesses at every level, with multiple touch points that allow us to drive through the changes we have identified:
- Identifying a transformational strategy is central to our approach to creating value in a business. We look at a business with a fresh pair of eyes which can provide new insights and an alternative approach. A new strategy will frequently be designed to make the most of long-term macro trends identified at an earlier stage in the investment process.
- This may involve implementing a new business model, repositioning a business within its industry, growing it through acquisitions or diversifying its markets.
- Our intensive overhaul of our businesses’ strategies and operations has repeatedly put them at the forefront of developments in their industries. We continue to refine and improve the strategies of our companies throughout our ownership.
- Our aim is to build exceptional management teams in our portfolio businesses to implement change and drive operational excellence.
- We typically strengthen management by combining the existing team with our own experts and with new hires, often from outside the sector to bring a fresh perspective. However, when necessary, we will bring in a new management team to implement our strategy and drive the business forwards.
Developing through capital expenditure
- We are prepared to invest significantly in our businesses to transform them.
- As part of this process, we implement new frameworks for capital expenditure programmes to improve performance and grow our businesses organically. We also develop scalable platforms for expansion, enabling them to grow more rapidly through acquisitions.
- All capital expenditure is controlled by Terra Firma using strict return criteria, ensuring that only the highest impact programmes are implemented.
Building through mergers and acquisitions
- We undertake mergers and acquisitions to strengthen our portfolio businesses, aiming to grow their scale and capability and consolidate and improve their position within their industries to release synergies.
- Since 1994, Terra Firma has invested in 33 businesses and executed more than 60 additional bolt-on acquisitions to develop them.
Lowering the cost of capital to create extra upside
- We lower the cost of capital within our businesses by repositioning them to reduce business risks.
- We do this by diversifying and stabilising cash flows and resolving business and regulatory uncertainties. We also actively manage their capital structures through refinancings and securitisations.