We look for opportunities created by global trends
Macro to micro
Our investment process starts with our view of what is happening at the macro and global level. We identify how these trends could create opportunities. We then look for businesses that we believe are well positioned to seize them. This approach – from macro to micro – is the foundation of Terra Firma’s investment strategy.
- Since 1994, we have followed a consistent investment approach of acquiring companies that have been overlooked, are underperforming or whose performance we feel can be significantly improved. These may be in sectors that are out-of-favour or be businesses that have been under-managed or under-capitalised. Our goal is to generate superior returns by transforming the strategy, operations, finances and management of the businesses we acquire to make them best-in-class.
- All of our investments share three characteristics: they are asset-backed, in what we consider to be essential industries and require transformational change.
- We look for businesses that are rich in assets, which helps protect the value of our investments and provides a stable platform for growth. It also offers a wide variety of options to create value for our businesses through financings and exits.
- We have significant expertise in investing in these types of businesses. In the early 1990s, we pioneered the practice of asset-by-asset due diligence within the rail and pub sectors. We continue to use this approach today using detailed bottom-up asset-by-asset due diligence when evaluating each of our investment opportunities. By breaking down aggregate cash flows, we identify the true potential economic value of each underlying asset.
- Essential Industries
- We only invest in what we call ‘essential’ industries which offer a stability of underlying demand and so are more resilient in downturns. They do not depend strongly on technological innovation or branding and are often in regulated sectors where we have considerable experience. Thus far, this approach has led us to invest in energy and utilities, infrastructure, affordable housing, leisure/hospitality, agriculture, healthcare and asset leasing.
- We are strategy focused. We invest in businesses that meet the three core elements of our strategy rather than looking for businesses in specific sectors. We have invested in many businesses across a number of sectors which has allowed us to identify common drivers of value.
- Requiring transformational change
- We identify businesses that require fundamental change or repositioning in their market, perhaps because of past under-management or under-investment or because they can be repositioned to benefit from a trend that we have identified.
- We have a strong track record of transforming businesses by developing new strategies, investing significant amounts of capital and dramatically improving operational performance. Our team’s operational skills allow us to supplement and, if necessary, replace existing management in order to implement that change and drive operational excellence.
Guy Hands (Chairman and CIO), Dominic Spiri (CFO), Justin King (Vice Chairman, Head of Portfolio Businesses)
"Without deviation from the norm, progress is not possible"