Why special situations ?
In a context of sustainably moderate growth, thus limiting possibilities of top line expansion, firms may find an interest in:
- Carrying out operations of M&A (financial restructuring) to increase their top line, then their earnings;
- Carrying out operations of economic restructuring to reduce their costs.
Through financial restructuring, firms favour capital intensive operations (mergers & acquisitions, LBOs, minority buy-out, company delisting, etc.). Acquiring companies benefit from an accretive impact on their earnings.
Such operations are usually carried out during the top phase of the economic cycle.
Through economic restructuring, firms seek a “margin effect” or a “profitability effect” (cost cutting programmes, debt reduction, shift in business profile, change in management, post-merger synergies, shareholder activism, etc.). Such operations are mostly carried out during the bottom phase of the cycle to maintain or recover margins.
Restructuring is therefore a two-fold investment theme, offering opportunities throughout the market cycle.
Reinventing one's investements
We invest in companies whose valuation is likely to improve due to the ongoing or upcoming restructuring of their activities.
This universe is highly dynamic as firms are likely to successively exit one of the sub-themes to settle in the other.
On one hand, firms that have undergone successful economic restructuring may become targets of tender offers, hence becoming eligible to the financial restructuring sub-theme. On the other hand, once the target of a tender offer has been acquired, the acquiring company may decide to carry on economic restructuration, hence fitting the economic restructuring sub-theme.
This all-sector universe includes all market capitalisations and is therefore able to perform in all market regimes.
Past performances are not a reliable indicator of future performances of the funds and of the funds manager.