Finding, developing and selling great companies requires discipline, while at the same time recognizing that no two companies are the same. We explain below our motivation, the systematic process to find great companies and how we apply a structured approach to execute their growth plans.
Our goal is always to deliver world-class returns with an acceptable risk profile. Since the company’s inception more than 20 years ago, we have remained true to our strategy and our investment focus. In partnership with ambitious management teams, our focus has always been on developing small and medium-sized Nordic companies, proving their international potential and/or bringing an international trend to the Nordics.
We apply a systematic process to identify and select portfolio companies. We go to great lengths to identify ambitious growth companies that are already demonstrably strong performers. With the right mix of capital, expertise and willingness to change, these companies can be lifted to new heights. We believe that a profitable growth strategy is the best way of creating sustainable economic value and every aspect of our ownership strategy reflects this.
Every year we meet a large number of companies and the people behind them. It is critically important to look at many companies to find the few that have the right mix of what we seek:
- Leadership with ambition and implementation capabilities.
- Attractive markets with growth potential and companies with unique characteristics.
We invest in companies where our ownership is wanted and welcome and where we can achieve an ownership share of 50-80%, employing between €10 and €40 million per company. Throughout the life of the firm, we have had a consistent strategy and approach to our investments – a strategy which has proven to be successful.
We apply a structured and systematic approach when we consider a company prior to making an investment. The key elements we analyze are:
One of the most important success factors in our investments is the quality and abilities of the management team of the company in which we invest. Strong personal qualities, relevant experience to the execution of the growth plan and a high level of ambition, drive and growth mindset are among the most important qualities we seek. Prior to investing, we make detailed assessments of management’s skills and experience and the management resources required to execute the agreed business plan. As a rule, we always invest alongside management and facilitate their ownership.
Market and competition
We have a strong preference for investing in growth sectors and growth companies. Good underlying growth increases the opportunity for success in the investment and also the ability to exit the investment when the time is right. We therefore look for both strong historic growth and the prospects for future growth in potential portfolio companies.
Understanding the competitive landscape is critical for identifying opportunities and developing robust growth plans. It is also an effective tool for identifying potential acquisition candidates for the companies we are considering.
Products, services and unique features
We look for companies with a tangible competitive advantage and/or unique features. A competitive edge and unique position are among the key drivers of growth and margin improvement. This is, therefore, a critical area of analysis when we evaluate potential investments.
Risk analysis is central to all of our investment processes. While we evaluate the entire risk spectrum, we place particular focus on several crucial areas. For example, we seek to avoid situations where there is a high customer concentration or a single technology risk. The same applies to the risk associated with one or more key personnel, extensive political risk and companies that are correlated to oil prices and other commodity prices. In addition, we need to understand what risks we can influence, and what risks we cannot influence. If there is a risk we can influence, we can implement specific action plans to mitigate the risk.
Who will be the next owners of the businesses in which we invest? This is a critical question before we make an investment and one that is also present in the strategy we develop for the company. Together with management, we put in place a strategic plan to develop the companies into businesses that will be highly attractive to industrial or financial buyers in the future. In understanding the exit potential we analyze the competitive landscape on a regional and global level as well as mapping recent M&A activity as well as private equity ownership in the industry.
How we contribute
Our primary value proposition and contribution to portfolio companies is the effective combination of expertise, capital and dedicated resources to support management in executing their strategy.
Reiten & Co has an experienced private equity team. The partners have worked together for 18 years on average. Adding to this experience, we actively utilize a highly professional and proven network of advisors, banks and other business partners, all of whom contribute in supporting the investments we make. We act as a catalyst for growth, and seek to provide resources in various forms to grow and create economic value. However, our contribution goes further.
We experience that many of the CEOs in the companies we meet have limited support from, and interaction with their boards or owners. By actively supporting, coaching and energizing top management, we can contribute to creating a strong momentum in the company. One of our most important roles is to work with management to ensure clear strategies, objectives and focus areas for the development of the company.
We focus on growth in all of our businesses. Our network and expertise are useful in both establishing the company in new markets and strengthening presence and market share in existing markets. When making additional acquisitions in a portfolio company, we most often participate directly in the acquisition and integration processes. Together, we have made over 90 add-on acquisitions in the portfolio.
Access to capital
We contribute actively in facilitating access to both equity and debt for our portfolio companies. We have an extensive network and expertise within financial instutions and other sources of capital and actively use this competence to help our portfolio companies.
The path from being a small or medium sized company to becoming a larger, more substantial company is challenging and has many potential pitfalls. Helping companies successfully navigate this phase is one of Reiten’s key areas of expertise – an area where we have a proven record of success. One of the most important aspects of navigating this phase successfully is ensuring that operational improvements keep up with growth and that margins continue to improve.
Our expertise lies in understanding the key operational drivers for the business and ensuring that these are the areas of focus for the company and the board. We understand organizations and we know what is necessary and achievable in our portfolio companies. Our job is to help management focus on the right priorities and the right times and support them in those efforts. Additional contributions can range from participation in project groups within the company to analytical support.
We have one unconditional responsibility to our investors; to maximize our returns. At the same time, we recognize the critical importance of managing assets in a prudent manner as well as in a larger perspective of responsibility. We strongly believe that, both now and in the future, winning companies will manage to create value by strengthening the connection between corporate profits and social benefit in both the short and long term.