Value creation
A long-term business approach
»We develop leading Danish industrial businesses through value-creating, active and long-term ownership.«
This statement is a central focal point of the Schouw & Co. business concept. Longterm active investments are pivotal in our business strategy and they differentiate Schouw & Co. from private equity funds, for example. »In many cases, other investment companies have a shorter investment horizon, whereas we always take a long-term approach,« says Schouw’s President Jens Bjerg Sørensen.
»When we acquire a company, our intention is to own it indefinitely. Our ‘best ownership’ philosophy means that we are the best owners of a business for as long as no one else creates value better than we do.«
Jens Bjerg Sørensen acknowledges that there are a number of good aspects in an investment approach with a predefined ownership period of, say, 5–7 years. »But there can also be negative aspects,« he explains. »When the time comes for the owners to sell the business, they may develop different investment horizons than the management. That’s why, at Schouw & Co., we don’t have a pre-set plan for when to exit from a company.«
At Schouw & Co., we focus on futureproofing our portfolio companies’ positions during the entire ownership period, not only during the first couple of years. »Combined with an unremitting and firm focus on current operations, we believe this is the best way to own a business,« adds Jens Bjerg Sørensen.
»The best way to safeguard long-term value creation for our shareholders is to have a sound and sensible business model in relation to our employees, our customers and our suppliers. Striking a balance between creating value for the shareholders and ensuring that we have a long-term business capable of development is an ongoing challenge.«
Schouw & Co. owns and operates companies within widely different industries that don’t necessarily have anything in common.
»That is the result of a deliberate choice we made more than 20 years ago, when we sold half of our packaging activities and acquired Grene,« explains Jens Bjerg Sørensen. Schouw & Co. has grown bigger and stronger over the last 20 years, with revenue of almost DKK 10 billion in 2008. That’s a threefold increase in five years.
»Our growth is the product of our active ownership approach in which we provide financial and strategic support to our businesses in the pursuit of their development plans. Given the current situation, we are refocusing from substantial growth ambitions to an unyielding pursuit of lifting the profitability of our businesses,« says Jens Bjerg Sørensen.
One of the key elements of creating value is ensuring that our group has the necessary financial versatility. »Fortunately, we are in a situation where we are the ones in control of Schouw & Co. and not the banks,« says Jens Bjerg Sørensen and he continues: »In order to retain the financial versatility, we will take extraordinary steps in the coming year to considerably improve the cash flows of our businesses. We have a distinct target for 2009 of reducing our debts by 10% and our working capital tie-up by hundreds of millions of Danish kroner.«
Respect, integrity and dedication are values that permeate the corporate culture of Schouw & Co. As the portfolio companies operate within widely different industries, they obviously represent quite different business cultures. That is actually one of the strengths of the conglomerate; each individual business culture is adapted to the value chain and the environment, in which it operates. »It is not our ambition for these companies to be identical. We want each of them to be strong and focused in the areas they operate in,« explains Jens Bjerg Sørensen.
There is a fundamental element common to all our businesses, however. That is the concept ‘results are created by people’, which has characterised Schouw & Co. from the very beginning. It is about showing other people respect and being considerate, but at the same time making demands. »No matter how much capital we inject into a company, at the end of the day, the employees are the key to success,« says Jens Bjerg Sørensen.
»We develop leading Danish industrial businesses through value-creating, active and long-term ownership.«
This statement is a central focal point of the Schouw & Co. business concept. Longterm active investments are pivotal in our business strategy and they differentiate Schouw & Co. from private equity funds, for example. »In many cases, other investment companies have a shorter investment horizon, whereas we always take a long-term approach,« says Schouw’s President Jens Bjerg Sørensen.
»When we acquire a company, our intention is to own it indefinitely. Our ‘best ownership’ philosophy means that we are the best owners of a business for as long as no one else creates value better than we do.«
Jens Bjerg Sørensen acknowledges that there are a number of good aspects in an investment approach with a predefined ownership period of, say, 5–7 years. »But there can also be negative aspects,« he explains. »When the time comes for the owners to sell the business, they may develop different investment horizons than the management. That’s why, at Schouw & Co., we don’t have a pre-set plan for when to exit from a company.«
At Schouw & Co., we focus on futureproofing our portfolio companies’ positions during the entire ownership period, not only during the first couple of years. »Combined with an unremitting and firm focus on current operations, we believe this is the best way to own a business,« adds Jens Bjerg Sørensen.
»The best way to safeguard long-term value creation for our shareholders is to have a sound and sensible business model in relation to our employees, our customers and our suppliers. Striking a balance between creating value for the shareholders and ensuring that we have a long-term business capable of development is an ongoing challenge.«
Schouw & Co. owns and operates companies within widely different industries that don’t necessarily have anything in common.
»That is the result of a deliberate choice we made more than 20 years ago, when we sold half of our packaging activities and acquired Grene,« explains Jens Bjerg Sørensen. Schouw & Co. has grown bigger and stronger over the last 20 years, with revenue of almost DKK 10 billion in 2008. That’s a threefold increase in five years.
»Our growth is the product of our active ownership approach in which we provide financial and strategic support to our businesses in the pursuit of their development plans. Given the current situation, we are refocusing from substantial growth ambitions to an unyielding pursuit of lifting the profitability of our businesses,« says Jens Bjerg Sørensen.
One of the key elements of creating value is ensuring that our group has the necessary financial versatility. »Fortunately, we are in a situation where we are the ones in control of Schouw & Co. and not the banks,« says Jens Bjerg Sørensen and he continues: »In order to retain the financial versatility, we will take extraordinary steps in the coming year to considerably improve the cash flows of our businesses. We have a distinct target for 2009 of reducing our debts by 10% and our working capital tie-up by hundreds of millions of Danish kroner.«
Respect, integrity and dedication are values that permeate the corporate culture of Schouw & Co. As the portfolio companies operate within widely different industries, they obviously represent quite different business cultures. That is actually one of the strengths of the conglomerate; each individual business culture is adapted to the value chain and the environment, in which it operates. »It is not our ambition for these companies to be identical. We want each of them to be strong and focused in the areas they operate in,« explains Jens Bjerg Sørensen.
There is a fundamental element common to all our businesses, however. That is the concept ‘results are created by people’, which has characterised Schouw & Co. from the very beginning. It is about showing other people respect and being considerate, but at the same time making demands. »No matter how much capital we inject into a company, at the end of the day, the employees are the key to success,« says Jens Bjerg Sørensen.
The four key elements
Overall, Schouw & Co. applies four key elements as a means of creating value.
Diversified portfolio. We combine and own a number of leading Danish industrial businesses
that operate in different industries and render their services to different customer segments. Those businesses are all leaders
in their fields and focus strongly on their core businesses.
Active and developing ownership. We exercise active ownership of our businesses. We aim to focus on profitable growth, efficient use of capital and on future-proofing the strategic platforms of our portfolio companies.
Professional dialogue. We provide shareholders and markets with contemporary and detailed information so they can always make an assessment of the group’s true values.
Financial versatility. We will retain our financial versatility so as to prevent us from being restrained in our actions and to enable us to
act quickly should that be required. We optimise our capital structure, but always aim to have appropriate financial strength.
