Share 2016-09-26 17:29 RATOS B 39.60 SEK

Value growth measured in return

Our return target is company specific and at least 15–20% (IRR*), depending on company and market-specific factors. To assess our success requires an analysis of the companies we have divested to date. In the past ten years, we have sold 19 companies (exits) that combined have generated approximately SEK 30bn for Ratos’s cash flow. The internal rate of return (IRR) amounts to 22%. Extremely successful and less successful examples are among the divested companies. It is inevitable that returns vary from company to company and over time. Steadily changing economic situations and other external factors have an impact on the companies in ways that cannot be predicted at the time of acquisition.

* IRR: Internal rate of return – the annual average return of the invested amount calculated from the original investment, final selling amount and other cash flows, taking into account when in time all these payments were made to or from Ratos.

The internal rate of return (IRR) is 22%

The value Ratos has created based on the companies divested over the past ten years can be broken into three segments: operational development, improved cash flow and capital growth, and multiple arbitrage.

Operational development

Approximately 76% of value creation comes from different types of operational development in the companies, leading to higher growth and profitability. Sales growth is created both through organic growth and through acquisitions.

Cash flows and capital growth

Approximately 27% of value creation comes from financial effects. Of these, approximately half can be derived from higher sales and profitability. The remainder is explained by work with financial efficiency and measures to optimise the capital structures, for example, that an acquisition is leveraged.

Multiple arbitrage

Multiple arbitrage is the price of the company in relation to the company’s profits. Multiple arbitrage has provided a negative contribution of -3%, i.e. Ratos has sold for slightly lower multiples than those that applied at acquisition.