Adam Steiner Shares Insights into Private Equity

We’re pleased to share the following Q&A with Adam Steiner. Adam Steiner is the head of research at SVG Capital, a private equity investor and fund management business listed on the London Stock Exchange (ticker SVI). Adam joined SVG in 2002. He was previously a director of UBS Global Asset Management, where he was responsible for the management of more than £1 billion of UK small-cap equities and more than £1.5 billion of Asian equities.

MOI Global: Your firm applies private equity techniques to investing in public markets in Europe. Could you explain this investment approach, perhaps using a portfolio company as an example?

Adam Steiner: We use private equity techniques in four ways. When we value stocks we focus heavily on precedent transaction multiples and a theoretical LBO model rather than traditional metrics such as relative multiples and discounted cash flows. On the qualitative side we conduct lengthy due diligence, extensively utilizing industry experts. Typically we will take up to two months analyzing a company before taking a position. Our investment strategies are based on 2-3 year plans with measurable milestones and we rely on catalysts rather than the markets to drive our investments. Finally, we pursue a policy of constructive corporate engagement with our portfolio companies.

An example of this approach would be our recent investment in RPC plc in the UK. This company had always had a strong market position and solid cash generation, but had historically overinvested in expanding capacity through acquisitions. Many of these acquisitions had not been fully integrated, and so the group had significant capacity to improve margins and reduce working capital. We engaged with the management of the company, encouraging them to perform a strategic review. This review led to an increased focus on return on invested capital. With the right targets in place the management team was able to produce significant margin improvement and working capital reductions. This process is ongoing.

MOI: How concentrated is your portfolio? What is your investment time horizon?

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