Q&A - Dr Henrik Fastrich, Orlando Management GmbH

Orlando can be viewed as one of the founding firms in the Special Situations investment segment in the DACH region eight years ago. How has that market changed since then?

More and more firms are entering this market segment, some even from the US and Scandinavia. In Germany, probably three to four private equity funds and two publicly listed private equity companies currently compete with each other.

What differentiates Orlando from other investment firms like Arques and Aurelius?

At Orlando we focus purely on sustainable, bottom-line value creation, which is intrinsically long term, and have one of the best teams in the industry to make it happen. We are also very thorough in our due diligence approach. That differentiates us from competitors who base their success on bargain purchase gains, whereas we focus on fundamental value creation achieved by improving real, not forecasted, EBIT.

Recently, it has been rumoured that some investment banks and advisers claim that Orlando never pays attractive purchase prices and instead looks for deals with nominal pricetags. What's your view?

That is not true at all. Between 2001 and 2006, our first fund SSVP I invested more than EUR100m in equity across eight companies with a total transaction value of EUR300m. SSVP II, which began investing at the end of 2006, has already invested more than EUR50m. Actually, the funds advised by Orlando have never invested less than EUR1m equity; even including our smallest target, a loss-making company with less than EUR40m in sales.

How do you create value for the investors?

We focus entirely on sales improvement, cost reduction and process improvement programmes. We do not believe that complex financial engineering creates sustainable value. It is an important part of modern entrepreneurialism, but should never be overemphasised. In this respect, our track record is very compelling: In all companies in which SSVP I invested, the EBITDA was improved from between EUR50-120m in an average time period of 3.5 years. Multiple arbitrage is never factored into our investment considerations.

Why do you "lose" out in some deals against your competitors?

"Losing out" - if it can be called that - is part of our business. We see many transactions and are highly selective as to which ones we will pursue intensely. Our funds buy primarily at fair value and only our expertise drives value creation. While we pursue a value-oriented investment approach, our competitors, in particular the publicly listed ones, aim to realise short-term share price improvements.

Does that mean you are the more attractive buy-side investor?

Not always! We might adopt a less optimistic view on the business going forward and therefore project less value creation in our calculations and proposals. Our value indications are never inflated just to stay in the process. Due to our very experienced change management skills we develop very realistic business cases and transformation plans. Orlando is highly respected by social partners; management teams value our systematic approach and analytical skills! Our negotiation style is very pragmatic and straight forward, since today's seller might as well be tomorrow's seller of another entity.

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• GPs
• DACH