Investment Strategy
Babcock & Brown Capital (the Company) has a broad investment mandate. If the right opportunity becomes available, it is possible that the Company may commit all its capital to a single investment. The only goal is to achieve risk-adjusted returns over the long term consistent with the Company's investment objective.
Without limiting the scope of the Company's potential investments, the following are examples of situations in which the Company may invest:
- Consolidation: The Company may acquire or establish a business as a platform to acquire other businesses within a fragmented industry.
- Break-up: The Company may acquire a diversified business where it has assessed the constituent businesses to be worth more than the price at which the entire business can be acquired. The Company would then seek to extract value by divesting some or all of the constituent businesses through trade sales or public offerings, or unlocking the value of these businesses in some other manner.
- Restructuring: The Company may invest in a business that, due to mismanagement, inappropriate capital/ownership structure or some other factor, has underperformed or is simply undervalued. The Management Company would then apply both the operational skills of its executives and the investment and financing expertise of Babcock & Brown to implement the appropriate management, operational and capital structure changes to allow the business to realise its intrinsic value.
- Expansion capital: The Company may commit capital to fund a business whose growth needs exceed its access to capital through traditional financing sources such as the debt and equity markets; and
- Recapitalisation: The Company may acquire a business whose equity is undervalued because existing management has adopted a sub-optimal capital structure, which may include excessively conservative gearing or retaining cash within the business at sub-optimal rates of return. In such a situation, the Company could draw on Babcock & Brown's structured financing expertise to unlock value through more appropriate leverage or other capital structure changes, and the distribution of excess cash. The Company may invest in situations which combine several of the examples provided above.