Investment criteria
Cobepa invests in established companies with a solid business model, sustainable market position and strong management team. Other important criteria relate to cash flow generation and international presence or development potential.
Investment opportunities are assessed based on the following five criteria:
Solid business model
The presence of a solid business model is a key element for each investment. The company’s leadership position needs to be derived from a real competitive advantage which is strong and sustainable. In this case, the main keys for unlocking further value creation are in the hands of the company. Likewise, development will not be primarily dependent upon market conditions, but will be driven by internal initiatives or specific opportunities. Sustainable competitive advantage can be derived from barriers to entry, unique technology, dominant market share or state-of-the-art operations.
Growth perspectives
We seek to invest in companies with clear and sustainable growth perspectives, over and above market growth. Cobepa hence prefers investment returns to be primarily based on the increase of sales and cash flow rather than on pure deleveraging and financial engineering. Furthermore, we believe that growth fuels corporate development and can counterbalance the impact of a cyclical downturn in the overall market.
Capacity to generate cash flow
The capacity of a company to convert sales into free cash flow is a third important investment criterion for Cobepa. It allows the company to further invest in the growth and strategic development of its business and/or to distribute dividends on a regular basis.
Strong management and governance
Cobepa invests in companies led by strong management teams displaying strategic vision, dedication and inspirational leadership. We encourage the implementation of long term incentive plans that align the interests of management and shareholders.
International presence
We find that many companies matching each of the above investment criteria also have an international footprint. Whilst not a prerequisite as such, their exposure to different geographical markets provides credibility to growth forecasts, diversifies market risk and can often be considered a good indicator of business model strength.