All About Distressed Investing with Paul

The following is an computer-generated summary of the video transcript.

Um, so the way that we make money in our sector of private equity is that we're looking to buy things that are distressed evaluation has moved from a space where it's a, it's a multiple, essentially multiple of cash flows. So if you were to look at something like that was sitting on the stock exchange, you would say, you know, this is a P ratio, this is the E V A video multiple. We're looking to buy something where, uh, the equity has been eroded. If you think about the capital structure, equity has been eroded, we're now starting to, you know, erode through the debt stack and then we can essentially acquire into that debt stack, um, and particularly where, um, we can then inject a new capital into the business, typically in the form of loans. Um, and really we acquire the equity for phenomenal value for, for no value because really the equity is underwater. Um, and then really through being very active and operational and in fact, the way that we set up, my, my other partner, um, if he was here today, you would see, he's got, he's got quite a lot of gray hair and, and he's the guy that really gets stuck in, uh, he's the guy that actually, you know, will be at the premises almost on a daily basis, making sure that people are doing what they're supposed to be doing. Frankly, we only want to get involved in turn around where we can see a clear path to the turnaround. We've got investment principles and you know, certain things like uh, you know, do we understand the asset? I mean, we follow very much school of warren Buffett, you know, do we uh, only invest in things that you really understand, you know, stay within your circle of competence. Can we find a new or good management team to bring into the business? Um, and because inevitably a lot of the times that we are investing, the management team unfortunately is partly responsible for the challenges that they had. So really focusing on easy turn around turn around that are within our control. We don't want to get involved in something where, you know, it's just gonna be very difficult for us to really execute. You know, if you have to try invent the next our phone, that's going to be a challenge for us. We want to get involved in things that is, that have a clear path to a turnaround. Typically acquiring through the debt as opposed to acquiring into the equity. Uh, and actually quite a short time frame, we don't want to be involved in things that are going to be turning around over the course of 10 years. Uh, we typically have shorter Uh, fund laugh uh, are fun, life is typically in the region of about eight years, so 68 years although we do have the ability to extend. Um, But the intention is not to get involved in my view, is something that is turning around for 10 years is not a turnaround. I mean, all you're doing is just kind of kicking the can down the road. So, um, very much making sure that you buy right I think is the key message, things that can turn quickly, things that we do understand, things that we know that there is a potential buyer for the asset, such that when it is turned around and when it is neatly packaged, it's got good governance, there will be a long line of people that would be stepping forward to fire it up. You got to make money on the bar and that's, that's where you gotta buy smart and, and, uh, well.