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In 2010, ABC Capital, a private equity firm specialized in investing in distressed
companies, acquired PTO, a Portuguese producer of cork floating floors and walls. Two years
after the initial investment, despite the upturn registered in the cork and in the construction
industries, PTO is not giving signs of recovery.
The aim of this thesis is to help ABC Capital solving the following dilemma: should they
keep investing in the company and perform a turnaround versus disinvesting by liquidating the
company.
In order to do so, this thesis combines a valuation approach with an extensive analysis
of the company, its competitors and the industry. Moreover, the relevant literature was
reviewed and applied, supporting all the analyses conducted.
We conclude that ABC Capital should maintain PTO in its portfolio and perform a
turnaround strategy, since this choice delivers more value to the shareholders of the firm.
More precisely, we recommend that PTO management should follow a Mix Strategy, where
the company simultaneously should increase sales and reduces its costs. Finally, we also
recommend that PTO, after stabilizing and becoming again profitable, should pursue a more
aggressive sales strategy, as sales are the major cause of value generation.