The turnaround funds market - Germany

1.1 Presentation

A Special Situation refers to particular circumstances of investment opportunity for funds or investors on a distressed poorly-performing firm, whose current valuation in the market differs from the underlying fundamentals of its securities (loss of a significant market share, balance sheet imbalances, etc.), in an attempt to profit from a potential rise in valuation that the special situation presents. This includes an equity based turning business event by the restructuring of a company or via corporate transactions (such as spin-offs, share repurchases, security issuance/repurchase, asset sales, or other catalyst-oriented situations)

Funds or investors involved in the aforementioned deals are called revolving funds , when bringing equity to sustain a company's poor financial conditions, turnaround funds when contributing with capital and sometimes human resources to develop and implement a problem-solving strategy for a distressed company, and vulture investors , when treating with a bankruptcy firms. This entities exist and place themselves in a specific segment of the market where there is absence or lack of financing sources, such as bank funding or credit

The main scope of the deal is to make profits creating value while allowing the distressed firm to restore its long-lasting financial and business stability, via changes in current practices (either managerial, technical or legal), thus experiencing a turnaround, i.e. a definite significant positive movement towards better improved economic conditions after a period of performance decline.