The ADP Spinoff was an interesting one and it was well covered. The goal was finding what value we added. The edge in the situation was in the spinoff entity CDK. Which wasn’t covered. Something, which very few if any, spotted. We liked the business model of CDKthat looked attractive due to the high degree of recurring revenues, a solid margin profile, healthy balance sheet and strong cash flow. It played out well for our partners.
A really interesting project that we initiated here at The Edge and it had a slight overlap with The Spinoff product but was unique in its thinking. The idea was to take the factual information from our study with Deloitte that indicated 4/10 Spinoffs are taken over in two years post Spinoff. This got our brain thinking to 1) What Spinoffs are in that phase 2) Which Spinoffs displayed the takeover characteristics according to our screening and fundamental analysis. The results contributed to our partners making some handsome returns.
JCP looked a good opportunity to us here at The Edge. There were a couple of problems. Firstly, what were we seeing that the market didn’t? And what could we provide that the market hadn’t covered? We contributed on two fronts. Initially on a timing front. The market had been pushing the idea for a while with little success. We saw opportunity in the struggling retailer as it was showing signs of operational improvement in recent quarters. We were positive on the new leadership Marvin Ellison and the Chairman, Mike Ullman, both of whom had implemented a turnaround strategy resulting in higher comparable store sales growth and margin expansion in the last few quarters. The result for our partners was very encouraging.
