Private Equity WHU www zaboji com Storyline Theory background Private

Private Equity @ WHU www.zaboji.com Storyline 1. Theory background Private Equity in Europe Issues debated in 2006/7 Issues raised in 2008 2. 3. 4. www.zaboji.com The Company Lifecycle Growth & Profitability Revenu ues I Existence II Survival III Profitability/ Stabilization IV Growth Orientation V Rapid Growth VI Maturity/ Decline VII Rejuvenation or death? www.zaboji.com Early Stage Market more segmented… Buyouts Expansion Entrepreneurial Investors Reven nues Turnarounds Creation Time www.zaboji.com Where does smart money go today? To the edges! …and is attracting the top talent, too! Buyouts Venture Capital V t C it l Reven nues Turnarounds Startups p Time www.zaboji.com The Business of Buyouts Mega Deals Buyouts Venture Capital V t C it l Big Buyouts Reven nues Turnarounds Mid Cap Market Startups p Time www.zaboji.com Private Equity in Europe Four distinct waves Modest Beginnings Dotcom Boom Buyout Business gets serious Industrialization mid `80 - mid `90 late `90 20002007- www.zaboji.com Europe Counts www.zaboji.com European Fund Raising Top Ten 1. Apax 2. Permira 3. 3 CVC 4. Cinven 5. BC Partners € 23.2 bn € 21.6 bn € 20 9 bn 20.9 b € 15.0 bn € 11.8 bn 6. EQT 7. 3i 8. C d 8 Candover 9. Carlyle 10. Bridgepoint € 11.0 bn € 10.3 bn € 8 7 bn 8.7 b € 8.6 bn € 8.0 bn Source: DOWJONES Financial News 13 August 2007 www.zaboji.com Relevance Private Equity is a rapidly growing asset class Private Equity firms create value & jobs Private Equity has the superior governance model www.zaboji.com Governance Long term investing (4-7 years) Interest of owners and management are aligned No agency cost Monthly Shareholder Committee Meetings y g and not speculative Quarterly Reports! www.zaboji.com Issues debated in 2006/7 ? Locusts or Honey Beens? Regulators want to regulate! Trade Unions protest! Buyout Firms regret not doing more PR! Press generates ressantiments! www.zaboji.com What are the issues in 2008 ? Impact of subprime crises? f b Reaction of the PE players? R ti f th l ? Is the Buyout business over? How about the future (i e 2009+) (i.e. www.zaboji.com Panel 1 participants say Economic slow down impacts Profitability und Cash-flow Have deals been financed at too high Leverage Multiples? What are the consequences of a breach of covenant? DB selling off € 30 bn, Citi Group 12 bn of leveraged loans g p How large is the stressed and distressed portfolio? Reaction of Bank Committees (getting back to normal? ) New equity to be injected Exits to be postponed by 2 3 years? 2-3 Deal flow slowing? www.zaboji.com Banking Crisis „ Th There is a very high level of financial risk end we haven‘t seen the i hi h l l f fi i l i k d h ‘ h end of it“ Sir Ronald Cohen, at a London Conference, 15 April Cohen Conference and a few minutes later he added „There is more finance around today than in any recession I‘ve ever seen before. I think you will see the private equity industry rescuing before industry that in other downturns might have gone bust“ www.zaboji.com DB rushes to sell loans „DB, one of the big lenders to private equity before last summer‘s Credit crisis, has accelerated the sale of its € 36 bn leveraged loan Portfolio ….“ Financial Times, 15 April 2008 and the story continues: „..are only removing part of their exposure … from the balance sheets are as they are offering fresh financing to the buyers of their loans.“ www.zaboji.com Problem? What problem? Private Equity Credit i f C dit is frozen, equities are manic and several big leveraged buy-outs h iti i d l bi l db t have collapsed in acrimony. Yet money continues to pour into private equity‘s coffers. Blackstone has just raised ist largest ever real estate fund, worth $ 11 bn. KKR has just closed a $ 18 bn buy-out fund. Some $ 176 bn has been raised globally by the indus try so far this year. indus´try Investors pick trusted managers….And a multi-year holding period, away from daily market swings, provides an option on recovery. Looking ahead, distressed markets with low liquidity will eventually play to private equity s strenghts and could produce good returns… equity‘s Financial Times. April 2008 www.zaboji.com Backup Case Study www.zaboji.com Case Study The very first KKR buyout in Europe Wincor-Nixdorf (from Siemens) www.zaboji.com Case Study Wincor-Nixdorf (1) 1952 – 1990 Entrepreneurial Stage St 1990 – 1999 Corporate M&A 1999 – 2004 Private Equity Buyout B t 2004 IPO • • • • Innovation leadership Broad product portfolio Stringent industry focus Initiated banking and retail business relations Customer driven organization • Integration into Siemens in 1990 Focus on core businesses International expansion Opt Optimization o internal at o of te a controlling and processes • Carve-out in late 1999 Stand-alone organization Rebranding Shareholding KKR 71% GS 18% Management 11% • • • • • • Leading provider of integrated solutions for g branch and store optimization Global player Further profitable growth People-driven, entrepreneurial company Exit of PE Investors in January 2005 • • • • • • www.zaboji.com Case Study Wincor-Nixdorf (2) Sales (€ m) CAGR 7.1% Employees 1 052 05 1 258 1 336 1 338 1 462 1 345 1 744 1 440 1 576 1948 3,694 4,433 4,618 4,983 6,114 6,937 7,787 96/97 97/98 98/99 99/00 00/01 01/02 02/03 03/04 04/05 05/06 99/00 00/01 01/02 02/03 03/04 04/05 05/06 EBITA (€ m and % of Sales) 161 104 116 Net debt (€ m) 63 23 40 3.2 4.7 76 83 88 1 3 7 516 410 406 329 262 234 176 200 2.2 5.7 5.7 6.5 7.2 7.4 7.9 8.3 05/06 Dec. 99 99/00 00/01 01/02 02/03 03/04 04/05 05/06 96/97 97/98 98/99 99/00 00/01 01/02 02/03 03/04 04/05 www.zaboji.com Case Study Wincor-Nixdorf (3) Symbol: WIN.ETR WKN: A0CAYB 75 70 65 60 55 50 45 40 35 30 25 20 € 20.5 19 May 2004 € 70.9 15 May 2007 Mai 04 Aug 04 Nov 04 Feb 05 Mai 05 Aug 05 Nov 05 Feb 06 Mai 06 Aug 06 Nov 06 Feb 07 Mai 07 www.zaboji.com