What is Private Equity and Private Equity in practice · © IK Investment Partners What is Private...

© IK Investment Partners

What is Private Equity and Private Equity in practice

28 April 2014

Björn Savén, Founder & Chairman, IK Investment Partners


Contents

Section 1 What is Private Equity?

Section 2 Introduction to IK Investment Partners

Section 3 Private Equity in practice: Minimax Viking Group


Section 1

What is Private Equity?


Definitions

Private Equity – What is it?

Private Equity

An equity investment in private companies

not quoted on a stock market

A separate and alternative asset class for

institutional investors

Confidential 4


Venture Capital Buyout Capital

Buyout investments & business lifecycle

Cash flow is normally

negative in seed and

start-up investments

Cash Flow

Time

Maturity

Decline Expansion

Seed &

Start-up


High leverage

opportunities in

buyouts

Confidential 5


Why does the Private Equity model work?

• As active owners, we have unique alignment to drive value

• We are informed through our experience, diligence and vertical expertise

• We are intensively engaged in asset selection, governance and value-creation

• We focus on the long-term, not short-term results

• We have unique capabilities/ experience to execute transactions and support our

companies

Confidential 6

Source: EVCA . PEREP_Analytics (2011)



Private equity’s new role

▪ Private equity has now overtaken the stock market as a medium for transacting

small to mid-size companies

▪ Governance of private equity firms now incorporate more frequent and detailed

investor reporting and valuations

▪ Significant employer – currently 21,000 private equity owned companies employ

approximately 8 million people in Europe

▪ Private equity and venture capital funds have invested €233 billion in Europe since

2007

Confidential 7 Development of Private Equity

Source: EVCA . PEREP_Analytics (2011)


Section 2

Introduction to IK Investment Partners


IK – a leading pan regional private equity firm

Confidential 9 Introduction

IK, founded in 1989, has consistently targeted the

European mid-market for 25 years

IK’s latest fund, IK VII, closed on commitments of

close to €1.4 billion

IK Funds have raised a total of €7 billion.

64 exits across 88 investments

IK’s partners have worked together for 14 years on

average, managing a team of about 70

Who we

are

IK Markets

1990 Sweden

1991 Denmark/Norway

1994 Finland

1995 Benelux

1997 Germany

2000 France

2008 Poland

Investment teams

Investment advisory offices

Distinct

and

consistent

strategy

Unique geographic focus and active ownership

proposition

Source on a proprietary basis national champions and

transform them into international leaders

Objective of doubling earnings of portfolio companies

Triple diversification focus on (i) geography, (ii) sector

and (iii) risk / reward

Institutionalised best practices via the “IK Way” –

cemented by dedicated Strategy, Operations and

Business Control team and core Industrial Adviser

network


Fund of funds

Public pension plans

Asset managers

Banks

Insurance companies

Corportate pension plans

GP

IK VII – commitments of close to €1.4 billion

Confidential 10 IK VII fundraising

Final close 21 October 2013

North America

Europe (ex Nordic)

Nordic

GP

Asia

Selected investors

Alberta Teachers’ Retirement Fund

bcIMC

Dansk Vækstkapital

HarbourVest

Hermes

Lexington Partners

MetLife Investments

Minnesota State Board of Investments

NYSTRS

Pantheon

Partners Group

SL Capital Partners

SPEAS

Varma

Geography

Institution


Portfolio construction

Confidential 11 Distinct and consistent strategy

60%

40%

Nordics 1/3

DACH 1/3

France Benelux

1/3

Geography

No UK, no Southern Europe

Consumer goods

Care

Industrial goods

Business services

Sector

Consistent focus

Size & Risk

Focus on low volatility

Triple diversification

Equity €50-100m

Transformational

Equity €100-150m

Stable, Co-invest

* Breakdown by number of investments


IK’s positioning and investment approach


* Limited competition is defined as a sale process (whether auction or not) which involves or quickly reduces to a limited

number of viable bidders

Local champions / niche market leaders

Clear idea / concept of value creation

Potential to double earnings in 5 years

Platforms for export / internationalisation

Complexity

Proprietary angles

Valuation and Exit

Develop on European/ Global scale

through buy and build

Strategic realignment

Internationalise / professionalise

standards

Reinforce management team

Active ownership

Further international expansion

Attractive for larger buyers

Multiple exit routes

Substantial potential buyer universe

Debt availability for middle market

Exit

Initia

tion

Ow

ners

hip

IK looks at 300 deals per year over 5 regions

IK actively pursues 20 deals per annum

IK invests approximately €400m per annum across

its regions

Source of investments: 2/3 primary, 1/3 secondary

79% of deals no auction or limited competition*

IK always in majority control (no club deals)

More than one IK professional per portfolio

company

50% of professionals time dedicated to

portfolio management

2.5x MM since inception

Average hold: 4-5 years

16% IPO, 55% trade buyer, 26% financial

sponsor

Low loss rate – 3 write offs since 1989


Our toolkit – the IK Way

Confidential 13 Methodical execution and approach

Institutionalising of best practice across the firm

Sourcing & Selection Execution Active Ownership Exit

1st year of

ownership

2nd year of

ownership

3rd year of

ownership

4th year of

ownership

5th year of

ownership

100 day plan 100 day review Mid term review 1st exit check 2nd exit check

Holistic

checklist

Management

evaluation

Governance

guidelines

Business control

system

Operations

toolkit

Su

pp

ort

ing

too

ls

Revie

w

tollg

ate

s

Annual reviews / management assessments by Partner group

▪ Methodical approach to replicate and maximise operational improvement and

earnings growth

▪ A mature Strategy, Operations and Business Control team combined with a select

group of Industrial Advisers form an integral part of IK’s investment strategy


Confidential 14

Investments

Other

activities

• Ingman was a co-owner (20%) in Hjem-Is (Kotijäätelö)

• Lithells sold to Atria Oyj in 1997

• Nobia acquired Novart and Parmavalmiste in 1998

• Sale of MacGREGOR to Kone Cargotec in 2004/2005

• Attendo acquired MedOne in 2007

Team • IK has a dedicated team of native Finns with a broad experience in the

Finnish market and established network in the Finnish industrial and financial communities

IK’s transactions in Finland

IK is a leading actor in the Finnish private equity market

Private Equity in Finland


Active ownership – growing companies internationally


Many of IK’s portfolio company seek growth opportunities outside Europe

Sourcing Platform Significant Add-on/

Capex Exit Sales Position


Private equity versus public equity

Confidential 16

Private equity

▪ Clear strategic mandate from majority

owner

▪ Focus on hitting mid-term targets

▪ Easy access to new capital

– Optimised capital structure

▪ Small, efficient

▪ Majority owner in direct interaction with

management

Public equity

▪ Constantly need to sell strategy to new

potential shareholders

▪ Focus on hitting short-term targets

▪ Unreliable access to new capital

– Structurally overcapitalised

▪ Size of boards will increase coordination

and process problems

▪ Politeness and courtesy at the expense of

truth and frankness

▪ Board motivated to reduce adverse

publicity and potential liabilities

Private Equity vs Public Equity


Section 3

PE in practice: Minimax becomes Minimax Viking Group


Minimax Viking Group (MVG) a global and fully integrated leader in fire suppression products, systems and service

Confidential 18 Minimax Viking Group – Case study

Market leader in fire protection systems, primarily for the industrial market with a special focus on special hazard

situations

Operates an integrated business model

- MVG can supply fire suppression components to third-party installers and is able to offer a complete service

consisting of all components, planning and installation

- Customers tend to source after-sales service (e.g., inspection) from MVG, which provides a high-margin and

recurring revenue stream for MVG

Broad technology range (i.e., water, mist, foam and gas systems & industrial detection)

IK acquired Minimax from a private equity firm in 2006, being familiar with the business through historic contacts and

discussions with management


MVG is organised along three divisions and displays a number of attractive business characteristics


Products Systems Service

Manufacturing and distribution of fire

protection components, e.g., sprinklers

Engineering and installation of detection

and suppression systems

Inspection, maintenance and repair of fire

protection systems

33% 40% 27%

US

Europe 51%

14%

35%

Asia

Repair

10% Modernisation

14%

Service

27%

49% New systems

and products Recurring

revenues

23%

Industry

Infrastructure

53%

4% Commercial

20%

Energy

Revenues: ~€1,1bn+

Based on 2013 revenues Based on 2013 revenues Based on 2013 revenues

Truly global footprint High share of recurring revenues Diversified end-customer base

Key attractions


Vision at entry to build a global market leader with €1bn + in sales


Revenue growth Goal for Exit

Truly global player

Leader in special hazards

EUR 1 Billion + in sales

Best practices in terms of service and

solutions provider

Stable growing business

466

400

2006

(Entry)

Base

Organic

growth

Add-on

acquisitions

Vision for Exit

c.1bn

466

131

€m / €bn


Strong organic growth complemented by transformational add-on acquisitions


2013

~1.1bn+

2012 2006 2008

~960m

2007

~750m

~1bn

2009

~1.1bn

~790m

2010

~560m

2011

~490m

Acquisition of CFP Group (2007)

Leading US based installation and service company

Strong presence western and southern US states

Network to service national accounts, e.g., Wallmart

Acquisition of Viking (2009)

Leading fire protection components manufacturer

Based in the US and #2 market position in home market

Distribution of products worldwide

Revenue development (in EUR)

~240%


Increased share of service revenues adds stability and enhances MVG’s attractiveness


German service revenues

~107

2008

~110

2007

~100

2006

~90

~130

160+

2013 2011

~140

2012 2010

~120

2009

€m

18% 27%

Total service

revenues as

% of total

revenues

Total service

revenues as

% of total

revenues

▪ Stable revenue stream with attractive margin

▪ MVG as system installer best positioned to provide inspection

(legal requirement), maintenance and repair services

▪ Adds stability and resilience to the overall business profile -> value

driver


During the past 8 years, MVG developed from a regional specialist into a truly global player

▪ Expansion of offering into components

segment through Viking acquisition

▪ MVG now fully integrated along the

value chain – components, installation

and service

▪ Significantly expanded geographic

coverage – especially in the US

(acquisitions) and Asia (organic)


Positioning

Pro

duct port

folio

B

road

Narr

ow

Geography Global Local

Local

players

Regional

specialists

Regional

Generalists

Global

Generalists

UTC

Tyco

2006

2014

Date post:	09-Apr-2018
Category:	Documents
Upload:	lydung
View:	218 times
Download:	3 times

What is Private Equity and Private Equity in practice · © IK Investment Partners What is Private...

Documents