SHORT INTRODUCTION ON MANAGEMENT AND PRIVATE EQUITY TO: January 21, 2016
CONTENTS Introduction Remko Jager Summary profile Gilde Private equity history Venture capital, private equity and turnarounds Hands off and hands on investors Anglo-Saxon or Rijnlands PE model Value creation in PE Study Hans Bongartz (KPMG / INSEAD) Partnership in practice Management and Gilde Potential contradictions management and PE 2
CV REMKO ARNOLD JAGER (1961) 30 YEAR TRACK RECORD IN BANKING AND M&A Remko Jager (54) Managing Partner Gilde Equity Management Benelux Education: 1984 BSc (Engineering; HTS Tilburg) • 1991 MBA (Nimbas / Bradford) • 1993 Amsterdam Institute of Finance • 1996 ABNAMRO Nijenrode Senior Management Development Course • 1999 NCD Nijenrode Commissarissen Cyclus • Joined Gilde in 1998 25 years of Dutch Private Equity experience Background at ABN Amro and ABN Amro Participaties 3
SUMMARY PROFILE GILDE EQUITY MANAGEMENT BENELUX DEDICATED TO MANAGEMENT BUYOUTS IN THE BENELUX MID MARKET History dating back to 1982. Our team is dedicated to the Benelux mid-market since 1996 EUR 750 million long term funds under management, provided by reputable (inter)national investors as Rabobank, Allianz, Alpinvest and EIB Invested in more than 50 mid-market buyouts together with entrepreneurial and ambitious management teams Focus on growth, long term value creating strategy, actively supportive Independent and partner-owned. Team of 14 professionals, working from offices in Utrecht and Antwerp 4
PROUD SHAREHOLDERS OF… CURRENT AND PAST INVESTMENTS 5
POST WOII HISTORY OF PRIVATE EQUITY DIVIDED IN FOUR PHASES 2016 2009-current 2000-2008 1980-2000 1945-1980 1988 Operational Economic improvements Technology Unwinding large growth Multiple PE booms and crashes Leverage diversified Cheap leverage conglomerates 6
VENTURE CAPITAL, PRIVATE EQUITY AND TURNAROUNDS ALL IN DIFFERENT PHASES OF THE LIFECYCLE 7
HANDS OFF / HANDS ON INVESTORS DEPENDING ON THE LEVEL OF RESPONSIBILITY AT THE MANAGEMENT TEAM Hands-off investors Responsibility in the hands of management; only concerned with macro perspective Relies on periodic reporting At worst, management feels that adequate support and coaching is not available and subsequently lack focus and direction Hands-on investors Highly involved in the day-to-day activities and decisions of the management team / company to be fully engaged in future success Pro- active presence who’s continually encouraging and motivating management to promote operations At worst, the hands-on approach can be seen as constant interference; management feeling not trusted / not ready for the tasks 8
ANGLO-SAXON VERSUS RIJNLANDS PE MODEL SHAREHOLDER VALUE OR STAKEHOLDER VALUE KEY TAKE-AWAYS ANGLO-SAXON MODEL KEY TAKE-AWAYS RIJNLANDS MODEL Value creation is the motivation – stakeholder value Making money is the motivation – shareholder value Continuity and trust with as keyword satisfaction Short-term profitability: (shareholders, customers and employees): win-win (i) win-lose, • Mindset is: craftsmanship, content and dignity of (ii) may the best man win • employees, social responsibility (iii) you are for or against us • (iv) eat what you kill “Shared values” • Mindset is: money, power, heroism and usefulness of employees “The American Dream” 9
VALUE CREATION IN PE DEPENDS ON IMPROVEMENT OF PROFITABILITY, DELEVERAGE AND MULTIPLE ARBITRAGE Multiple Equity Deleverage EBITDA Equity effect investment increase at exit Total value will increase as a result of: Repayment of bank debts EBIT(DA) growth Multiple arbitrage 10
HANS BONGARTZ STUDY PSYCHODYNAMICS IN THE INVESTOR – INVESTEE RELATIONSHIP Partner at KPMG Corporate Finance. INSEAD Master thesis has been finalized in January 2015 Survey was conducted among 60 senior PE professionals The leadership capabilities of management are positively affecting corporate performance; 85% of the respondents indicate that over 50% of value creation during the investment period of a portfolio company depends on the quality of management – “ Niet de tent, maar de vent” Percentage of value creation depending on MT 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% 25% - 50% 50% - 75% 75% - 100% 11
PARTNERSHIP IN PRACTICE FACILITATING ENTREPRENEURSHIP, CLEARLY DEFINED ROLES, PROFESSIONAL (INFORMAL) SETTING, GEARED TO FAST DECISION MAKING Management is responsible for running and controlling the day-to-day business (customer dealings etc.) • Management / CEO forms statutory board of Newco, proxies will be tailored to the business • Company Management Board regulations provide for certain decisions to be approved by supervisory board / shareholders • Informal contacts and periodical meetings, to the point monthly reporting to SB and banks (P&L, BS, CF, KPIs) • Typically 4 to 6 meetings per year • Supervisory Three persons: 1 appointee by Gilde, 1 appointee by management and jointly chosen chairman • (sounding) Profiles will be drafted focused on the strategy of the business, i.e. ensuring added-value • Board Approval of annual budget and during the year e.g. investments outside budget / above threshold • Typically 1 to 2 meetings per year • Approval of annual accounts and e.g. acquisitions and dividends • Shareholders Meeting Most decisions require simple majority – balance, minority protection through selected super-majority decisions • SHA: corporate governance, leaver provisions, exit arrangements, good faith declaration, non-compete etc. • 12
MANAGEMENT AND GILDE Pre-deal Post-deal CV Realization of business plans, 100 days plans, budgets, etc. / company Internal reference checks (e.g. senior performance employees, direct reports, staff) Ability to make decisions External reference checks (e.g. suppliers and clients) Leadership skills, teambuilding and style Face-to-face meetings – personality and behaviour Adaptability to changing market conditions (a/o new phase with PE) Team dynamics Personnel and customer satisfaction Capabilities and competences surveys Entrepreneurship and strategic vision 13
POTENTIAL CONTRADICTIONS MANAGEMENT AND PE Topic Management Private equity Vision and goals/strategy Long-term Short-term Remuneration policy Based on the operation Based on realization of plans Control and entrepreneurship Limited control of PE Maximum needed control Exit strategy Long-term focused / Exit focused beyond exit Management changes Personal interest Company interest 14
THANK YOU FOR YOUR ATTENTION! Gilde Equity Management Benelux Newtonlaan 91 3584 BP Utrecht Phone +31.30.2192.542 15
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