october 2013 marc st john, partner global private equity – europe and beyond
TRANSCRIPT
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Disclaimer
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Agenda
CVC Fund VI Raise: Strategy, Tactics, Results & Lessons Learned
Europe as an Investment Opportunity
Managing a Global Private Equity Business
The Case for Private Equity
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CVC Fund VI Raise – Strategy
De-risk the PE Business as Quickly as Possible
Create Momentum
Supply / Demand Cover
Drive Terms
Sell Europe
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CVC Fund VI Raise – Tactics
Keep the Ball in the Others’ Court as Much as Possible
Numbers / Documents in the Data Room
Full Firm Involvement
Core Messages Internalised
Consistent Messaging
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Keys to Success:– Preparation– Right Counsel– Quality of Relationship– Momentum
Bifurcation in the Market
CVC Fund VI Raise – Lessons Learned
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Europe – Macro to Micro
Macro The Euro and the Banking System
The Economies
The Companies
Midi
Micro
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Macro – European Union
EU: a Poorly-Constructed Currency Union
Formed just Before an Unprecedented Credit Boom
Capital Flowed from North to South
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Macro – Though there are some Headwinds…
“The Eurozone: Tale of a Bad Marriage”, Presentation to CVC by Martin Wolf (12 Sep 2013)Associate Editor & Chief Economics Commentator, Financial Times
Happy Honeymoon – in the first decade, members had a honeymoon, in which everybody, alas, got what they wanted, laying the ground for an acute crisis:
– Countries with historically low credibility and high interest rates enjoyed low interest rates, surging capital inflows and booming economies: they spent on their partners’ credit
– Countries with an historic attachment to export surpluses got improved competitiveness and apparently good investment opportunities for their surplus funds
Bad Marriage – a number of very different economies and polities decided to share a single money, but they did not agree to share a fiscal system or a banking system
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Macro – Though there are some Headwinds…
Why it is Hard to Save the Marriage – challenges to be met include:
– Debt write-offs
– Financing
– Structural Reforms and Divergent Inflation
– Reforms in relation to Banking, Fiscal and Political Union
Obstacles to action are Economic, Ideological and Political
Good marriage Unlikely; Divorce remains a Possibility; Bad Marriage most likely Outcome
– Will take a lot of Reform, both Economic and Political
– Will take at least a Decade
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2012 -2013 Ranking
Country 2011-2012 Ranking
1 Switzerland 12 Singapore 23 Finland 44 Sweden 35 Netherlands 76 Germany 67 United States 58 United Kingdom 109 Hong Kong 11
10 Japan 911 Qatar 1412 Denmark 813 Taiwan 1314 Canada 1215 Norway 1616 Austria 1917 Belgium 1518 Saudi Arabia 1719 Korea Rep. 2420 Australia 20
Source: The Global Competitiveness Report, 2012-2013. World Economic Forum.
Midi – The Global Competitiveness of European Economies
Global Competitiveness Index (2012-2013) Metrics
Institutions
Infrastructure
Macroeconomic Environment
Health and Primary Education
Higher Education and Training
Goods Market Efficiency
Labour Market Efficiency
Financial Market Development
Technological Readiness
Market Size
Business Sophistication
Innovation
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USA 366
Japan 220
China 68
Europe 1,933
Source: “Hidden Champions”, Professor Hermann Simon.
Micro – The Hidden Champions of Europe
What Is a “Hidden Champion”? Number of Hidden Champions
Leader in its market
Less than $7 billion in sales
Low public visibility
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CVC Capital Partners
Our Approach
Small Locally-Rooted Teams with Embedded Senior Oversight
Compensation Aligned with Performance
Over-Resourcing
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Small Locally-Rooted Teams
20 Offices Globally
London
Paris
Madrid
Amsterdam
Brussels
Zurich
Luxembourg
Milan
Frankfurt
Jersey Copenhagen
Stockholm
New York
Operations FIG FIG
TMTOperations
Financing
Bangkok
Hong Kong
Singapore
Beijing
Shanghai
Tokyo
SeoulFinancing
OperationsFIG
Operations
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Aligned Compensation
Same Principles as We Apply to Our Portfolio Company Managers
Compensation Tied to Investment Performance
Performance Measured at Level of Investment
Own Money at Stake
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Over-Resourcing
Current Deal Leaders Number Number of Investments
Led or Co-Led
Number of Deals / Capacity Per Annum
Total 49 312 98
Actual 10 – 12
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Private Equity performance vs. Listed Equity – Net to LPs
PE-backed Investments Outperform Listed Companies over Time
Source: Cambridge Associates, Q1 2013Notes:(1) Global Private Equity Only Fund Index Summary: End-to-End Pooled Return, net of fees, expenses and carried interest