Europe and Beyond - Marc St John, Partner, CVC

Report
Global Private Equity – Europe and Beyond
Marc St John, Partner
October 2013
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, Tactics, Results & Lessons Learned
CVC Fund VI Raise – Strategy
 De-risk the PE Business as Quickly as Possible
 Create Momentum
 Supply / Demand Cover
 Drive Terms
 Sell Europe
5
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
6
CVC Fund VI Raise – Results
6
Months from Launch to Closing
7
CVC Fund VI Raise – Results
33
Countries Visited During the Fund Raise
8
CVC Fund VI Raise – Results
891
Number of Individual Investor Meetings
9
CVC Fund VI Raise – Results
1,504
Number of Times DD Pack Downloaded
10
CVC Fund VI Raise – Results
117,012
Miles Travelled during March by MSJ
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CVC Fund VI Raise – Results
$1,000,000,000
Largest Commitment
12
CVC Fund VI Raise – Results
c.$8,000,000,000
Commitments Processed Between
28 June and 5 July
13
CVC Fund VI Raise – Results
166
Unique Side Letters Negotiated
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CVC Fund VI Raise – Results
$18,200,000,000
Demand for $13,650,000,000 Available
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CVC Fund VI Raise – Lessons Learned
 Keys to Success:
–
–
–
–
Preparation
Right Counsel
Quality of Relationship
Momentum
 Bifurcation in the Market
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Europe as an Investment Opportunity
Europe – Macro to Micro
Macro
The Euro and the Banking System
Midi
The Economies
Micro
The Companies
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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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Midi – The Global Competitiveness of European Economies
Global Competitiveness Index (2012-2013)
Metrics
2012 -2013
Ranking
 Institutions
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
Country
Switzerland
Singapore
Finland
Sweden
Netherlands
Germany
United States
United Kingdom
Hong Kong
Japan
Qatar
Denmark
Taiwan
Canada
Norway
Austria
Belgium
Saudi Arabia
Korea Rep.
Australia
2011-2012
Ranking
 Infrastructure
1
2
4
3
7
6
5
10
11
9
14
8
13
12
16
19
15
17
24
20
 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
Source: The Global Competitiveness Report, 2012-2013. World Economic Forum.
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Micro – The Hidden Champions of Europe
What Is a “Hidden Champion”?
Number of Hidden Champions
 Leader in its market
USA
366
Japan
220
China
68
Europe
1,933
 Less than $7 billion in sales
 Low public visibility
Source: “Hidden Champions”, Professor Hermann Simon.
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Managing a Global Private Equity Business
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
Operations
FIG Financing FIG
Operations TMT
New York
Jersey
Madrid
Zurich
Paris
Brussels
London
Amsterdam
26
Singapore
Frankfurt
Milan
Stockholm
Luxembourg Copenhagen
FIG
Hong Kong Financing
Bangkok
Operations
Shanghai
Operations Beijing
Seoul
Tokyo
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
Total
Number
Number of Investments Number of Deals /
Led or Co-Led
Capacity Per Annum
49
312
98
10 – 12
Actual
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The Case for Private Equity
Private Equity performance vs. Listed Equity – Net to LPs
PE-backed Investments Outperform Listed Companies over Time
Source: Cambridge Associates, Q1 2013
Notes:
(1) Global Private Equity Only Fund Index Summary: End-to-End Pooled Return, net of fees, expenses and carried interest
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How does PE do it?
PE Investors Bring a Unique Business Model and an Effective Toolkit to do the Job
 Single Shareholder
 Alignment of Interest
 This is All We Do / Simple Fixes
 Access to Expertise
 Leverage
 Exit Options
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