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"Riverside Europe 600 minutes conference" Financial Sponsors As Counterparts in M&A - Helsinki, 22 January 2008
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Lars ErikssonRegional DirectorRiverside Europe Partners
Financial SponsorsAs
Counterparts in M&A
Helsinki, 22 January 2008
Agenda
1. Riverside in Europe
2. When the PE market is a route for divestment
3. How to sell a company to a financial sponsor
4. Success case story: Welltec
Riverside’s Profile
Overview: The largest buyout firm focusing on small and mid-cap investments in Europe, US and Asia
Focus: Leading companies at the small end of the middle market with an Enterprise Value of €15 million to €120 million
History: Founded in 1988 in New York. Active in Europe since 1989
Today: 18 offices worldwide, of which 8 in Europe
Investments: More than $1.8 billion under management worldwide, of which €500 million in Europe
Experience: Over 160 acquisitions worldwide completed since inception, of which 23 in Europe
European funds: 1997: Riverside Central Europe Fund, $25m2002: Riverside Europe Fund II, €38m2005: Riverside Europe Fund III, €315m
Riverside in Europe
Riverside offices in Europe:Amsterdam BrusselsBudapestMadridMunichPrague StockholmWarsaw
Current European investments include:
Riverside has invested in 23 companies in 11 countries throughout Europe in the last 10 years
Riverside in Europe
Riverside officesPortfolio companies (past and current)
When PE is a route for divestment?
• What is PE?• Providing equity capital to companies not quoted on
a stock market to help them grow and succeed • Medium to long-term commitment (several years or
longer)• Transformational, valued-added, active investment
strategy• PE suits companies and their owners in situations such
as:• Growth Potential
• Regional or International Expansion• Divestment of Non Core Assets (Corporates)
• Speed vs Value• Restructuring
• Succession Issues (Family Held Companies)
Common Perception of Private Equity
They ripped the guts out of our company
All they are here for is for profit making Employee of AA taken over by Permira and CVC Capital, February
2007
Swarms of locusts that fall on companies, stripping them bare before moving on Franz Müntefering, Chairman of Social Democratic Party of Germany,
April 2005
Private equity movement threatens to destroy a generation of hard-won progress
Transport & General workers union, March 2007
Buccaneering asset-strippers GMB workers union on Permira, January
2007
Private equity firms are worse than mafiaGuardian, September 2007
Private equity is a fraud Internet blogger from Australia, July
2007
Benefits of Private Equity
Medium to long term commitment (several years or more)
Growth capital without fixed expenses or debt serviceSolid and flexible capital base enhancing borrowing
capacity for other opportunitiesProviding know-how and support to management and
access to industry experts in every sectorLarge network of relationship to help companies build
strategic partnershipsPrivate equity-backed companies grow faster than other
companiesImproving operations and modernising facilities
Shareholders in private equity-backed companies have one
key objective: to make the company successful
Public vs Private: Governance Differences
Public Private
Objective• Make the company big• Buy-to-keep
• Make the company successful• Buy-to-sell
Executive pay
• Lots to gain, little to lose:• Lavish pay package + stock
options on top
• Full commitment + ownership mentality
• Co-investment + compensation closely tied to performance
Public scrutiny
• Don’t-rock-the-boat attitude• Focus on quarterly earnings
reports
• Ability to make bold decisions and do the best thing for the business
Board of directors
• Often friends & family• Non-executives are too busy to
really know the company and often lack the necessary information
• Private equity representatives + industry experts
• Help management create and stay on track executing the strategy
Exit • Result of a strategic error• Culmination of a successful
transformation„Private equity firms attract and keep the best managers, focus them extraordinarily well, provide strong incentives, free them from distractions, give them all the help they can use and let them do what they can do”
Fortune Magazine, November 2006
”Sweet Spot” Characteristics
Little Leader?International (Global) Growth PotentialPan-European Growth Potential?Low Customer Concentrations?Growing End Market?Recurring Revenue Model?Low Capital Expenditure Business?Owned by a Non-PEG?Favorable Auction Environment?
How to Sell A Company to a Financial Sponsor?
Use of Advisers?We all need them!Confidentiality – the life blood of our business
Availability of Information?Be prepared to disclose!
Access to ManagementYes, we are no managers!Post Acquisition Business Plan
FinancingThe banks are our partners
Riverside Success Story:Welltec
• Company products:– Precision-controlled conveyance systems for intervention and
manipulation in oil and gas wells– Well Tractor – proprietary device that can drive itself forward in
oil well and perform maintenance and repair tasks
• Transaction background:– Industry-leading company led by an experienced management
team who needed a strategic partner and capital for growth
• Riverside improved Welltec’s product and operations and gave the company new growth opportunities Strengthened the executive board with two industry-experienced
executives Improved financial and operating systems and controls Invested in R&D to expand the service offering Secured additional funds to finance growth Completed strategic add-on acquisition of Heat Seekers in Canada,
expanding Welltec’s access to tar sands market Opened new service bases in North and South America, Middle East, Africa
and Asia
Riverside dramatically increased Welltec’s sales (up 175%) making it an undisputed industry leader
Welltec: Riverside Value Added
Riverside gave a successful entrepreneur and his company new growth opportunities to create a dominant player in the
industry
0
10
20
30
40
0
20
40
60
80Financial Performance
2001 2006
Sales (€m) EBITDA (€m)
2002 2003 2004 2005 2001 20062002 2003 2004 2005
+175% +150%
Before Riverside ownershipDuring Riverside ownership
