贝恩资本的私募股权盈利指南.doc
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1、 tom365tom365 pdfWAPTXT The new hands-on approach to building value in portfolio companies Private equitys road map to profits by Chris Bierly, Graham Elton and Chul Joon Park Chris Bierly, a partner in Bain & Companys Boston office, has extensive experience working with private equity firms and the
2、ir portfolio companies. Graham Elton, a partner in Bains London office, is a leader in the firms European Private Equity Practice. Chul-Joon Park, a partner in Bains Seoul office, co-directs the firms Asian Private Equity Practice. Copyright 2006 Bain & Company, Inc. All rights reserved. Editorial t
3、eam: Lou Richman and Susan Donovan Layout: Global Design Private equitys road map to profits The new hands on approach to building value in portfolio companies When Thomas H. Lee Partners, Bain Capital and Providence Equity Partners joined with Edgar Bronfman Jr. to acquire the Warner Music Group (W
4、MG) from Time Warner in 2004, the $2.6 billion buyout looked to some like a triumph of hubris over common sense. Even though WMG had a world-class roster of talent and a legendary catalog, the music business was in the doldrums. Digital piracy was rampant. Consolidation among traditional retailers w
5、as squeezing the music industry on one end of the business. Meanwhile, the cost of acquiring and marketing artists squeezed it on the other, as freewheeling competition among record labels had inflated the price of signing breakthrough acts. Against that background, the new owners seemed unlikely to
6、 recoup their initial investment, much less reap the high returns private equity deals are expected to generate. But, within a little less than two years, the skeptics were whistling a different tune. The buyout partners had so transformed WMG, with dramatic increases in cash flow and earnings, that
7、 they were able to take the company public again. They paid down debt and, through cash dividends received in the first year, recouped 110% of their original stake. And they did all of this while keeping their equity position intact, so that as WMGs stock price climbed, their gains continued to grow
8、. In fact, a little more than two years after the acquisition, the stock price rose to the point that the buyout firms remaining stake in the companycombined with the money paid out to the investor group as dividends was worth more than three times their initial investment. How did they pull it off?
9、 Collaborating closely with management, the new owners moved quickly to pick up the tempo at WMG. After taking inventory of WMGs most attractive markets and business segments, they developed a bold operational plan that challenged the conventional wisdom of the music industry. First, Bronfman (now t
10、he CEO) and his team pared down the roster of performers and pruned the product pipeline. They focused on promoting their established stars and new acts that had the greatest longterm potential. They also embraced the new world of digital distribution, making WMGs content more widely available onlin
11、e and on mobile devices. They created premium price digital albums, adding special bonus tracks to entice buyers to download new releases. In the process, Bronfman and his team of private equity backers did something more than turn WMG around. They established a new benchmark for how buyout funds mu
12、st operate, as the private equity industry is gripped by a fundamental shift. Its a shift that provides lessonsand could have profound consequencesfor managers of companies in nearly every corner of the economy. Activists needed For years, buyout deals followed a familiar script. After months of dig
13、ging to ferret out the target companys true value, the papers would be signed and the toasts drunk. And what happened next? The targets management would slip back into business as usual, and the new owners would hunker down until market conditions ripened for a sale. For better than a decade, this m
14、odel was a money machine, outperforming the market indexes. 1 Private equitys road map to profits Figure 1: More, bigger funds Number of active US LBO funds 500 428 400 345 300 Today, that approach looks more like wishful thinking than a winning formula. Fed by a seemingly bottomless well of investo
15、rs money, the number and size of private equity firms have mushroomed. Between 2001 and 2005, more than 425 US-based firms had amassed nearly $300 billion from limited partners, with multi-billion-dollar rounds of new funding becoming routine. (See Figure 1.) To put that capital to work, firms are p
16、ursuing larger deals. In July 2006, for example, a consortium of private equity investors offered a record $33 billion for HCA, the hospital chaineclipsing the storied RJR Nabisco buyout by KKR that first put private equity in the public eye in 1989. In fact, private equity firms are assembling port
17、folios that make some of them the worlds biggest conglomerates. Venerable brand-name companies, including Hertz, Celanese, Neiman-Marcus, MetroGoldwyn-Mayer and General Motors Acceptance Corporation, have landed in private equity portfolios in the past two years. But with so much capital to deploy,
18、buyout firms find themselves pitted against one another in high-stakes auctions that drive up acquisition prices. Look at the business headlines and its clear that almost all large deals involve private equity firms competing against each other or trade buyers. The new masters of the universe will s
19、oon confront other new challenges. With interest rates low and abundant credit available for borrowers, the debt markets have been exceptionally benign in recent years. But even with the wind at their backs, buyout firms generated returns exceeding three times their original investmenta common bench
20、mark for successon just over one-third of all deals. Forty percent failed to return their acquisition cost. Its going to be a lot tougher going forward as credit markets turn less favorable and private equity funds will no longer be able to rely on the magic of leverage to deliver outsized gains. Fo
21、r example, a hypothetical investment made under prevailing conditions in 2000 and sold in 2005 would have turned in a smart three times its original cost. But as lending conditions tighten and borrowing costs rise, exit multiples are likely to tumble such that a similar acquisition made at todays hi
22、gh costs would barely return its original investment. To succeed in this new environment, private equity funds need a radically different formula. They must replace passive stewardship with a hands-on approach to building value in their portfolio companies. Shifting gears immediately once a deal is
23、completed, the new activist funds follow a five-step process for spotting, staging, leading, measuring and profiting from breakthrough operational improvements. Our experience shows that deal makers who in the first year actively plan and launch initiatives this way outperform the industry average b
24、y a better than two-and-a-half-to-one margin, measured on cash returns. (See Figure 2.) 200 144 100 0 1995 2000 2005 Capital of active US LBO funds $300B $292B $207B 200 100 $39B 0 1995 2000 2005 Note: Active funds are those that have raised capital in the previous five years. Source: Buyouts Newsle
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