The Global Economic Impact of Private Equity Report 2008 - World ...

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Exhibit 7: Comparison of employment at major producers (2000–2003)CAGRTotal 2000 toNumber of employees 2000 2001 2002 2003 Change 2003LindeGermany 18,475 18,380 18,154 17,807 (668) (1.2%)Europe (excl. Germany) 20,436 19,693 19,637 19,921 (515) (0.8%)North/South America 6,371 6,256 6,340 6,292 (79) (0.4%)Asia 1,409 1,577 1,885 2,139 730 14.9%Australia/Africa 435 494 505 503 68 5.0%Total Employees 47,126 46,400 46,521 46,662 (464) (0.3%)Thereof Gas 18,661 17,689 17,500 17,420 (1,241) (2.3%)Air LiquideFrance 9,393 9,856 9,856 10,208 815 2.8%Europe (excl. France) 8,787 8,932 8,932 8,932 145 0.5%Americas 8,181 8,008 7,392 7,337 (844) (3.6%)Asia Pacific 3,030 3,080 3,388 4,147 1,117 11.0%Africa 909 924 1,232 1,276 367 12.0%Total Employees 30,300 30,800 30,800 31,900 1,600 1.7%BOCEurope 11,398 12,173 13,213 12,353 955 2.7%Americas 6,969 7,305 7,243 7,451 482 2.3%Africa 17,137 16,120 17,435 17,138 1 0.0%Asia/Pacific 7,205 7,573 8,389 7,565 360 1.6%Total Employees 42,709 43,171 46,280 44,507 1,798 1.4%Praxair 23,430 24,271 25,010 25,438 2,008 2.8%Airgas 8,000 N/A >8500 N/ASource: Annual reports.Exhibit 8: Structure post-exit of Allianz Capital Partners/Goldman SachsAir LiquideMesser Industrie aMesser Griesheim GmbHGerman OperationsMesser NewMesser USMesser UKMesserWestern Europe(excl. Germany & UK)MesserEastern EuropeMesserChina & PeruSource: Goldman Sachs.Note: a. Holding company for the Messer family’s interests.102 Case studies: Messer GriesheimThe Global Economic Impact of Private Equity Report 2008
New Lookann-kristin achleitnerTechnische Universität Müncheneva nathusiusTechnische Universität MünchenKerry hermanHarvard Business Schooljosh lernerHarvard Business SchoolExecutive SummaryIn July 2003, UK fashion retailer New Look was taken privatewith the support of Apax Partners/Permira. The managementof New Look, originally listed publicly in 1998, wanted totransform the company to improve performance and takeadvantage of several opportunities they believed the UK andEuropean retail sector offered. These transformations wouldincrease business risk and require substantial investmentsand patience from investors. Given the pressures a listedcompany faced to meet expectations on short‐termperformance, management felt the public markets wouldnot provide the right environment for their ambitious newplans. Apax Partners also believed that New Look wouldbe better positioned to take advantage of these long‐termopportunities if taken private. Apax Partners partnered withPermira to do the deal. In April 2004, Apax Partners/Permiraeach invested £100 million in a buy‐out vehicle thatpurchased New Look; each assumed 30.1% stake, founderTom Singh held 23.3% and other management held 13.4%(3.1% was assumed by Dubai‐based retail giant Landmark).The deal represented a growth story: under the buyoutmanagement’s investment, New Look grew EBITDA annuallyby an average of 14.6% between 2004 and 2007 andincreased its full‐time equivalent headcount by 7.7% per yearon average in the same period. As active shareholders, theprivate equity partners supported New Look in making thelong‐term investments required in the transformation processand helped both to strengthen its management team aroundCEO Phil Wrigley and to increase its capital efficiency. Thetransformation process had three key initiatives. First wasinvestment in a new larger distribution centre, and re‐locatingit more centrally in England. Second was a continued andaccelerated roll‐out of larger store formats, enabling NewLook to offer a wider product range in a more conduciveretail environment and to include men’s and children’s wearas counterweights to the cyclicality associated with women’sfashion. When the company found itself in a strong enoughposition to expand to markets beyond the UK, itimplemented the third key initiative: pursuing internationalexpansion in France, Belgium, Ireland, Kuwait, and Dubai.The New Look case presents an example of a company thatpursued an ambitious growth plan with the support of privateequity partners. The envisioned transformation processturned out to be highly successful with increasing efficienciesand profits as well as an increase of over 3,500 employeesover four years.The UK Retail Sector: 1998–2004By the late 1990s, clothing retailers typically benefited fromhealthy margins and positive cash flow and generated highreturns on capital, making them fundamentally attractive toinvestors. Yet the sector came with risks as well; fashion wasnotoriously cyclical – even a warm month during the wintercould spell disaster – and for trend‐setting brands, oneseason’s miss could represent tremendous losses. Analystsnoted that clothing markets were naturally fragmented dueto the fact that customers drive demand for niche concepts.Low barriers to entry into the industry meant competitionwas high. In the UK there were three significant full‐pricedselling cycles: Christmas, back‐to‐school and Easter.Like‐for‐like (LFL) sales, or same‐store sales, were dependentmainly on three things: the company’s local consumerenvironment (the store’s location); merchandising, essentiallythe appeal of the retailer’s clothing offerings; and the maturityof the retailer’s stores. LFL sales growth drove a retailer’sability to leverage annual operating cost increases, soopportunities for space expansion and growth in marketshare determined sustainable growth.The late 1990s saw several significant forces affectingthe retail consumer. 1 Work and leisure patterns had changed,and a “money rich, time poor” consumer had emerged, witha concomitant increase in spending on leisure. Demographicshad also changed with a decline in younger people, a largeportion in their middle age, and an increase in single‐personhouseholds; all of which had implications for spending patterns.The retail sector witnessed an increase in consolidation of salesand a decrease in shop units. According to one study, thenumber of small, single independent retailers fell in the UKin tandem with their market share.1The following section draws in part on Tim Dixon and Andrew Marston, “The impact of e-commerce on retail real estate in the UK,” Journal of RealEstate Portfolio Management, 1 May 2002, vol. 8, no. 2, p. 153.The Global Economic Impact of Private Equity Report 2008 Case studies: New Look 103
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The Globalization of Alternative In
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ContributorsCo-editorsAnuradha Guru
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PrefaceKevin SteinbergChief Operati
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Letter on behalf of the Advisory Bo
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Executive summaryJosh lernerHarvard
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• Private equity-backed companies
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C. Indian casesThe two India cases,
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Part 1Large-sample studiesThe Globa
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The new demography of private equit
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among US publicly traded firms, it
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should be fairly complete. While th
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according to Moody’s (Hamilton et
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draining public markets of firms. I
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FIguresFigure 1A: LBO transactions
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TablesTable 1: Capital IQ 1980s cov
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Table 2: Magnitude and growth of LB
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Table 4: Exits of individual LBO tr
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Table 6: Determinants of exit succe
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Table 7: Ultimate staying power of
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Appendix 1: Imputed enterprise valu
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Private equity and long-run investm
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alternative names associated with t
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4. Finally, we explore whether firm
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When we estimate these regressions,
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cutting back on the number of filin
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Table 1: Summary statisticsPanel D:
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Table 4: Relative citation intensit
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figuresFigure 1: Number of private
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Private equity and employment*steve
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Especially when taken together, our
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centred on the transaction year ide
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and Vartia 1985.) Aggregate employm
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Page 71 and 72: employment-weighted acquisition rat
Page 73 and 74: FIguresFigure 1: Matches of private
Page 75 and 76: Figure 6:Figure 6A: Comparison of n
Page 77 and 78: Figure 8:Figure 8A: Comparison of j
Page 79 and 80: Figure 11: Variation in impact in e
Page 81 and 82: Figure 12: Differences in impact on
Page 83 and 84: Private equity and corporate govern
Page 85 and 86: et al (2007) track the evolution of
Page 87 and 88: groups aim to improve firm performa
Page 89 and 90: distribution of the LBO sponsors, m
Page 91 and 92: the most difficult cases. This stor
Page 93 and 94: to see whether these changes of CEO
Page 95 and 96: Figure 3:This figure represents the
Page 97 and 98: TablesTable 1: Company size descrip
Page 99 and 100: Table 5: Changes in the board size,
Page 101 and 102: Table 7: Board turnoverPanel A: Siz
Page 103 and 104: Part 2Case studiesThe Global Econom
Page 105 and 106: European private equity cases: intr
Page 107 and 108: Exhibit 1: Private equity fund size
Page 109 and 110: Messer Griesheimann-kristin achleit
Page 111 and 112: ealized it was not possible to grow
Page 113 and 114: The deal with Allianz Capital partn
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Page 117 and 118: Exhibit 1: The Messer Griesheim dea
Page 119: Exhibit 5: Post buyout structureMes
Page 123 and 124: feet. This restricted store space w
Page 125 and 126: institutional investors why this in
Page 127 and 128: Although a public listing did not a
Page 129 and 130: Exhibit 5: Employment development a
Page 131 and 132: Chinese private equity cases: intro
Page 133 and 134: Hony Capital and China Glass Holdin
Page 135 and 136: Hony’s Chinese name means ambitio
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Page 139 and 140: Executing the IPOEach of the initia
Page 141 and 142: Exhibit 1A: Summary of Hony Capital
Page 143 and 144: Exhibit 4: Members of the China Gla
Page 145 and 146: Exhibit 6A: China Glass post‐acqu
Page 147 and 148: Exhibit 8: China Glass stock price
Page 149 and 150: 3i Group plc and Little Sheep*Lily
Page 151 and 152: y an aggressive franchise strategy,
Page 153 and 154: soul” of the business. But there
Page 155 and 156: Exhibit 1: Summary information on 3
Page 157 and 158: Exhibit 6: An excerpt from the 180-
Page 159 and 160: Indian private equity cases: introd
Page 161 and 162: ICICI Venture and Subhiksha *Lily F
Page 163 and 164: investment,” recalled Deshpande.
Page 165 and 166: 2005 - 2007: Moderator, protector a
Page 167 and 168: Exhibit 3: Subhiksha’s board comp
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founded two companies at this time
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By 2003 this restructuring task was
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Exhibit 1C: Private equity investme
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Exhibit 4B: Bharti cellular footpri
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Exhibit 6: Summary of Bharti’s fi
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Exhibit 7: Bharti’s board structu
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In the 1993‐94 academic year, he
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consumer products. She was also a R
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AcknowledgementsJosh LernerHarvard
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The World Economic Forum is an inde
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