Executive summary - Udo Bullmann

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2.5 Protection of minority shareholdersA take-over offer of 1,600p per share was made to all shareholders.2.6 Management policies and shareholder activism: stock option programs, effects on board andCEO´s, management fees, employee informationUnder Reitzle the board of Linde has fostered good contacts with the representatives of the workforce and giventhem extensive information. This will be the same in the new company.2.7 Effects on public financesLinde/BOC will continue to pay taxes to the German state. However, the company’s high level of debt will result in areduced tax bill.3. LBO exit (secondary LBO, IPO, listing)Linde had been considering two ways to sell the materials-handling division (“Kion”): flotation on the stockexchange or a sale to a group of financial investors. On the 5 th of November 2006 Kion has been sold to a consortiumcomprising the private equity funds Kohlberg Kravis Roberts & Co. (KKR) and Goldman Sachs at a price of € 4billion. The competition authorities approved the deal.KKR/Goldman Sachs say that they will honour all the agreements on safeguarding locations made by the Lindeexecutive board with employee representatives. They want to pursue a strategy of growth to achieve sustainableincreases in Kion´s value. The new owners plan to float Kion on the stock exchange in about 5 years in order to cashin on their investment.ReferencesSüddeutsche Zeitung 09.06.05, S. 24; Frankfurter Allgemeine Zeitung 29.06.05, S. 12; Börsenzeitung 05.09.06, S.13; Frankfurter Allgemeine Zeitung 22.09.06, S. 17; Financial Times Deutschland 19.10.06, S. 3;managermagazin11/06, S. 91ff.; Börsenzeitung 01.11.06, S. 11; Frankfurter Allgemeine Zeitung 01.11.06, S. 18;Handelsblatt 01.11.06, S. 17; Financial Times Deutschland 02.11.06, S. 10; Süddeutsche Zeitung 02.11.06, S. 28;Frankfurter Allgemeine Zeitung 02.11.06, S. 18; Handelsblatt 07.11.06, S. 21; Financial Times Deutschland07.11.206, S. 1, S. 10; Börsenzeitung 07.11.06, S. 1, S.11; Handelsblatt 07.11.06, S. 1; Financial Times 07.11.06, S.13; Financial Times Deutschland 17.11.06, S. 10; Börsenzeitung 23.11.06, S. 9; Frankfurter Allgemeine Zeitung24.11.06, S. 18; Börsenzeitung 28.11.06,S. 9; Börsenzeitung 22.12.06, S. 10; Börsenzeitung 09.01.06, S. 9;Börsenzeitung 09.01.07, S. 9
Märklin1. Company descriptionMärklin is the world’s largest manufacturer of model railways. It bought up Trix, which used to be the second-largestmodel railway manufacturer. At the present time, Märklin has 1 000 employees in Germany and another 300 in aplant in Hungary. The company has production facilities at three locations in Germany. In 2005 Märklin’s turnoverfell to €123 million, compared with €148.5 million in 2004 and €164.4 million in 2003. Group losses amounted to€6.8 million in 2005. The company had a credit line of €60 million with several banks. Having taken up €55 millionof this facility, it had almost exhausted its credit.2. Economic and social effects2.1 Private equity fund descriptionThe sale to private equity investors was made under pressure from the banks to which the company owed money. Inthe middle of 2005, the creditor banks demanded the intervention of an investor. As the company put off its decision,two banks lost patience and sold their loans to Goldmann Sachs. The company’s shares were in the hands of 22family members. Three of them blocked the sale to private equity investors until the very end. They wanted to keeptheir holdings, which totalled 23% of the company’s shares, even if an investor bought out the company, a conditionthat prospective investors could not accept. The company was finally sold to the British private equity firmKingsbridge for a price reputed to be about €30 million. A total of €13 million was to be made available immediatelyand a sum of two million euros was to be tied up to deal with any unforeseen problems. The remainder was not to bepaid until the investor withdrew from the company.The works councils and the relevant trade union, IG Metall, wholeheartedly supported the sale of the company by thefamily to the private equity investor, since all the jobs at Märklin would otherwise have been at risk. The banks hadgiven the company an ultimatum to agree a sale with the private equity investor by 15 May 2006 or have their loanscalled in, which would have made the company insolvent.2.2 Effects on job creation, investments in training and education of labour force, investments ininnovationBefore the acquisition by Kingsbridge Capital 340 employees had been dismissed in 2004. Directly after theacquisition the financial investors made at first no statements about activity changes. In January, 2007 the companyfor the current year announced a planned place reduction of 310 of a total of 1340 employees. After the turnoverwould be stabilised, now one goes to the cost structures, said the manager anew named in September, 2006 JanKantowsky. The most important measure is the reorganisation of the manufacture with the reduction on two of fourlocations up to now. The plants in Thuringian Sonneberg with 220 employees and in Nürnberg with 60 employeesare closed down, other 60 colleagues in the home office Göppingen will lose their workplace. The more slendermanufacturing processes and the allocation of works on supplier should provide from now on also for higherefficiency like new machines.2.3 Management policies and shareholder activism: stock option programs, effects on board andCEO´s, management fees, employee informationThe investor has appointed two new members to the board: a new financial director and a director responsible for therestructuring process. The chairman of the board, Paul Adams, has left the company half a year later, after helpingthem to develop a capital spending plan.The investor’s strategy involves trying to rekindle interest in model railways among the young generation. This islikely to prove difficult. Children and young people prefer to devote their leisure time to the use of technologicalproducts – computer games and mobile phones being the current favourites. The investor also wants to improve
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HEDGE FUNDSAND PRIVATE EQUITY -A CR
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The need for long-term investmentTh
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On the basis of a coherent analysis
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The pension fundsWhere does all the
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3. The target company is merged wit
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Societies’ response - current nat
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In most of the case studies, PE inv
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huge tax advantages when the rate o
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known to bank supervisors. Those da
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provide transparency with respect t
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The demand for change and better re
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industrial policy, focusing on know
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AcknowledgementsThis report has bec
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The situation we are facing now is
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market to promote the knowledge-eco
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Our desire to separate the single s
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Typically a single strategy HF oper
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In most European countries, fund ma
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It should also be signalled that:
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Institutional investorsCurrent and
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leverage in order to benefit from s
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1.6 The costs, the management fees
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only remaining way to boost returns
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A majority of hedge funds have limi
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Our analysis is that these concerns
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Average annual returnsTremont HF in
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1.11. Tendency of crowdingDespite t
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• Corporate governance:“In the
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Onshore FoHFsCountryUnitedKingdomGe
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ItalyBank ofItaly•Specializedasse
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1.14 Societies’ response - curren
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Investments are often in individual
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employed 21 . Leverage effect expla
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Investments are sold off to other c
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Private Equity: European trends in
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time because of the longer holding
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Bain CapitalPartners 74.7 9Thomas H
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Sources of new funds raised (2005)C
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The private equity manager virtuall
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The fund structuring arrangements f
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ownership transfers. But buyout cap
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equity value chain. The main areas
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of the table but that less mature c
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UCITS (Undertakings for Collective
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Article 49Within the framework of t
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open and secure retail markets and
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offeree company must give its views
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In its Communication on worker info
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est practices, promoting innovative
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- Work to ensure more consistent an
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destabilising the financial markets
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& LBOs invest. It increases financi
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In particular, incumbent managers o
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long-term competitiveness of the ac
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It also leads to further weakening
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If HFs and LBOs have brought uncert
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the social responsibilities of comp
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areas after recapitalisation 11 . I
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Furthermore, the funds in many case
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privatised with a view to stimulati
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asset stripping, and the offering o
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dividend to Valentia.The second pub
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***The three country case studies o
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eturns well below those achieved by
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investment funds - in the UK alone
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4.2 The issue of pension fundsThe p
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One year earlier the British Financ
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the fund exceeds the highest value
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5.3 Short sellingHistorically, hedg
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global financial markets. In 1998 t
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implications associated with the li
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The classic source of leverage is l
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I talk to have got a prayer in the
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The main reason for the lack of inf
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7. The need for change to ensure a
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clearly destructive must be prevent
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European Union.Part III is going to
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2. Market transparency - a common i
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International Settlements in Switze
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3.2 The main beneficiaries of regul
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Page 164 and 165: In our view, if we want to promote
Page 166 and 167: investors.The EC should set up an i
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Page 170 and 171: widely differing impacts of PE acti
Page 172 and 173: estrict investment to specific asse
Page 174 and 175: Clearly the governance authorities
Page 176 and 177: paid. There is therefore a need for
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Page 182 and 183: Corporate governance provisionsLong
Page 184 and 185: ANNEX 1 - Case studiesANNEX 1 - Cas
Page 186 and 187: 1. Company description ............
Page 188 and 189: AA1. Company descriptionThe Automob
Page 190 and 191: Autoteile Unger1. Company descripti
Page 192 and 193: Bulgarian Telecommunications Compan
Page 194 and 195: Deutsche Börse1. Company descripti
Page 196 and 197: DIS1. Company descriptionThe DIS De
Page 198 and 199: DT-GROUP1. Company descriptionDT Gr
Page 200 and 201: (2005 €610m) resulting in an EBIT
Page 202 and 203: FRANS BONHOMME1. Company descriptio
Page 204 and 205: Friedrich Grohe AG1. Company descri
Page 206 and 207: 3. LBO exit (secondary LBO, IPO, li
Page 208 and 209: industrial sector level. A compromi
Page 210 and 211: Linde1. Company descriptionLinde is
Page 214 and 215: marketing outside Germany and to bo
Page 216 and 217: 2.3 Effects on job creation, invest
Page 218 and 219: Peguform1. Company descriptionThe h
Page 220 and 221: PICARD1. Company descriptionPicard
Page 222 and 223: STORK1. Company descriptionThe indu
Page 224 and 225: TDC1. Company descriptionTDC is the
Page 226 and 227: TELECOM ITALIA GROUP1. Company desc
Page 228 and 229: 2.5 Corporate governance and econom
Page 230 and 231: same way like some institutional in
Page 232 and 233: Viterra1. Company descriptionViterr
Page 234 and 235: Glossary 1Absolute returns: The ret
Page 236 and 237: Hurdle rate: A rate of return that
Page 238: Stock option: An individual's right
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