Executive summary - Udo Bullmann

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marketing outside Germany and to boost sales in numerous European countries. Production and marketing are to berationalized.Also the corporate management contemplates opening an amusement park around the theme of model railways. It isto be opened in 2009, when Märklin celebrates its 150 th birthday. Many workers oppose the idea, because theybelieve, that it is meant as a distraction from cuts in production. Adding to that, one earns less selling candy in anamusement park than being a skilled worker in production. Besides there are already two amusement parks in thearea and they don't operate profitably.The first destination after the acquisition by the investor is the stabilization of the turnovers. The production and thedistribution should become more effective. As the first measure the sales were strongly upgraded at own accountabout an online shop in the Internet and in the factory-owned museum loading. This led to strong criticism of thespecialist suppliers who saw own position weak. After a clearing discussion the dealers from the single point-of-salesshould be incorporated in the Internet business. The toy turnover could be increased in 2006 by about 4%.Nevertheless, 2006 was closed again with a loss.In total the investments are increased in 2007 towards in 2006 by 50% on 15 Mil. EUR.3. LBO exit (secondary LBO, IPO, listing)The investor now intends to turn the company around. The result of operations has improved already. In the first halfof this year the turnover increased by 4 % to nearly € 50 million. The orders received are 6 % higher than last year.Kingsbridge plans to keep the company for four to six years before making its exit.ReferencesWirtschaftswoche 11.12.03, S. 60f.; märklin Presseinfo 16.12.2005, www.märklin.com; Financial TimesDeutschland 19.12.05, S. 6; Financial Times Deutschland 17.03.06, S. 7; Süddeutsche Zeitung 18/19.03.06, S. 25;Frankfurter Allgemeine Zeitung 21.03.06, S. 18; Handelsblatt 27.03.06, S. 12f. ; Süddeutsche Zeitung 26.04.06, S.28; Financial Times Deutschland 26.04.06, S. 7; Financial Times Deutschland 08.05.06, S. 8; FrankfurterAllgemeine Zeitung 11.05.06, S. 18; Börsenzeitung 13.05.06, S. 9; Handelsblatt 15.05.06, S. 14; focus online.17.05.06; Süddeutsche Zeitung 26.05.06, S. 23; Handelsblatt 16.10.06, S. 14; managermagazin 12/2006, S. 120;Financial Times Deutschland 06.12.06, S. 4; Frankfurter Allgemeine Zeitung 07.12.06, S. 18; FrankfurterAllgemeine Zeitung 11.01.07, S. 12; Handelsblatt 11.01.06, S. 16; Süddeutsche Zeitung 11.01.06, S. 21
Mobilcom1. Company descriptionMobilcom is a listed mobile communications company. It does not have its own network but buys blocks of airtimefrom other carriers and resells them to its own customers. Its subsidiary freenet.de is an Internet service provider. In2000 the company took part in the Federal Government’s auction of UMTS licenses (Mobile broadband network)and obtained an operating license for €8 billion. Its turnover in the past few years has amounted to some €2 billion.2. Economic and social effects2.1 Private equity fund descriptionIn 2000 France Télécom (FT) acquired a 28.5% stake in the company. FT gave a contractual undertaking to fund theestablishment of a UMTS service. At the same time, FT negotiated an option to acquire a majority stake inMobilcom in 2003. In 2000 Mobilcom’s losses amounted to €89 million. These increased to €205 million in 2001. In1997 Mobilcom had employed 220 people. By 2002 the workforce had grown to 5 500. At that time, France Télécomitself was in debt to the tune of €70 billion. In 2001 Mobilcom began to establish its own mobile network. In mid-2001 it had 5.2 million customers. Its debts amounted to five billion euros, and its debt-to-equity ratio wasconsiderably higher than that of its competitors.The funding pledges made to Mobilcom applied only to the establishment of a UMTS network. By this time,however, all the experts agreed that Mobilcom would not make a profit from its UMTS operations, not even in thelong term.In 2002 the government stepped in to save the company from insolvency. France Télécom now tried to do all in itspower to withdraw from its financial commitments to Mobilcom. An infringement of the code of business practice byGerhard Schmid, chief executive of Mobilcom, gave France Télécom the opportunity to declare that it no longer feltbound by its existing contracts and to go back on its pledge to finance the establishment of a UMTS network. After alengthy dispute, France Télécom and Mobilcom reached a compromise, whereby FT took over debts amounting to €7billion. The compromise deal was approved at an extraordinary general meeting at the beginning of 2003. The costlylicense secured by Mobilcom in the UMTS auction had to be returned unused to the Federal Government. At ageneral meeting in April 2005, Mobilcom’s shareholders voted by a large majority to bring an action for damagesagainst FT for having pulled out of the funding agreements.In May 2005 France Télécom sold 27.3% of the shares in Mobilcom to the US private equity investment combineTexas Pacific Group (TPG) and retained a 1% share for itself. TPG obtained three out of twelve seats on thesupervisory board.2.2 Debt structure, alteration of company capital management fees requested by LBOBefore the planned merger with Freenet, Mobilcom once more had a high liquidity ratio as a result of the disposal ofits debts. Mobilcom’s routine business yielded steady operating profits. This aroused the interest of the private equityinvestor, as did the fact that the book values of Mobilcom’s assets were set very low in relation to their real currentvalue. A merger with Freenet would offer the opportunity to convert the balance sheet from book values to currentvalues. This would have unlocked hidden reserves of 800 to 1 000 million euros, providing an opportunity to payspecial dividends or to raise the leverage ratio by means of new borrowing.TPG was firmly resolved to pay out several hundred million euros to shareholders in the form of special dividends.The dividends have yet to be paid, perhaps because TPG is marking time in the face of the wide publicity given to itsaggressive recapitalization plans. Thorsten Grenz, chief executive of Mobilcom, wanted nothing to do with thiswindfall and resigned his post.
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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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within jurisdictions with enhanced
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 212 and 213: 2.5 Protection of minority sharehol
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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