Bain Capital Private Equity Investing in 2015 Discussion Materials –Bocconi University June 2015
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Growth is Coming Back… in Moderation
5.0%
“The Old Normal”
“The Crisis Years”
“The New Normal”?
4.3% Eurozone Nominal GDP CAGR
4.0% 3.0% 2.0%
Inflation 2.6%
2.2% 1.4%
1.0%
1.5%
Real GDP -0.1%
0.0% -1.0%
Positives: • Euro/$ supports exports • Interest rates very low • Europe corporate profit margins lagging US • €1.1 trillion Eurozone QE just beginning
2000-07
2008-13
2014-20F
Challenges: • Currency union still fragile • Ageing demographics • QE is stimulating financial, not productive assets
BainCapital PRIVATE EQUITY
Source: IMF historicals and forecasts as of April 2015
2
But Europe Remains an Attractive Place to Invest
Opportunities
Europe’s Challenges • • •
Owners (even governments) finally selling assets Private equity provides effective liquidity Managements need help to access transformative international growth
Sustained transaction volume
Complex environment with diverse local dynamics
• • •
Complexity creates differential insights Deep local teams provide true understanding Trusted relationships enable us to buy well
Still opportunitie s to buy well
Still high impact of management best practices
• • • •
Conglomerates with non-core assets Companies facing global competition Cost structures out of synch with the market Sales forces underperforming potential
Potential for growth
Owners of assets must adapt to lower growth climate
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3
….GDP Growth is not the only Driver of Returns
Macro Trends
2nd-Order Drivers
Micro Opportunities
“Appreciate macro growth: its uncertainty and relative price”
“Derive growth insight from 2nd-order drivers”
“Make growth happen”
• PEG ratio sensitivity!
Generally GDP Growth is Low…….
• Country and sector themes… • Intensive analytics
……But You Can Find Industries with Penetration Drivers
• Strategic and operating insight… • Active involvement ….And Companies with Operational Improvement Oppties
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4
..But you Need to be Mindful of Where Value Creation Comes From
Macro Trends Be Global • Broadest perspective: - Over geographies - Over asset classes
• Long-term outlook vs. short-term reactions
2nd-Order Drivers Build Differential Insights
Micro Opportunities Be Active Partners
• Deep vertical expertise over decades
• Insight drives company selection
• Multi-geography presence
• Blueprint guides strategic change
• Large portfolio of companies
• Nimble Board - Bias for Action • Capital and People drive consolidation
BainCapital PRIVATE EQUITY
5
A Differentiated Approach is Important…..
Focused Sourcing
Disciplined Selection
Unique Value Creation
•
Sector specialisation Value creation potential (corporate carve-outs) Differential insights
Experienced local team with deep industry knowledge and close relationships with corporates
Large investment team with global experience in complex transactions
• •
Deliver transformational change Drive growth, margin and cashflow Position for multiple re-rating Realise value
Integrated approach combining deal team with 21 dedicated portfolio professionals on the ground
• •
• •
BainCapital PRIVATE EQUITY
Headcount for European portfolio group as of My 2015.
6
…to Create Opportunities for Alpha
Apply Bain Capital Core Strategy • Differentiate on complexity and global scope • Find contrarian conviction in diligence • Drive equity value through change across multiple dimensions
Structure for Asymmetry
• Focus on purchase price to growth multiple • Smaller % equity accounts − Less at risk − More opportunity to multiply equity • Dividends ASAP
Multiple Paths to Exit • Asset Selection − Seek assets which attract trade and financial buyers (not just IPO exit) • Asset Marketing − Build demand early, and broadly, as buyer pool widest in years
