There's been a realisation, post-economic crisis, that private equity needs to return to its roots: creating value through operational improvement rather than financial engineering. That's why this year Private Equity International launched its inaugural Operational Excellence Awards, designed to highlight the industry's leading operationally-focused firms.
The PEI awards are evidence of a welcome recognition that PE needs to return to its roots as a value added partner.
Nordic firms dominated the EMEA regional awards, with EQT taking the overall trophy for its investment in German cable group KBW. EQT transformed KBW from a technology-focused utility style company to a mass-market, consumer-focused business with top quality products and service. In doing so, it achieved annual 18 percent sales growth, 23 percent EBITDA growth and 21 percent employee number growth.
2012 PEI Operational Excellence Award Winners
American Industrial Partners, Brooks Instrument (overall winner, Americas; energy/services)
Clayton Dubilier & Rice, Sally Beauty (retail/consumer)
The Gores Group, Lineage (TMT)
MatlinPatterson, XLHealth (healthcare)
The Blackstone Group, Graham Packaging (manufacturing/industrial)
Chicago Growth Partners, Royall & Co. (business/financial services)
Headland Capital Partners, Yonghui Superstores (overall winner, Asia; retail/consumer)
Hony Capital, China Shijiazhuang Pharmaceutical Co (healthcare)
KKR Asia, Modern Dairy (manufacturing/industrial)
The Blackstone Group, Intelenet Global (business/financial services)
EQT, KBW (overall winner, EMEA; TMT)
Milestone Capital Partners, Coffee Nation (retail/consumer)
Nordic Capital, Nycomed (healthcare)
Altor, SPT (energy/services)
Aureos/Abraaj Capital, Golden Lay (manufacturing/industrial)
PAI Partners, Spie (business/financial services)
In the Americas, American Industrial Partners won overall for its investment in Brooks Instrument, a provider of flow meters and controllers (which also won the energy & services category). Through add-on acquisitions, expansion into new markets, and the development of new product lines, AIP managed to nearly triple EBITDA – from $14 million at the time of acquisition to $40 million in 2011 – and increase market share from 15 percent in 2007 to 23 percent at time of exit in early 2012.
In Asia, judges unanimously decided that Headland Capital Partners' work with Yonghui Superstores in China was the stand-out winner. Despite taking a minority shareholding position, Headland was able to drive Yonghui’s expansion – from 58 stores in 2007 to 204 in 2011 – and leverage increased scale, striking better supply deals as the company moved into new Chinese markets. Over the period of Headland’s involvement with the company, Yonghui experienced sales growth of 48 percent and EBITDA growth of 47 percent.
Judges for EMEA included Professor Eli Talmor, of the Coller Institute of Private Equity; Thomas Pütter, chairman of Ancora Finance Group; and Sir Edmund Truell, founder, Pension Corporation. For the Americas, judges included Jim Ilaria of Alvarez & Marsal; David Turner, head of PE at Guardian Life; and University of Chicago's Steve Kaplan. In Asia, judges included Vinit Bhatia, acting head of Bain & Company's private equity practice in Asia; Paul Mitchell, KPMG partner; and Jie Gong, executive director at Morgan Stanley AIP.
Thomas Pütter commented: “We live in a world where PE returns will have to be driven not by macro-plays but by real strategic and operational improvements in companies. The PEI awards are evidence of a welcome recognition that PE needs to return to its roots as a value added partner for companies and management teams enabling transformations and growth trajectories through its contribution of capital and expertise, which these companies would otherwise find more difficult to attain.”
Full write-ups of the winning investments were published in our special Operational Excellence supplement alongside the October issue of PEI.
PEI will also soon be hosting its second annual Operating Partners Forum in New York on 18-19 October, which will bring together a roster of senior industry figures including Alan Lafley of Clayton, Dubilier & Rice, and Robert Nardelli of XLR-8 Investment and Advisory Company.