Elderd Land - Gimv

Role of PE and VC in private companies

Elderd Land

FDCongres, 22 October 2014

Agenda

• Gimv at a glance

• Investment strategy

• Value creation and portfolio management

ROLE OF PRIVATE EQUITY IN PORTFOLIO COMPANIES 2

GIMV AT A GLANCE


Gimv, a pioneer in continental Europe since 1980


Gimv, a pioneer in continental Europe since 1980

UNIQUE STRENGTHS &

DIFFERENTIATION

• Funding from strong balance sheet,

complemented with specialised co-

investment funds

• Long-term active support to portfolio

companies

• International reach with a local touch,

strong brand & network

• Focus on value creation via

4 platforms

• Flexibility in investment instruments

and exit timing, given evergreen fund

structure

FACTS & FIGURES

• Listed on NYSE-Euronext Brussels

• EUR 1.8 billion AUM

• 34 years of expertise in PE & VC

• 99 employees in 4 offices

DIVERSIFIED PORTFOLIO

A pioneer in continental Europe since 1980


EVOLUTION AUM SHAREHOLDERS (E)

35%

27%

25%

13%

Retail Investors

VPM

Internationalinstitutionals

Belgianinstitutionals

• Average return: 11.6% (33 years)

• Market cap: EUR 918 million (31/03/2014)

• Listed: NYSE-Euronext Brussels

• Free float: 73%

• Employees: 99

0

200

400

600

800

1000

1200

1400

1600

1800

2000

InvestmentPartnership

Equity

Diversified portfolio

24%

10%

27%

15%

21%

3%

BY INVESTMENT PLATFORM

47%

22%

6%

10%

11%

2% 2%

BY GEOGRAPHY

47% Belgium

22% France

6% Germany

10% The Netherlands

11% Rest of Europe

2% USA

2% Rest of the world

24% Consumer 2020

10% Health & Care

27% Smart Industries

15% Sustainable Cities

21% 3th Party Funds

3% Other participations

14%

1%

8%

38%

34%

5%

BY VINTAGE*

* related to the year of initial investment

14% ≤ 2000

1% 2001-2003

8% 2004-2006

38% 2007-2009

34% 2010-2013

5% ≥ 2014

6 ROLE OF PRIVATE EQUITY IN PORTFOLIO COMPANIES

The Private Equity and

Venture Capital landscape …

is evolving rapidly and profoundly

Gimv will be pro-active and a forerunner

in re-shaping its industry


Recap on PE and VC business model


• Closed end

• Listed

• Captive

• Grow business

• Improve operating

results

• Buy & Build

• Incentivise mgt

• Timing

• Buyers universe

• Right process

• Valuation

• Deal selection

• Due diligence

• Financing

• Structuring

Raises funds from

several sources

Sources investment

opportunities and

negotiates deals

Grows the value of the

companies

Creates liquidity for

the investments

ULTIMATE GOAL => TO CREATE VALUE

The Private Equity and Venture Capital landscape …

is evolving rapidly and profoundly

• Structurally, less use of financial

leverage

• Pressure on returns (in PE and VC

models)

• VC-model is experiencing funding

difficulties across Europe

• Increased need to specialize and

deliver “real world” added value

• A number of established players are

forced to reduce their ambition

• Other players disappear because of

financial crisis and reshaping of

financial markets

• Only the most professional and best

performing teams will continue to

have access to funding and best

deals

Gimv will be pro-active and a forerunner in re-shaping its industry


Gimv’s competitive

advantage


Macro-trends

Deal thesis

Investment

platforms

• How to create equity value

• How does the business make money

• Aligned with Gimv’s culture &

strengths

• Deal theses and sectors backed-up by positive

momentum from (societal) trends

• Global – e.g. ageing, need for infrastructure

• Local networks and centres of excellence

A strategy based on specialised investment platforms

• Focus on business clusters

• Proprietary insights and deal theses

• Historical strongholds and successes

• Access to great ecosystems

• While leveraging the firm’s

• Evergreen structure

• Local presence

• PE financial discipline & VC industry

knowledge/insights

Gimv’s organisation today:

Multidimensional cross country platformstrategy

• Consumer 2020 Companies with a clear vision on the needs and preferences of the future consumer

• Health & Care Health and care solutions for the ageing, health- and cost-conscious society

• Smart Industries Smart, technology enabled solutions and added value services

• Sustainable Cities Services, utilities & infrastructure with a sustainable community impact

4 platforms with dedicated and skilled team

across Gimv’s home market: Belgium, the Netherlands, France and Germany


Best-in-Class Partner in Value Creation

GIMV NEXT STRATEGY

• Focused on 4 platforms

• Very pro-active deal sourcing

• Using repeatable, proven and

actionable investment theses

• Active ownership, executing a

mutually defined value creation plan

VALUE DRIVERS FOR PORTFOLIO

COMPANIES

• Clarifying and refining strategy &

business model

• International expansion

• Scaling up, buy-and-build (roll-out)

• Professionalization and operational

excellence

TRANSFORMING HIGH POTENTIAL COMPANIES INTO INTERNATIONAL

MARKET LEADERS


Value creation and portfolio management


Investment process


(INTERNATIONAL)

DEAL FLOW

“Building

value

through

active

participation”

Business building IPO Trade Sale M&A

Sourcing

Initial analysis of the Business Plan

EXPERT DUE

DILIGENCE

Due diligence

Letter of Interest to analyse all aspects in depth

FAST DECISION

MAKING

CLOSING

Deal making

Final negotiations result in Term sheet

BOARD SEAT /

OBSERVER

Business building

Solid collaboration / add Value

MAXIMIZE

SHAREHOLDER

VALUE

Prepare for exit

Exit horizon of 4 to 7 years on average

Four types of value creation for PE and VC


Corporate governance!

(Including delivering proper incentives for management)

1

2

3

Financial Engineering

Deleveraging

Financial restructuring

Improve company performance

Sales growth/margin improvements

Capital utilisation

Buy and build

Requires operational know-how

Multiple arbitrage

Buy cheap, sell high

PE- financials & strategic visibility

VC- strategic relevance & technology/market risk

Financial management

Active ownership

Over time, the way PE and VC create value has shifted

• PE: from deleveraging, multiple arbitrage to operational value creation & growth

• VC: technology development alone not enough but market prove essential

18 22 36

51 31

46

39

31 51

32 25

0%

20%

40%

60%

80%

100%

Leverage era (1980s) Multiple expansionera (1990s)

Earnings growth era(2000s)

Operationalimprovement era

(2010s)

So

urc

e o

f V

alu

e

Operational improvement Multiple arbitrage LeverageSource: BCG-IESE/Goldman Sachs



“Any fool can buy a company, just pay enough.

The hard and important part of our job was what we did to

create shareholder value once we acquired it.”

Henry R. Kravis, Co-Founding Member of KKR

Operational value creation : the only driver that

makes a difference ?

Create value – more than just capital

Stimulate

growth • Growth strategies: organic

& inorganic growth (M&A)

• Introduce new customers,

suppliers and strategic

partners

Legal

Support • Support with legal issues

(patent infringements,

liabilities, disputes)

• Common specifics

surrounding shareholder

structure

• Add commercial and operational skills, complementary team

• Introduce and hire independent industry board members

• Improve corporate governance: audit, remuneration and strategy

committee

MT & supervisory

board

• Improve reporting (KPI,

P&L, cashflow)

• Improve forecasting

(modeling etc.)

• Negotiations with

(venture) debt providers

Financial

support

• Headhunters

• Auditors

• Investment bankers

• Industry analysts

• Entrepeneurs & industry

leaders

Leverage

network


There is a range of portfolio activism styles…

Directive Hands-off

Where you see it

• Turnarounds

• Certain MDs

“Do what we tell you

to do”

• Leading-edge PE firms

“Let’s figure out

what to do

together”

Collaborative

• Traditional approach

“Do what you

said you would do when

we bought the

company”


Source: Bain analysis

Gimv investment style and portfolio relationship

ROLE OF PRIVATE EQUITY IN PORTFOLIO COMPANIES

INVESTMENT STYLE RELATIONSHIP WITH PORTFOLIO COMPANY

20

FLEXIBLE

• In choosing our holding periods

• In responding to market opportunities

and entrepreneurial initiatives

DISCIPLINED

• Regarding good governance, business

ethics and adherence to lean and

professional processes

• “Hands on” investment process

• “Hands with” portfolio management

ENGAGED

• Pro-active

• Building value through active

participation on BoD level

• High level of interaction

• Hands-with

• Agreed business plan as basis for

partnership

CORPORATE GOVERNANCE & REPORTING - BVA ACADEMY 16/11/2012

p. 21

The PE-VC governance model: awareness, priority

and structure

• Due diligence process = profound investigation on all aspects of the corporation

• Financial, legal, IP

• Strategic, commercial

• HR, management

• Set well-defined targets for the company

• 100 days’ or 300 days’ action plan

• Clear business model & business plan > focus

• Disciplined routine for budget and budget reviews

• Separated powers and responsibilities

• For (each of) shareholders / (supervisory) BoD / management

• Management agreements - aligned interests

• Professionalised BoD with independent directors

• Detailed shareholders’ agreement

• Financial and management reporting structure


CORPORATE GOVERNANCE & REPORTING - BVA ACADEMY

16/11/2012

p. 22

The Board of Directors has to provide the company with …

Corporate Governance: the main role of a BoD is to put

an effective management in place

... a well-defined

strategy with

clear objectives

... the tools and

resources to execute

the strategy

... a system to

control the use of

these tools and

resources

... a well- functioning

management to

execute this strategy


Exit

• Horizon varies broadly 3-8 (?) years

• Exit timing considerations

• Market conditions (external)

• M&A market in general

• In specific market segment

• Unique asset /scarcity (internal)

• Unique technology/IP position

• Strong growth and market position

• Profitable or clear path to it

• Strategic value / attractiveness asset (internal-external)

• Large/sizeable market opportunity

• Need-to-have (~ value steps)

• Multiple buyers => create competition around asset

• Above all, companies are NOT SOLD but BOUGHT …

• … however good exit preparations definitely improve chances


Exit preparation

• Formulate buyer categories: e.g. Software vendors, Telco’s,

• Identify indivual acquirors and list contacts in those firms

Map buyers universe

• What makes target so attractive: product, customers, position, etc

• What will be important to different categories and individual firms

• How does company score now on various items

Buyers rationale

• Focus on the right business aspects: nice to have vs. must have

• Focus on right buyers: bottom fishers will remain low in valuation

• Strategies for specific buy rationale’s

• Hidden pearl => create more awareness

• One buyer => create awareness and new (OEM) partnerships

Improve attractivenes (~6 months)

Awareness of AND visibility in ECO system is critical to participate

in M&A activity and enhance value maximisation


Our strategic approach results in real

competitive advantages in our deals

Health & Care


e.g. The number of people over

80 will double by 2030 and

reach 7% of total population

AGEING POPULATION

leading to increasing

demand H&C spending is

increasing, now 9% of

GDP, unsustainable

historical trend of GDP

+2% annually

CONTINUED

GROWTH with need

for structural change

e.g. New 3D imaging

techniques to guide surgeons

CONTINUOUS

TECH INNOVATIONS

e.g. Diabetes cases in Europe

are set to rise by 23% from 2010

to 2030

CHRONIC DISEASES

on the rise

Increasingly educated (80% of people online

search for healthcare related information)

PATIENTS MORE CONSCIOUS

Strong trends underline demand for H&C investments


Let’s focus on Health & Care…


Health & Care Consumer

2020

Smart

Industries

Sustainable

Cities

Control Wolf (F)

Luciad (B)

Joint control Almaviva (F)

Xeikon (B) Veolia (B)

Minority Eurocept (Nl)

PlanetVeo (F) Lampiris (B)

Itineris (B)

Early VC Covagen (CH)

Complix (B)

Agrosavfe (B)

Co-scale (B)

VC-deals: red PE-deals: green

Health & Care value creation strategies

Biotech HealthCare Services Medtech

Development projects with well

defined value creating milestones

• We invest in disruptive

technologies

• with good chances to yield a

transaction with pharma

Product engines with multiple shots

on goal

From early to mid stage (seed

investments included in Flanders)

• Buy & build in the mid-market

• Regional pre-consolidation

• Growth acceleration in new

healthcare delivery models

• Participate in new integrated

care models

• Partner with family owned

businesses

• (partial) Privatization

• Value chain optimization

Disruptive technologies

• at least animal data

• close to CE-mark

Next generation products

• incremental technology

improvements: more

complementary with existing

technologies

Growth acceleration

• initial revenues

• clear sales/distribution model

• growth capital and buy-outs

• buy & build on top of existing

business


INVESTMENT DETAILS

COMPANY STRATEGY & OUTLOOK

INVESTMENT RATIONALE

www.eurocept.nl

ROLE OF PRIVATE EQUITY IN PORTFOLIO COMPANIES

Eurocept

• Investment of Gimv and Gimv Health & Care Fund, minority position

• Eurocept wants to build a leading position in the Netherlands and entering new

markets by complementing organic growth with a careful buy-and-build strategy.

• Growth focused on broadening product portfolio and entering new geographies

• Trend to out-patient medical treatment and direct-to-patient distribution offers

excellent growth opportunities

• Integrated model of specialty pharma and medical homecare offers clear synergies

• Eurocept is a well established player and well positioned to take lead in market

consolidation and taking on new therapeutic areas

Eurocept, established in 2001 in Ankeveen, offers a unique combination of specialty pharma products

(Pharmaceuticals) and medical homecare services (Homecare). Focus on high-value prescription drugs for

chronic diseases where by both divisions target the same medical specialist groups (prescribers) and offer

integrated care offering of the product (medicine, nutrition etc), the delivery and application (medical device

and nursing service) as well the monitoring (data and therapy compliance) of the patient at home.

29

Concluding statements


Concluding comments

• Gimv fundamental focus on growth opportunities through real value creation in

portfolio

• In-depth knowledge of the sectors is key

• …to find & assess the right deals

• …to build the equity story and pay a competitive/fair price

• and to create value in the portfolio

• Gimv combines VC skills and PE skills into one team.

• Discipline in operational and strategy execution

• Nature to develop and maintain industry knowledge and ecosystem

• Portfolio management focused on creating sustainable value

• Clear equity story defined upfront including organic vs. non-organic growth

• Disciplined execution, maintaining flexibility and engaged partnership


CONTACT

Belgium

Gimv nv

Karel Oomsstraat 37

2018 Antwerpen

T +32 3 290 21 00

The Netherlands

Gimv Nederland Holding BV

Lange Voorhout 9

2514 EA Den Haag

T +31 70 3 618 618

France

Gimv France SAS

38, avenue Hoche

75008 Paris

T +33 1 58 36 45 60

Germany

Gimv

Promenadeplatz 12

80333 München

T +49 89 442 327 50

Elderd Land

Partner

[email protected]

M: +31 6 53 76 41 07

Economy & Finance

Elderd Land - Gimv