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EquityFC Blog
Showing entries posted in September 2008
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How are your integration skills? | 22 September 2008
Loving this quote from Owen Trotter, founding partner of private equity firm Key Capital Partners: "I’m looking at a bolt-on acquisition for one of our portfolio
companies at the moment. If you can’t sell companies you bought because
of market conditions, you need to do something to enhance their value. Either
you make them bigger or you add one or two smaller companies to extend
the range of the company. It’s a way of creating value if you can’t
rely on prices."
Why do I love it? Two reasons. First, it's fundamentally upbeat. The titans of the investment banking world may have dined royally on toxic investments (at our expense, if the seemingly wrong-headed US Treasury bail-out plan gets copied over here), but elsewhere in the world people are getting on with business. Like most PE firms, I'm guessing Key Capital has uncommitted funds to play with, and it wants to create value for its investors. We should all remember Col Kilgore's final words in Apocalypse now: "Some day, this war's gonna end." And this credit crunch/financial meltdown/recession-ish period will end, too. At that point, the positive people are likely to surge stronger than those who just gave up and shut their eyes.
Second reason I like it is because it's a mid-market, regional PE partner saying that good management is the key to success. That's reassuring for all the FDs and FCs out there: just because the media thinks we're all doomed, that's no reason to stop doing the right things in "Mittelstand" finance functions up and down the country (whether you're PE backed or not).
It also means FDs and FCs with a bit of M&A nous in the mid market are also going to be a hot ticket, either as pemanent placements or as advisers. So keep looking up - and dust off your notes about successful post-deal integration...
The worst conditions for 60 years... NOT! | 8 September 2008
We'll have more to say on Alistair Darling and his frankly misguided views on the economy in due course. But while the mainstream media and politicians are pretty sad for fetishising recession, some press officers are also jumping on the bandwagon.
Take today's release concerning Deloitte's FTSE350 salary survey. The headline? "Economic slowdown takes toll on executive pay". Ooooh - sounds scary, right? If the recession is hitting the boardroom, we're all doooomed! The evidence? "Salary increases for FTSE 350 executive directors
have slowed compared to last year... The median increase is now 6.2%
compared with 7.0% 12 months ago."
Ah. So not that bad at all, really. (Although I'm still a bit disgusted. Plenty of average wage earners are heeding the government's call to swallow sub-4% increases to keep a grip on inflation - so how come the FTSE350 directors are just ignoring them?) And... "The median potential annual bonus is now 150% of
salary in FTSE 100 companies... but remains at 100% of salary in FTSE 250 companies. The
amount actually earned has also increased. In the most recent financial
period, the bonus payout was typically around 70% to 80% of the maximum
possible. Over three quarters of plans paid out in excess of the target
level and only around 6% of executive directors received no annual
bonus payout in the period." Oh, yeah, this recession is really killing us...
Meanwhile, out in the real world, most businesspeople I talk to say, "well, we're not doing too badly, but the economy is obviously screwed." Which reminds me of Tony Blair's famous retort about the NHS: everything thinks they were just lucky when they got a good service at their hospital because obviously the whole system is rubbish. Maybe - just maybe - we can stave off a bad recession if we focus on our own businesses - and not what we're told about the economy.