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Private Equity: The German Experience PDF

640 Pages·2011·2.739 MB·English
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Private Equity The German Experience Paul Jowett and Francoise Jowett Private Equity Also by Paul Jowett and published by Palgrave Macmillan PARTY STRATEGIES IN BRITAIN (with David Butler) THE ECONOMICS OF INFORMATION TECHNOLOGY (with Margaret Rothwell) PERFORMANCE INDICATORS IN THE PUBLIC SECTOR (with Margaret Rothwell) RIVALRY IN RETAIL FINANCIAL SERVICES (with Margaret Rothwell) Private Equity The German Experience Paul Jowett and Francoise Jowett © Paul Jowett and Francoise Jowett 2011 Softcover reprint of the hardcover 1st edition 2011 978-0-230-53776-7 All rights reserved. No reproduction, copy or transmission of this publication may be made without written permission. No portion of this publication may be reproduced, copied or transmitted save with written permission or in accordance with the provisions of the Copyright, Designs and Patents Act 1988, or under the terms of any licence permitting limited copying issued by the Copyright Licensing Agency, Saffron House, 6–10 Kirby Street, London EC1N 8TS. Any person who does any unauthorized act in relation to this publication may be liable to criminal prosecution and civil claims for damages. The authors have asserted their rights to be identified as the authors of this work in accordance with the Copyright, Designs and Patents Act 1988. First published 2011 by PALGRAVE MACMILLAN Palgrave Macmillan in the UK is an imprint of Macmillan Publishers Limited, registered in England, company number 785998, of Houndmills, Basingstoke, Hampshire RG21 6XS. Palgrave Macmillan in the US is a division of St Martin’s Press LLC, 175 Fifth Avenue, New York, NY 10010. Palgrave Macmillan is the global academic imprint of the above companies and has companies and representatives throughout the world. Palgrave® and Macmillan® are registered trademarks in the United States, the United Kingdom, Europe and other countries ISBN 978-1-349-35942-4 ISBN 978-0-230-30866-4 (eBook) DOI 10.1057/9780230308664 This book is printed on paper suitable for recycling and made from fully managed and sustained forest sources. Logging, pulping and manufacturing processes are expected to conform to the environmental regulations of the country of origin. A catalogue record for this book is available from the British Library. A catalogue record for this book is available from the Library of Congress. 10 9 8 7 6 5 4 3 2 1 20 19 18 17 16 15 14 13 12 11 Contents List of Figures vi List of Tables viii Preface ix Acknowledgements xi The Interview Partners xii 1 Introduction 1 2 Minority Participations: 1965–1975 10 3 The Failed Venture Capital Experiment: 1976–1991 15 4 The Early Shoots: Genes Ventures, Matuschka/TVM, & 24 HANNOVER Finanz 5 The First Phase: From Venture Capital to LBOs 52 6 The Second Phase: 3i, CVC, Bain, and Matuschka 76 7 The Third Phase: Trial and Error with LBOs 108 8 The Schroders’ Story of the 1980s 159 9 The 1984–1991 Experience in Retrospect 178 10 The Fourth Phase: Frustrating Times 1992–1994 184 11 East German Adventures 247 12 The Fifth Phase: Retrenchment & Spin-offs: 1995–1996 275 13 The Sixth Phase: The Tsunami Begins 300 14 The Seventh Phase: 2001: The Collapse and Its Aftermath 377 15 The Eighth Phase: The Booming Market: 2004–2007 426 16 The Ninth Phase: The Fall 480 17 What Did Private Equity Ever Do For Germany? 501 A Note on Sources 506 Notes 510 Index 531 v List of Figures 4.1 Klaus Nathusius 26 4.2 Cover story of Der Spiegel: World Power – Deutsche Bank 31 4.3 Reinhard Pöllath 39 4.4 Albrecht Hertz-Eichenrode 47 5.1 Robert Osterrieth 55 5.2 Robert Osterrieth’s Memo to Nick Ferguson Proposing 65 a German LBO Fund 5.3 Thomas Matzen 70 6.1 Mitt Romney and Bill Bain 86 6.2 Overview of the Matuschka Group 94 7.1 Raimund König 110 7.2 Dietmar Scheiter 112 7.3 Markus Trauttmansdorff 116 7.4 Otto van der Wyck 118 7.5 Stefan Zuschke 129 7.6 Thomas Pütter 141 7.7 Albrecht Matuschka 145 7.8 The Crash of the Leifeld Investment 151 7.9 Rolf Dienst 155 9.1 Overview of Private Equity Office Openings & 179 Team Changes 9.2 Sources of Private Equity Transactions, 1984–1991 180 10.1 Martin Halusa 214 10.2 Chris Peisch 227 10.3 Eberhard Crain 230 10.4 Tombstones for Cinven & Thomas CJ Matzen in 235 Germany 10.5 Finding a New Home for the MatCap Portfolio 239 10.6 The MatCap Portfolio of Companies 242 10.7 The Bain & Company Structure for Managing the 244 MatCap Portfolio 11.1 The East German Investment Trust Portfolio 268 13.1 Jens Odewald 320 13.2 Norbert Stelzer 322 13.3 Sources of Private Equity Transactions, 1992–2000 345 14.1 Ralf Huep 398 15.1 Thorsten Langheim 441 vi List of Figures vii 15.2 Der Spiegel Coverstory: The Greed of the Big Money 452 15.3 Stern Coverstory: The big feast – why we are all locusts 453 16.1 Sources of Private Equity Transactions, 2001–2009 491 17.1 Sources of Private Equity Transactions, 1984–2009 503 List of Tables 4.1 Private Equity Transactions in 1980–83 49 5.1 Private Equity Transactions in 1984 54 5.2 Private Equity Transactions in 1985 59 6.1 Private Equity Transactions in 1986 91 6.2 Private Equity Transactions in 1987 100 7.1 Private Equity Transactions in 1988 136 7.2 Private Equity Transactions in 1989 153 7.3 Private Equity Transactions in 1990 157 9.1 Private Equity Transactions in 1991 182 10.1 Private Equity Transactions in 1992 204 10.2 Private Equity Transactions in 1993 210 11.1 Private Equity Transactions in 1994 258 12.1 Private Equity Transactions in 1995 282 12.2 Private Equity Transactions in 1996 291 13.1 Private Equity Transactions in 1997 303 13.2 Private Equity Transactions in 1998 311 13.3 Private Equity Transactions in 1999 350 13.4 Private Equity Transactions in 2000 354 14.1 Private Equity Transactions in 2001 404 14.2 Private Equity Transactions in 2002 406 14.3 Private Equity Transactions in 2003 416 15.1 Private Equity Transactions in 2004 443 15.2 Private Equity Transactions in 2005 457 15.3 Private Equity Transactions in 2006, A–L 461 15.4 Private Equity Transactions in 2006, M–Z 468 15.5 Private Equity Transactions in 2007, A–L 472 15.6 Private Equity Transactions in 2007, M–Z 476 16.1 Private Equity Transactions in 2008, A–L 482 16.2 Private Equity Transactions in 2008, M–Z 485 16.3 Private Equity Transactions in 2009 497 viii Preface A journalist writing from the standpoint of April 2010, when we sub- mitted our manuscript to Palgrave Macmillan, might well have been tempted to entitle this book: “The rise and fall of private equity in Germany”. There would have been a certain symmetry to the story that followed; perhaps too long on the rise and too short on the fall. But while such a title would make good copy for a newspaper, for a book it would risk being an ill-judged epitaph. The aptness of the journalist’s title surely fades over time. As writers of a book, we hope for a longer period of circulation. Even at its nadir, during the dol- drums of 2009, the small cap segment of private equity was alive and kicking. Only in large cap and mid cap were the private equity markets temporarily choked off by the widespread collapse in credit. Private equity’s fall from grace after the Lehman Brothers bankruptcy was perhaps in large part both inevitable and predictable. Any industry which enjoys a period of run-away success is bound to hit a speed- bump at some point or another. Has our story been influenced unduly by being written during the period of melt-down? We think not. A few members of the industry suggested that the industry’s fall-out would mark a fitting end to our book. But we cannot believe that the crisis of 2009 marks the begin- ning of the end for private equity. Far more likely, private equity will regain its poise, and chart once more a course of growth and develop- ment. The industry has been written off many times before, and no doubt will be written off many times again in the future. A more accurate title for our book might have been: “The cyclical development of private equity in Germany during the period 1984–2009”. That would hardly have made for catchy copy, although it would have given a better flavour for the real picture. While writing up our verdict on private equity’s first phase from 1984–1991, we pondered how the industry managed to survive to the second. Much went wrong during those early years, and large sums of money were lost. Investors could have been forgiven for shunning the sector thereafter. Similarly, the bursting of the dotcom bubble in 2001, which undermined venture capital in such spectacular fashion, could have bequeathed a similar fate to private equity. That it didn’t was more by luck than design. For in the minds of many, confusion between the two remained deep rooted. ix

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