ECON6024_Private Equity_2009 Semester 1_Reading4_Answers

University of Sydney_ECON6024_Private Equity_2009 Semester 1

The University of Sydney

Note that the answers below are not meant to be exhaustive. They are merely a guide. You should augment them with your own ideas.

Lion and Blackstone are bidding as a syndicate. An important deal for both. Why?

Europe: focus on PE buyouts rather than venture investing. Why? (p. 260) Aging owners

EU anti-trust regulations strategic investors unable to purchase

competitors, even while old conglomerates being broken up.

Less liquid financial markets than US – exit considerations.

Experience with consumer-focussed brands – including food and beverages. Aim for proprietary deals – avoid auctions. Match Lion’s characteristics and bios to requirements of the buyout of Orangina (p. 265-266).

Small fund.

Vast experience – one of the largest PE firms in the world. Focus on business fundamentals first – valuation considered later. Match Blackstone’s characteristics and bios to requirements of the buyout of Orangina (p. 267-269).

Large fund.

Why would Lion and Blackstone make good partners? Worked together on Allied Domencq deal.

Orangina non-core to Cadbury. Why? (p. 270) Softdrinks market growing in Europe. Why? Increased wealth

Increased demand for convenience

Change in consumer tastes

Fast-growing sub-segments

Place of Orangina in its various markets … Problems with how Orangina has been managed recently (e.g. under-investment in marketing, high turnover of personnel). ECON6024: PRIVATE EQUITY Reading 4 - Answers

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University of Sydney_ECON6024_Private Equity_2009 Semester 1

Note PE funds competing against strategic investors (e.g. Pepsi). Opportunities to add value include: (p. 273-274) Costs and benefits of standing alone rather than operating as a corporate

division.

Role of price elasticity

Regulatory issues

Focus related to fact that this is a consumer brand.

See class discussion.

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