|By Marketwired .||
|February 7, 2013 12:01 AM EST||
MUNICH, GERMANY -- (Marketwire) -- 02/07/13 -- Secondary buyouts (secondaries) produce returns that match or even exceed returns on primary buyouts (primaries) sold to private-equity (PE) acquirers -- while carrying substantially less risk, according to a new report by The Boston Consulting Group (BCG) and HHL Leipzig Graduate School of Management. The report, titled "Take a Second Look at Secondaries: Owners That Raise Their Value-Creation Game Can Excel," is being released today.
The report's findings are a strong challenge to critics who claim that secondaries -- companies whose ownership passes from one PE buyer to another -- are second-rate assets, because they have little potential for value creation. Drawing on one of the largest samples of primary and secondary buyout transactions ever compiled, the report reveals that the median annual return on the secondaries in the database was 24 percent, compared with 20 percent on primaries sold to PE acquirers. Another key finding suggests strongly that merger and acquisition (M&A) activity, not leverage, is the surest route to improved returns on secondaries. The median annual return on secondaries that did add-on M&A was 25 percent, compared with a median return of 15 percent on those that did not.
"The competitive returns of secondaries that engaged in add-on dealmaking were driven by the synergies and operational improvements that the deals generated," said Dr. Jens Kengelbach, a BCG partner and coauthor of the report. "So it is puzzling that less than 30 percent of secondaries in our sample engaged in M&A -- even though private-equity executives generally regard M&A as their primary value-creation lever, ahead of alternatives like geographic expansion and outsourcing."
Tertiary Buyouts Are a Viable Exit Strategy
Many PE professionals regard tertiary buyouts (tertiaries) as the exit of last resort -- to be engaged in only if the market's IPO window is closed or strategic buyers show little interest in the asset. But the evidence does not support this view. Returns on secondaries sold to a tertiary buyer were within striking distance of the returns on trade sales. The median annual return on the tertiaries was 21.5 percent, compared with 25.8 percent on the trade sales.
Secondaries that were exited through a sale to a tertiary buyer also held up well compared with those exited through a trade sale on operational-performance metrics such as sales and earnings growth. With little evidence that the IPO market will revive in the near future, investors in secondaries should know that tertiaries remain a viable option.
Secondary Buyouts Are Here to Stay
The report is especially timely, because secondary buyouts have become an increasingly prominent feature of the PE landscape. Secondary and later-stage deal volume in the first nine months of 2012 was roughly $56 billion, according to statistics compiled by Preqin, a clearinghouse for information on alternative investments. Activity in secondary and later-stage transactions is likely to remain high for the foreseeable future, owing to steep declines in public-to-private deals, the moribund state of the market for initial public offerings, continuing efforts by PE firms to deploy capital accumulated during the buyout boom, and pressure from investors for the return of some of their funds.
Better Value Creation Drives Better Performance
The tactics that in the past produced strong returns for secondaries -- M&A and efficiency improvements -- will continue to create value in the years to come. In addition, secondary owners will need to focus more strongly on organic growth. In the future, the PE firms that outperform with secondaries will be those with the skills to pursue organic top-line growth activities while continuing to engage in M&A and realize operational improvements. In short, to maximize returns on their holdings, PE sponsors need to be prepared to use the complete value-creation toolkit.
A copy of the report can be downloaded at www.bcgperspectives.com.
To arrange an interview with one of the authors, please contact Eric Gregoire at +1 617 850 3783 or [email protected].
About The Boston Consulting Group
The Boston Consulting Group (BCG) is a global management consulting firm and the world's leading advisor on business strategy. We partner with clients from the private, public, and not-for-profit sectors in all regions to identify their highest-value opportunities, address their most critical challenges, and transform their enterprises. Our customized approach combines deep insight into the dynamics of companies and markets with close collaboration at all levels of the client organization. This ensures that our clients achieve sustainable competitive advantage, build more capable organizations, and secure lasting results. Founded in 1963, BCG is a private company with 78 offices in 43 countries. For more information, please visit bcg.com.
Bcgperspectives.com features the latest thinking from BCG experts as well as from CEOs, academics, and other leaders. It covers issues at the top of senior management's agenda. It also provides unprecedented access to BCG's extensive archive of thought leadership stretching back almost 50 years to the days of Bruce Henderson, the firm's founder and one of the architects of modern management consulting. All of our content -- including videos, podcasts, commentaries, and reports -- can be accessed via PC, mobile, iPad, Facebook, Twitter, and LinkedIn.
The Boston Consulting Group
Global Media Relations Manager
Tel +1 617 850 3783
Fax +1 617 850 3701
The true value of the Internet of Things (IoT) lies not just in the data, but through the services that protect the data, perform the analysis and present findings in a usable way. With many IoT elements rooted in traditional IT components, Big Data and IoT isn’t just a play for enterprise. In fact, the IoT presents SMBs with the prospect of launching entirely new activities and exploring innovative areas. CompTIA research identifies several areas where IoT is expected to have the greatest impact.
Mar. 2, 2015 02:00 AM EST Reads: 3,047
Wearable devices have come of age. The primary applications of wearables so far have been "the Quantified Self" or the tracking of one's fitness and health status. We propose the evolution of wearables into social and emotional communication devices. Our BE(tm) sensor uses light to visualize the skin conductance response. Our sensors are very inexpensive and can be massively distributed to audiences or groups of any size, in order to gauge reactions to performances, video, or any kind of presentation. In her session at @ThingsExpo, Jocelyn Scheirer, CEO & Founder of Bionolux, will discuss ho...
Mar. 2, 2015 12:00 AM EST Reads: 2,993
Roberto Medrano, Executive Vice President at SOA Software, had reached 30,000 page views on his home page - http://RobertoMedrano.SYS-CON.com/ - on the SYS-CON family of online magazines, which includes Cloud Computing Journal, Internet of Things Journal, Big Data Journal, and SOA World Magazine. He is a recognized executive in the information technology fields of SOA, internet security, governance, and compliance. He has extensive experience with both start-ups and large companies, having been involved at the beginning of four IT industries: EDA, Open Systems, Computer Security and now SOA.
Mar. 1, 2015 04:00 PM EST Reads: 1,265
The industrial software market has treated data with the mentality of “collect everything now, worry about how to use it later.” We now find ourselves buried in data, with the pervasive connectivity of the (Industrial) Internet of Things only piling on more numbers. There’s too much data and not enough information. In his session at @ThingsExpo, Bob Gates, Global Marketing Director, GE’s Intelligent Platforms business, to discuss how realizing the power of IoT, software developers are now focused on understanding how industrial data can create intelligence for industrial operations. Imagine ...
Mar. 1, 2015 03:15 PM EST Reads: 1,364
Operational Hadoop and the Lambda Architecture for Streaming Data Apache Hadoop is emerging as a distributed platform for handling large and fast incoming streams of data. Predictive maintenance, supply chain optimization, and Internet-of-Things analysis are examples where Hadoop provides the scalable storage, processing, and analytics platform to gain meaningful insights from granular data that is typically only valuable from a large-scale, aggregate view. One architecture useful for capturing and analyzing streaming data is the Lambda Architecture, representing a model of how to analyze rea...
Mar. 1, 2015 02:00 PM EST Reads: 1,352
SYS-CON Events announced today that Vitria Technology, Inc. will exhibit at SYS-CON’s @ThingsExpo, which will take place on June 9-11, 2015, at the Javits Center in New York City, NY. Vitria will showcase the company’s new IoT Analytics Platform through live demonstrations at booth #330. Vitria’s IoT Analytics Platform, fully integrated and powered by an operational intelligence engine, enables customers to rapidly build and operationalize advanced analytics to deliver timely business outcomes for use cases across the industrial, enterprise, and consumer segments.
Mar. 1, 2015 01:45 PM EST Reads: 1,230
The explosion of connected devices / sensors is creating an ever-expanding set of new and valuable data. In parallel the emerging capability of Big Data technologies to store, access, analyze, and react to this data is producing changes in business models under the umbrella of the Internet of Things (IoT). In particular within the Insurance industry, IoT appears positioned to enable deep changes by altering relationships between insurers, distributors, and the insured. In his session at @ThingsExpo, Michael Sick, a Senior Manager and Big Data Architect within Ernst and Young's Financial Servi...
Mar. 1, 2015 12:00 PM EST Reads: 1,278
SYS-CON Events announced today that Open Data Centers (ODC), a carrier-neutral colocation provider, will exhibit at SYS-CON's 16th International Cloud Expo®, which will take place June 9-11, 2015, at the Javits Center in New York City, NY. Open Data Centers is a carrier-neutral data center operator in New Jersey and New York City offering alternative connectivity options for carriers, service providers and enterprise customers.
Mar. 1, 2015 12:00 PM EST Reads: 1,925
Mar. 1, 2015 10:30 AM EST Reads: 2,615
PubNub on Monday has announced that it is partnering with IBM to bring its sophisticated real-time data streaming and messaging capabilities to Bluemix, IBM’s cloud development platform. “Today’s app and connected devices require an always-on connection, but building a secure, scalable solution from the ground up is time consuming, resource intensive, and error-prone,” said Todd Greene, CEO of PubNub. “PubNub enables web, mobile and IoT developers building apps on IBM Bluemix to quickly add scalable realtime functionality with minimal effort and cost.”
Mar. 1, 2015 10:00 AM EST Reads: 4,771
Sensor-enabled things are becoming more commonplace, precursors to a larger and more complex framework that most consider the ultimate promise of the IoT: things connecting, interacting, sharing, storing, and over time perhaps learning and predicting based on habits, behaviors, location, preferences, purchases and more. In his session at @ThingsExpo, Tom Wesselman, Director of Communications Ecosystem Architecture at Plantronics, will examine the still nascent IoT as it is coalescing, including what it is today, what it might ultimately be, the role of wearable tech, and technology gaps stil...
Mar. 1, 2015 09:45 AM EST Reads: 927
With several hundred implementations of IoT-enabled solutions in the past 12 months alone, this session will focus on experience over the art of the possible. Many can only imagine the most advanced telematics platform ever deployed, supporting millions of customers, producing tens of thousands events or GBs per trip, and hundreds of TBs per month. With the ability to support a billion sensor events per second, over 30PB of warm data for analytics, and hundreds of PBs for an data analytics archive, in his session at @ThingsExpo, Jim Kaskade, Vice President and General Manager, Big Data & Ana...
Mar. 1, 2015 09:00 AM EST Reads: 1,295
In the consumer IoT, everything is new, and the IT world of bits and bytes holds sway. But industrial and commercial realms encompass operational technology (OT) that has been around for 25 or 50 years. This grittier, pre-IP, more hands-on world has much to gain from Industrial IoT (IIoT) applications and principles. But adding sensors and wireless connectivity won’t work in environments that demand unwavering reliability and performance. In his session at @ThingsExpo, Ron Sege, CEO of Echelon, will discuss how as enterprise IT embraces other IoT-related technology trends, enterprises with i...
Mar. 1, 2015 09:00 AM EST Reads: 2,195
When it comes to the Internet of Things, hooking up will get you only so far. If you want customers to commit, you need to go beyond simply connecting products. You need to use the devices themselves to transform how you engage with every customer and how you manage the entire product lifecycle. In his session at @ThingsExpo, Sean Lorenz, Technical Product Manager for Xively at LogMeIn, will show how “product relationship management” can help you leverage your connected devices and the data they generate about customer usage and product performance to deliver extremely compelling and reliabl...
Mar. 1, 2015 09:00 AM EST Reads: 1,330
The Internet of Things (IoT) is causing data centers to become radically decentralized and atomized within a new paradigm known as “fog computing.” To support IoT applications, such as connected cars and smart grids, data centers' core functions will be decentralized out to the network's edges and endpoints (aka “fogs”). As this trend takes hold, Big Data analytics platforms will focus on high-volume log analysis (aka “logs”) and rely heavily on cognitive-computing algorithms (aka “cogs”) to make sense of it all.
Mar. 1, 2015 09:00 AM EST Reads: 1,067
One of the biggest impacts of the Internet of Things is and will continue to be on data; specifically data volume, management and usage. Companies are scrambling to adapt to this new and unpredictable data reality with legacy infrastructure that cannot handle the speed and volume of data. In his session at @ThingsExpo, Don DeLoach, CEO and president of Infobright, will discuss how companies need to rethink their data infrastructure to participate in the IoT, including: Data storage: Understanding the kinds of data: structured, unstructured, big/small? Analytics: What kinds and how responsiv...
Mar. 1, 2015 05:00 AM EST Reads: 2,468
Since 2008 and for the first time in history, more than half of humans live in urban areas, urging cities to become “smart.” Today, cities can leverage the wide availability of smartphones combined with new technologies such as Beacons or NFC to connect their urban furniture and environment to create citizen-first services that improve transportation, way-finding and information delivery. In her session at @ThingsExpo, Laetitia Gazel-Anthoine, CEO of Connecthings, will focus on successful use cases.
Mar. 1, 2015 04:00 AM EST Reads: 2,932
Mar. 1, 2015 03:30 AM EST Reads: 2,516
SYS-CON Events announced today that GENBAND, a leading developer of real time communications software solutions, has been named “Silver Sponsor” of SYS-CON's WebRTC Summit, which will take place on June 9-11, 2015, at the Javits Center in New York City, NY. The GENBAND team will be on hand to demonstrate their newest product, Kandy. Kandy is a communications Platform-as-a-Service (PaaS) that enables companies to seamlessly integrate more human communications into their Web and mobile applications - creating more engaging experiences for their customers and boosting collaboration and productiv...
Feb. 28, 2015 05:00 PM EST Reads: 1,422
From telemedicine to smart cars, digital homes and industrial monitoring, the explosive growth of IoT has created exciting new business opportunities for real time calls and messaging. In his session at @ThingsExpo, Ivelin Ivanov, CEO and Co-Founder of Telestax, shared some of the new revenue sources that IoT created for Restcomm – the open source telephony platform from Telestax. Ivelin Ivanov is a technology entrepreneur who founded Mobicents, an Open Source VoIP Platform, to help create, deploy, and manage applications integrating voice, video and data. He is the co-founder of TeleStax, a...
Feb. 28, 2015 03:30 PM EST Reads: 4,036