Levers for a balance in the share of future capital gains

The crisis has turned the in the relationship between Fund and leaders, after the boom years where the "management packages" Vivarte, Cegelec, Actaris or Editis patterns were a gold mine of the LBO. With the fall in turnover, managers saw their prospects of added value to the output and have become aware that need them more time to adjust their business than the duration of their remuneration system. "Many patterns realized that their package was not worth more nothing while they were heavily indebted", said Olivier Dardel, a partner at Bucephalus Finance. Others, in 10 of the LBO, in command of firms in difficulty, such as Monier (PAI), Navimo (Duke Street) or OMS (Cognetas, Sagard), had to release the reins. "Yes, the crisis has created situations of tension between Fund and leaders." "It is there that could test the strength of the relationships between managers and teams of investment," said Jean-Marc Dayan, a partner at Duke Street.

A new modus operandi

The crisis has been a developer of troubles before the crisis, updates a study of the OC & C and Newbridge cabinets with a panel of Fund and leaders (1). Amplified the difficulties, arising from the existence of "black boxes", a need for assistance of leaders or a lack of transparency of the funds to the leaders in the renegotiation of bank debt. They materialize after, when, in a third of the cases, the Fund has radically changed its mode of intervention. "Money Coach, which by construction were reluctant to change leaders to not add the crisis to the crisis have become intrusive because of the difficulty in isolating the responsibility of the management of the external causes," indicated Michel Sasportes, managing partner of OC & C, and Thierry Miremont, Associate Director of Newbridge Partners. For fear of being accused of fact management and liability appeal in a failing firm, funds instead withdrew abruptly, the leader then enquiring about their final output.

But these tensions, said the study, remained minority: they were held in 25 of the cases according to the managers, in 10 according to the Fund. "In the majority of cases, funds were able preserve their relationship with the leaders in renegotiating the"managements packages", on a pragmatic basis by reverting to more reasonable terms and conditions in the share of the value, and giving comfort to leaders when these packages put them at high personal risk", explain effect the two leaders. "That a shareholder accepts the principle of reality during the decline of economic indicators, it is a strong sign of maturity in the relationship with the leader," notes Jean-Marc Dayan. These issues eventually, only 5 of the funds took a hard line, indicate the two firms.

Today, funds and leadership must find a new modus operandi. While the market resumes, it must, first, block sales of LBO firms according to strict auctions, consider Michel Sasportes and Thierry Miremont. "Because of the pressure, the manager is sometimes kept away from the sales process and the Fund recipient itself may suffer. Must reduce the levers of debt, the objectives of TRI and extended periods of detention. Managers must not merely of a culture of the result but also of a "cash culture" (controlled cash management) and funds to strengthen their operational culture. Levers for a balance in the share of future capital gains.