You’re reading Value Add’s weekly briefing, the leading newsletter for the operating side of private equity. Here’s what you need to know this week, from new insights for PE-backed executives and portco news to recent buyouts and investment trends.

Insights

Chart of the Week: One-third of PE-backed technology buyouts last year have already replaced their CEOs, according to an analysis by Value Add. Excluding tech companies, only 11% of PE-backed CEOs have been replaced over the same time period, which is on par with CEO turnover in publicly traded companies. The data suggests that management changes are still very much a value-creation tactic used by PE firms but not as broadly across industries as one might expect. (Read More)

More Insights

• Europe Private Equity Report 2024 (Read)
• Consumer Sector Private Equity Report (Read)
• Private Equity Case Study: BJ’s Wholesale (Read)
• Energy Sector Private Equity Report (Read)
• CEO Turnover is Highest in PE-backed Tech Buyouts (Read)

Spotlight

What’s the deal? Bapcor, an Australian retailer specializing in automotive parts, has received a takeover bid from Bain Capital valued at A$1.83 billion ($1.2 billion). The offer, made at A$5.40 per share, represents a 23.9% premium over Bapcor's last closing price before the announcement. This proposal comes amidst challenging times for Bapcor, which has faced significant financial and management difficulties in recent years​​​​.

In 2023, Bapcor reported revenues of A$763 million, a +11% increase year-over-year, and an EBITDA of A$124 million, marking a +7% rise. Despite these positive figures, the company's stock price has dropped -21% year-to-date due to a profit warning issued earlier this year. Bapcor forecasted a decline in its second-half profits for 2024, projecting a full-year result between A$93 million and A$97 million, down from A$103 million in 2023. This downturn is attributed to weak retail performance, competitive pricing pressures, and rising operational costs​​​​.

Bapcor has been navigating a turbulent period. The company's recent history includes the departure of CEO Noel Meehan in February 2024 and the subsequent withdrawal of Paul Dumbrell, who was set to replace him. Mark Bernhard, a non-executive director, has stepped in as interim CEO while a search for a permanent leader is underway. Additionally, board chair Margie Haseltine announced she would not seek re-election, further signaling instability at the top levels of management​​​​.

Market Positioning. Bapcor is a leading provider of automotive parts, accessories, and services in the Asia-Pacific region. It operates several well-known brands, including Autobarn, Burson, Autopro, and Midas, and has a network of over 1,100 stores. Despite its strong market presence, Bapcor has struggled to maintain its competitive edge due to rising competition from rivals like Super Retail Group and the pressures of a declining retail environment​​ due to high interest rates and credit card debt which is putting pressure on consumer spending.

Bain Capital's bid is seen as an opportunity to stabilize Bapcor and potentially unlock value through strategic improvements. Analysts believe the private equity firm's involvement could bring much-needed operational expertise and capital to revitalize the company. However, some major investors, including Burson co-founder Garry Johnson, argue that the offer undervalues Bapcor given its potential if managed effectively. This sentiment reflects a broader skepticism about whether Bain's offer represents the best outcome for shareholders​​​​.

Buyout News 

Famed venture capital firm Andreessen Horowitz is launching a private equity fund to invest in mature companies. Not much has been said about the fund’s strategy, but given how active established PE firms have been investing in the tech sector over the past five years, Andreessen Horowitz is probably looking to tap its industry connections to invest in companies that have graduated beyond the startup phase. (Source)

KPS Capital Partners has sold packaging business Eviosys for $4 billion to Sonoco Products, which manufactures cans such as those used by Pringles. KPS paid $2.7 billion for the business in 2021, marking one of the first exits from a PE deal that year. (Source)

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