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Private Equity Presentation
- 1. Private Equity Long-term investing to build stronger & more competitive companies
- 2. 2AFLG Investments Private Equity “We care about your organization and your success. We help you tackle your toughest challenges. We measure ourselves by our clients’ success and particularly by the impact you achieve in the market. ” Freddy Russian is a Founder, Chief Executive Officer and Managing Director of American Family Legacy Group and AFLG Investments Private Equity for the Global Private Equity and Global Market Strategies. As founder of American Family Legacy Group in 2009 and AFLG Investments Private Equity in 2013, Mr. Russian has led AFLG Group to become a highly successful and trusted Global Firm. His experience and achievements have guided AFLG Investments to become a Powerful Player Globally. Mr Russian began his career in 1991 as a Head Currency Trader managing over a billion dollars in currencies. In addition different roles in “Wall Street” as Financial Analyst ,Senior Rating Bond Analyst (Dow Jones), in Private Client Group as an Assistant Vice- President (Bank of America/Merrill Lynch) Always using different strategies and innovation for the ultra-high network families and institutions. Mr. Russian has a BA in Business Administration and Finance from the University of Central Oklahoma and many other industry certifications. In addition, throughout his career has been recognized with many awards, including the “Silver Spur” award and the “Director’s Club” award. FREDDY RUSSIAN AFLG Group, President & CEO AFLG Investments Private Equity
- 3. 3AFLG Investments Private Equity But in reality, private equity is much more… By definition, private equity is an asset class in which financial buyers purchase stakes in companies that are not publicly traded. A source of capital for companies in need. A job creator and employer of millions of Americans across the country. A key driver of economic growth and innovation. A steady source of income for its investors such as public and private pension funds, university endowments and charitable foundations. Private Equity is: AFLG Investments Private Equity
- 4. 4AFLG Investments Private Equity AFLG Investments Private Equity Originated in the US in the 40s with the founding of two Venture Capital firms American Research and Development Corporation (ARDC) and J.H. Whitney & Company. First Leveraged Buyout in 1955. LBO boom in the 80s with the emergence of KKR. Purchase of RJR Nabisco for $31.1 billion in 1989 standout LBO deal and subject of a book (Barbarians at the Gates)
- 5. 5AFLG Investments Private Equity AFLG Investments Private Equity Managers unlock significant value by: Leverage Multiple Expansion Superior Returns EBITDA Growth Topline Grown Efficiency Improvement + + = Improving Business Strategy Injecting Managerial Expertise Advancing Production Technology Expanding Distribution The essence of private equity is the alignment of interests between management and business owners. This structure supports long-term planning without constant pressure of delivering quarterly results to public shareholders focused on short-term results. There is one shared objective: increasing company value. Together, management and owners make business decisions to achieve this goal.
- 6. 6AFLG Investments Private Equity AFLG Investments Fund Structure Projects Limited Partners Institutional Investors Private Individuals Onshore Institutional Investors Onshore Private Individuals American Private Equity , LLC General Partner M & A Services American Family Legacy Group, LLC Management Company AFLG Investments Delaware Limited Partnership
- 7. 7AFLG Investments Private Equity AFLG Investments Private Equity PE Entry ExitValue Creation Within 3-5 Years Financial Support • Raising new equity rounds and debt financing • Financial Planning & cost control • Introducing transparent reporting system M&A Support • Developing M&A strategy • Search and valuation of attractive acquisition targets • Legal support and deal structuring • Integration assistance Operational Support • Help in bringing top experience people to the team to bridge personnel gaps • Attracting independent board members and industry experts • Motivation schemes implementation • Development of tax and legal structure, IT systems • Access to anew partner and client network, help in expanding abroad • Optimization business processes and internal decision-making Help in forming / adapting company strategy • Business model adaptation to changing market realities • Implementing company development plan and setting KPI’s Preparing company for an IPO or trade sale • Improvement of corporate governance • Substituting investment banks at exit • Legal support and deal structuring
- 8. 8AFLG Investments Private Equity AFLG Investments Private Equity • Companies are acquired using Financial Leverage • Leverage can account for between 50% and 90% of total transaction cost • Target companies usually mature with strong cash flows • Cash flows generated by company used to pay down debt • Value generated when debt portion is paid down Leveraged Buyouts • Funds buy partial stake in an early stage company • Early stage companies go through various rounds of funding – Stage A, B, C, D, E, etc. • Funds typically exit their investment with IPO or buyout from subsequent funding rounds • Funds usually go public after scaling • Riskier than typical PE investment due to business failure • High return potentials e.g Google, Microsoft, Facebook Venture Capital • Company seeking expansion • Typically profitable and able to generate cash, but not enough to finance expansion • PE company approach is typically more hands on. • Value is generated via • Good entry price • Operational/Margin improvements • Growth due to expansion Growth/Expansion Capital Management Buyouts • PE fund supports existing management to take over company • Reliance on management to derive value • Inherent alignment of interest is invaluable Distressed Investments • Investment in equity or debt securities of financially stressed companies. • Value is generated by turning around the business in addition to the typically undervalued entry price • PE funds typically have relevant industry experience Others
- 9. 9AFLG Investments Private Equity AFLG Investments Private Equity The private equity industry: Includes more than 2,400 U.S. based private equity firms, and 3,400 worldwide. Invests more than $1.6 trillion in 15,200 U.S. based companies over the last ten years. Sponsors companies that employ more than 8 million workers worldwide.
- 10. 10AFLG Investments Private Equity AFLG Investments Private Equity 1 2 3 6 54 Public Pension Funds Private Sector Pension Funds Others Sovereign Wealth Funds Endowment Plans Banks & Investment Banks 7 8 Foundations Insurance Companies
- 11. 11AFLG Investments Private Equity AFLG Investments Private Equity Limited partner investors receive the lion’s share of returns generated by private equity. Original Investment - $10 billion Limited Partner Investors Private Equity Fund Managers Returns from $10 billion fund assuming a 3x multiple Profit - $15.6 billion Profit - $4.3 billion
- 12. 12AFLG Investments Private Equity AFLG Investments Private Equity 11.3% 39.6% 2.7% 6.3% 0% 10% 20% 30% 40% 50% U.S. Private Equity Index Top Quartile Private Equity Funds (Vintage Year 2001) S&P 500 Index Russell 2000 Index 10-Year Annualized Return Private equity investing provides outsized returns to help investors meet their retirement, educational and charitable goals
- 13. 13AFLG Investments Private Equity AFLG Investments Private Equity Private equity-backed companies that went public have outperformed their competitors and the markets. 23% 12% 0% 10% 20% 30% Private Equity-Backed Companies Publicly Traded Competitors Average Return in 2014 Productivity at private equity-backed companies grows 2 percentage points faster than at their competitors.
- 14. 14AFLG Investments Private Equity AFLG Investments Private Equity 2015-H1 Industry Investments Totals (Billion) $73 $69 $19 $19 $16 $31 $9 Business Products & Services Consumer Products & Services Healthcare Information Technology Materials & Resources Energy Financial Services
- 15. 15AFLG Investments Private Equity AFLG Investments Private Equity Companies in the top ten states receiving private equity investment employ more than 4.5 million people. (2014) 0 200,000 400,000 600,000 800,000 1,000,000 $0 $50,000 $100,000 $150,000 $200,000 $250,000 Texas California New York Illinois New Jersey Pennsylvania Florida Georgia Tennessee Connecticut Number of EmployeesCapital Invested Capital Invested Number of Employees
- 16. Private Equity Long-term investing to build stronger & more competitive companies