unleashing organizacional value

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Unleashing organizacional value Value proposition for LATAM Private Equity & Venture Capital January 2015 Ignacio Garcia – Santos [email protected]

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Unleashing organizacional value Value proposition for LATAM Private Equity & Venture Capital

January 2015 Ignacio Garcia – Santos

[email protected]

Private Equity in Latin America

Latin American economies are growing... ..at a steady pace even though there are still big political and infrastructural issues to be solved…

With a strong middle – income class… ..that will leverage a market expansion in the coming years creating big opportunities for those with local experience and networks…

“The  poten*al  impact  of  VC  in  La*n  America  is  enormous  considering  that  small  and  medium  enterprises  account  for  more  than  95%  of  all  firms  in  the  region  and  are  responsible  for  60%  to  70%  of  employment”  

Situation which is attracting Global PE to the Region…

“Absorbing  the  lessons  of  what  has  not  worked  well  in  China  and  India,  GPs  and  LPs  are  broadening  their  horizons  beyond  the  BRICs  to  seek  diversifica*on  in  markets  that  will  offer  the  next  wave  of  growth,  including  Sub-­‐Saharan  Africa,  

Southeast  Asia  and  La*n  America”  Bain  PE  Report  2014    

A recovering industry focused on expansion… …creates a unique opportunity for Latin American PE funds with value creation and long term investment philosophy…

Mid  –  Market:  Size  of  investment  (10  –  100  mill  usd)  or  Company  revenue  (30  –  250mill  usd)    

 A  total  of  US$3.5b  was  raised  during  the  first  half  of  2014,  with  final  or  par*al  

closings  for  23  separate  funds.    

An opportunity that requires… Organizations capable of dealing with developing economies and complex business environments.

Targeted  policy  tools  to  promote  business  development  in  La*n  America  

OECD  2013    

Our approach & value proposition

Organizations are complex systems with a high interdependence between its elements..

The disconnection between any of the elements of the system has a huge impact on its execution capability destroying value

as a consequence.

Each phase of a growth cycle requires a distinctive articulation of the elements…

Time  Co

mplexity

 

Understanding the organizational system correctly is critical in order to determine the best possible approach to its challenges.

Having a clear understanding of which are the main restrictions impeding growth… is crucial in order to determine the most appropriate approach to unleash the potential value.

Accountabilities

Capability

Integration of value chain

Coordination and Execution

Vision

Leadership

Identity Versatility

Value strategy

Alignment and planning

DIRECTION

CULTURE

CA

PABI

LITY

D

ELIVERY

Our value proposition... Stage: Value strategy vehicle evaluation

Offer Description

o  Diagnostic tools: Transformation index ®

o  Organizational diagnosis to understand how the system is working and what is the most important deficiency and restriction to unleash value.

o  Specific cultural assessment.

o  Diagnostic tools: Organizational complexity diagnosis

o  Determine how much value is lost due to organizational deficiencies in levels of work, role relationships, accountability setting and organizational design.

o  Diagnostic tools: Capability assessment

o  Evaluate GP, Board or Management capability to manage the vehicles complexity.

o  Determine adequate capability and strategy / role correlation to increase probability of promised returns.

“We increase the funds knowledge of the organizational capabilities that affect investment returns in a simple and

measurable way”  

Our value proposition... Stage: Value strategy vehicle development

Offer Description

o  Organizational Integration

o  Cultural readiness pre – integration

o  Cultural integration (during integration process)

o  Organizational strategic alignment (after integration).

o  Organizational design & Capability planning

o  Organizational design aligned to the strategy of one investment object or the combination of several.

o  Determine the most appropriate governance system and decision making allocation according to the strategy.

o  Install talent management system and leadership practices to assure requisite organizational capability.

o  Exit alignment of management team

o  Prepare management team to sell company increasing transition readiness and strengthen leadership to conduct the transition.

“We increase the investments viability reducing time and effort in the performance improvement of the investment object”

Our experience in LATAM… Some successfully cases..

Company   Year   Project   Descrip8on    

AESA    YPF  Group     2014    

Organiza*onal  value  chain  Integra*on  

In  2014,  aaer  7  years  of  having  worked  in  the  company's  turnaround  aaer   near   bankruptcy,   AESA   needed   help   dealing  with   its   growth   in  the  Oil  &  Gas  engineering  and  construc*on  services  industry.  The  local  industry   was   under   a   huge   expansion   fueled   by   shale   gas   which  required   a   more   integrated   company   capable   of   assuring   value  delivery  at  a  total  new  level  of  demand.  AMG  lead  the  transforma*on  and  value  integra*on  process.    

Britanite    Grupo  CR  Almerida,  Grupo  Breca  and  Sigdo  Koppers  

2013  

Organiza*onal  design  and  capability  assessment      

In   2012   the  mining   services   company,   Britanie   (Brazil),   incorporated  Sigdo  Koppers  (Chile)  and  Grupo  Breca  (Peru)  as  stakeholders.  In  2013  the   new   board   asked   AMG   to   help   determine   which   would   be   the  most  adequate  organiza*onal  design  and  capability  requirements  for  the   new   strategy.  We   designed   a   new   organiza*on   and   the   first   to  levels  of  management  where  evaluated   to  determine   their  fit   to   the  new  role  requirements.    

Petrobras  Argen8na     2004  

Execu*ve  Capability  Assessment  

In  2004  the  Oil  &  Gas  company  Petrobras  Argen*na,  acquired  Pecom  Energia   from   the   Perez   Companc   Group.   During   the   process   AMG  Consul*ng   assessed   all   key   execu*ves   and   advised   on   the  conforma*on   of   the   merged   company   in   order   to   assure   adequate  capability  in  the  joint  company.    

Our experience in LATAM… Some successfully cases..

Company   Year   Project   Descrip8on    

LAN  &  TAM    LATAM  Airlines  Group    

2012     Cultural  Integra*on    

Aaer  the  integra*on  of  the  two  airlines  was  anounced,  in  2012  all  regional  and  “long  haul”  opera*ons  where  merged  bringing  together  two  very  different  cultres  and  management  styles.  AMG  was  incharge  of  integra*ng  the  management  team,  clarify  new  accountabili*es,  and  strengthen  the  team's  dinamic.  At  the  same  *me,  and  during  6  months,  we  worked  with  all  the  opera*ons    to  increase  cultural  integra*on  redeaness,  develop  leadership  capabili*es  to  deal  with  change  and  cultural  flexibility,  and  align  opera*ons  with  merger  priori*es  and  cri*cal  areas  of  success.    

Alsacia  &  Express     2011  

Organiza*on  Design  of  integrated  company    

In  2011  Grupo  Rios  acquired  the  remaining  stake  in  Express  consolida*ng  its  posi*on  as  the  biggest  operator  of  the  integrated  public  transport  service  of  San*ago,  Chile  (TransSan*ago).  The  new  merged  company  needed  to  combine  opera*ons  and  deal  with  change  without  affec*ng  a  very  sensible  public  service.  We  worked  on  the  change  process,  cultural  integra*on  and  designed  an  organiza*on  capable  of  simplifying  opera*ons,  assuring  a  bejer  quality  of  service  and  reducing  inefficiencies.    

Backed by strong industry expertise

Backed by a world class industry expert ... Adding unique world class industry expertise to our organizational transformation experience...

AMG and Enhancer have partner to offer their unique experience in the industry and transforming

companies to the Latin American PE Market.

Enhancer Executive Advisors •  Since 1998, Enhancer has contributed to improved performance and

significant value creation in over 200 large and small companies as well as public institutions. Enhancer consists of one of the most experienced groups of corporate advisers in Sweden today.

•  In recent years Enhancer has through its work in a wide range of industries and in many countries had the opportunity to study in detail the real and factual organizational conditions to capitalize on a company’s full potential.

•  Examples of clients where Enhancer has been engaged are the Ministry of Justice, The Swedish Police, Swedish Prison and Probation Service, Vattenfall, Fortum, PostNord, SJ, Svenska Spel, Eniro, Ericsson, Sony-Ericsson, TeliaSonera, SEK, SAS, Strålfors, Bisnode, Metronome, Lernia, Johnson & Johnson, Toyota.

•  In addition a range of other small and large companies are on the list. One Private Equity player has been engaging Enhancer in more than thirty of its portfolio companies.

•  Enhancers behind the scenes success is based on two fundamental assets. The first is a set of vital scientific findings constituting the levels theory, SST (Stratified Systems Theory) by Dr Elliott Jaques and second, a group of senior consultants with high capability and a solid background in Business and Academia.

Enhancer Success case study I

Predictability  of  Investment  Performance,  AP6    •  AP6   is   one   of   six   public   pension   funds   in   Sweden   and   invests  

primarily   in   private   equity   funds   and   directly   in   privately   and  publicly  owned  companies.    

 •  In  2002  Sjäje  AP-­‐fonden  (SF)  became  aware  of  Enhancer’s  science  

based   methodology.   The   SF   invests   in   both   private   companies  directly  and  in  PE  firms.    

•  The   SF   decided   in   2002   to   use   the  methodology   to   improve   its  performance  (in  more  than  30  companies)  and  at   the  same  *me  conduct   a   study   to   validate   the   importance   of   ensuring   that  companies   have   the   right   CEO   and   ensuring   that   PE   firms   have  partners  at  the  required  level.    

 •  Using  Enhancers  method  for  determining  the  match  between  the  

level  of  the  CEO  role  and  the  CEO,  SF  was  able  to  predict  whether  the  companies  would  perform  below  or  above   the   required   rate  of  return  as  investments.    

Enhancer Success case study I

24  companies   6  Private  Equity  Firms  

Investment  outcome  

Posi*ve  Predic*on  

Nega*ve  Predic*on  

Posi*ve  Predic*on  

Nega*ve  Predic*on  

Posi*ve  Outcome   11   3   3   -­‐  

Nega*ve  Outcome   1   9   -­‐   3  

Prospec8ve  study  of  24  companies  and  6  private  equity  firms:  

Results,  2-­‐8  years  later:  26  out  of  30  companies  performed  as  predicted  

Enhancer Success case study II

Capturing  improvement  poten8al  in  India    

Project  •  Analysis  and  organiza*onal  development  in  major  growth  

market  (India)      

Change  Program  •  Implementa*on  of  clear  and  aligned  tasks  •  Adding  managerial  layer  with  higher  capability    

Results  

Enhancer Success case study II

Op8mizing  SoYware  Development  Unit    

Situa8on  •  Aggressive  low  cost  compe**on  •  High  internal  cost  level    Change  program  •  Clear  and  aligned  tasks  •  Two  repor*ng  levels  removed  •  Required  staffing  secured  •  Agile  process    Results  

•  Time  to  market  from  31  to  3  weeks  

•  Major  contribu*on  to  largest  deal  in  units  history  

•  Highest  employee  sa8sfac8on  within  Ericsson  

Enhancer Management team

Jan  Åke  Karlsson  Senior  Partner  Enhancer  

Ulf  Lindberg  CEO  at  Enhancer  Consul*ng  

•  Ulf  is  a  business  and  marke*ng  oriented  CEO  with  a  strong  network  and  extensive  interna*onal  experience  from  strategy  development,  management,  nego*a*ons,  mergers  &  acquisi*ons   and  financing.  Ulf   has  15   years   experience   from   leading  posi*ons   in   large   global   corpora*ons   as   well   as   many   years   as   CEO   for  entrepreneurial  businesses.    

•  Ulf  has  with  Enhancer  worked  as  advisor  for  well  over  200  companies  on  request  of  owners,  boards  and  top  management,   from  big  mul*na*onal  corpora*ons  to  small  start-­‐ups  and  public  ins*tu*ons.  

•  Furthermore   Ulf   is   an   appreciated   moderator   and   process   leader.   He   is   for  example  moderator  for  CBN  and  in  Founders  Alliance.  

•  Jan-­‐Åke  has  a  business  and  marke*ng  background,  and  has  worked  in  a  variety  of  industries  and  corpora*ons  with  global  presence.    

•  During   his   career,   Jan-­‐Åke   has   primarily   been   engaged   in   change/growth  ini*a*ves,   e.g.   heading   complex   projects,   managing   turn   arounds   and   carrying  out  major  restructurings.  The  largest  organiza*on  he  has  led  had  a  turnover  of  2  billion   USD.   He   also   has   experience   from  working   with   brand   equity   issues   for  some  of  the  top  brands  of  the  world.    

•  Furthermore,   Jan-­‐Åke   has   been   Chairman   and  member   of   the   board   of   several  energy  companies,  entrepreneurial  start  ups  and  trade  associa*ons.    

About AMG

Strategic Consulting in Organizational Transformation

25 years of experience

advicing leading Firms in Latin America.

We contribute to the

sustainable growth of

businesses by mobilizing

behavior and aligning

organizational

capabilities to the

company's  value

strategy.

Help companies and people grow and transform themselves, contributing to the development of those countries in which they perform.

Our Mission

Clients require us when… Accelerated growth provokes imbalances in their implementation capacity Lack of alignment with the strategic vision hinders their sense of direction Mergers and acquisitions require integration of capabilities and cultures. Mobilizing the organization’s behavior is needed to increase business performance. Differentiating its value proposal is required to create a client centered organization. New leadership practices need to be developed to guarantee sustainable growht

Pharma | Consumer

Our clients

Agribusiness

Financial Services Utilities | Energy | Industry

Our clients

Services TICs | Media Government

Our clients