Repackaging in Private Equity

What Is Repackaging in Private Equity?

Repackaging in the private equity industry is the point at which a private equity firm purchases all the stock in a troubled public company, consequently taking the company private fully intent on patching up its operations and exchanging it at a profit.

For certain years, the primary goal of repackaging was to prepare a company for a return to the market with a initial public offering (IPO). All the more as of late, private equity firms have found alternate approaches to amplifying their profits that include less regulatory and shareholder examination.

How Repackaging in Private Equity Works

A private equity firm searches for a company that is unprofitable or failing to meet expectations and gets it outright in the conviction that the business can be convoluted. When the company is presently not public, the private equity firm can go to anything that lengths it thinks will be effective, like selling off divisions, supplanting management, or cutting overhead costs.

Its goal might be to take the redid company public with another initial public offering (IPO), to sell the company outright to another private buyer, or to merge it with another bigger entity or substances. Anyway, assuming that the repackaging succeeds, the private equity firm will get more cash-flow than it spent resuscitating the company.

The vast majority of the money used to purchase the company is borrowed instead of the cash close by at the firm. Consequently, the transaction is normally named a leveraged buyout.

Cashing in on Repackaging

Repackaging with the end goal of sending off another initial public offering has been a lucrative business for private equity firms. There were 22 IPOs brought to the market by private equity buyout firms in 2020, for an exit value of $74.5 billion.

Nonetheless, this strategy seems to have lost its shine generally. The number of initial public offerings brought to the market by private equity firms has been in decline beginning around 2013, with a slight uptick in 2018 and afterward a flood in 2020.

Private equity firms seem to have found simpler and more lucrative ways of cashing in on their acquisitions, considering the government, regulatory, and shareholder examination that public companies face.

Burger King, for instance, had a long string of corporate owners, including the Pillsbury Company, before it was bought in 2002 by TPG Capital. The investment group retooled the company and sent off a fruitful initial public offering in 2006. Just four years after the fact, amidst the Great Recession, Burger King was in a tough situation once more. It was taken private again in a buyout by 3G Capital.

Today, Burger King is a subsidiary of Restaurant Brands International, a cheap food conglomerate that is settled in Toronto, Canada, yet greater part possessed by 3G, a Brazilian company. The conglomerate likewise possesses the Canadian coffee shop chain Tim Hortons and the seared chicken chain Popeyes.

Genuine Examples

Private equity repackagings are all over and incorporate Panera Bread, the pastry kitchen restaurant chain, and Staples, the business supplies store.

Panera Bread was taken private in 2017 by BDT Capital Partners and JAB Holding Co. in a buyout that cost $7.5 billion. The combined equity firms had recently bought Peet's Coffee and Tea and Krispy Kreme Doughnuts. Starting around 2021, Panera Bread might open up to the world again as JAB just completed a $800 million refinancing deal on the business.

Staples was bought by Sycamore Partners for $6.9 billion, likewise in 2017. Staples had recently acquired its one-time rival, OfficeMax, and was worth around $19 billion out of 2010, showing just how much the company had slipped. It has been assumed that Sycamore planned to exit its investment in Staples in 2020 through an IPO yet that presently can't seem to occur.

Features

• The capital used to purchase a company for a repackaging is most frequently borrowed money, which is commonly known as a leveraged buyout.
• Repackaging in private equity is the point at which a private equity firm procures all the stock in a weak public company and patches up the company in order to make it more profitable.
• In the event that a repackaging in private equity operation is fruitful, the private equity firm may once again introduce the company to the stock market in an initial public offering (IPO).