KnowledgeNow: Future Foundations Apax Partners KnowledgeNow Conference October 2016 The 6th Annual Apax Partners Barcelona, KnowledgeNow Conference took place in Barcelona on October 2016 18 to 20 October 2016 What’s inside this report? Introduction Building the future for growth Putting the foundations in 02 12 20 place: case studies for success Building foundations for the future in Follow your North Star uncertain times Kyle Leahy Executive Vice President and A recipe for winning new customers Seth Brody Partner and Global Head of the General Manager of North America, Cole Haan Jon Simmons Operating Executive, Operational Excellence Practice, Apax Partners Apax Partners Mapping career paths to a strong future Greg Kayata Senior Vice President of Preparing for public markets Doug Ahrens CFO, GlobalLogic Shifting foundations in a Human Resources, Acelity 04 turbulent world The price of change Health and safety as a value driver Scott Kim CEO, Bankrate.com Cliff Dixon Vice President of Information Micro-opportunities, macro-knowledge Technology, Quality Distribution Building strength in carve-out situations Andrew Sillitoe Co-CEO and Nico Hansen Putting customers at the heart of Chief Investment Offi cer, Apax Partners Noel Goggin CEO, Aptos Matt Foster COO, Duck Creek Technologies systems planning Putting Brexit in a global context Vid Desai CIO, Vyaire Medical Sal Caruso CIO, One Call Care Management Andrew Sentance Senior Economic Nick Iozzo Operating Adviser, Apax Partners Adviser, PwC Extending your infl uence Rich Beattie Vice President, Multiply Using the Apax Portfolio Effi ciency The view from the Hill platform to get “large company” John Boehner 53rd Speaker of the United procurement States House of Representatives Edward Burgers Procurement & Facilities Manager, Exact Software Attendees The Operational Excellence team A differentiated platform for 26 28 30 value creation KnowledgeNow 2016 01 In attendance... Apax Partners is one of the world’s leading private equity Executives and partners advisery fi rms. An independent global partnership focused 118 solely on long-term investment in growth companies, our Funds invest in four sectors: Consumer, Healthcare, Services Portfolio companies* and Tech & Telco. 28 Apax Funds’ strategy is to drive superior returns through sector expertise, geographical fl exibility and transformational Representing... ownership. To that end, the Operational Excellence Practice Annual sales (“OEP”) and the fi rm’s vertical domain expertise are brought to $15bn+ bear through the life cycle of a deal to drive value. The OEP is comprised of resources possessing deep operational expertise Employees and broad acumen as general managers. The OEP resources 100,000+ “get in the boat” with management teams to drive results. Through the OEP’s KnowledgeNow programmes, communities and conferences, we create forums for executives to share experiences and discuss the common challenges our portfolio businesses face. Our annual conference, held in October 2016 in Barcelona and recounted in this brochure, is the cornerstone of these efforts. * Registered 02 Apax Partners KnowledgeNow 2016 The KnowledgeNow Conference was then, even now that the conference The evolution of Operational Excellence brings together portfolio companies, comprises attendees from portfolio critical vendors and operational experts companies representing more than from across the Apax network to $15 billion in annual sales. discuss common themes and to share As part of our own commitment to best practice. In the wake of the Brexit decision in continuous improvement at Apax, the UK and with the US election result we recently asked McKinsey to The conference has grown from strength looming large on the horizon, the examine the evolving perceptions to strength since ten people gathered in conference provided the ideal forum to and expectations of the Operational a New York conference room in 2011 discuss how businesses could continue Excellence Practice through a and realised they were facing many of to fl ourish in uncertain times by building comprehensive research study. the same challenges. This sense of a “Future Foundations” today. common purpose is as true today as it We take the idea of continuous improvement very seriously and wish to focus on serving two constituencies: Our primary objectives internally helping our deal teams and deal partners carry out due diligence on the way in; and externally supporting our portfolio executives to grow their businesses and drive equity value. The results from the survey were clear. Share... Network... Accelerate... Apax portfolio companies appear happy with our mission and strategy – we are designed to “get in the boat and row” with the portfolio companies, and we get in with a strike-force mentality. This seems to be understood and working ... ideas ... with each other ... project delivery well, with strong results and partnerships around the global portfolio. ... experiences ... with our partners ... talent development ... data ... with Apax ... transformation What was less universally understood ... best practices ... execution is the full range of services that the OEP provides, where there is opportunity ... worst nightmares to more broadly communicate our capabilities. There are also functional areas where we will strengthen our offer going forward, most notably in the areas of corporate carve-outs and human capital. More than 80% of the value that’s Portfolio Companies Registered: been created in our buyouts comes from the work that each and every one of our portfolio companies does every day; expanding margins, driving profi tability and growing the top line. Seth Brody Partner and Global Head of the Operational Excellence Practice, Apax Partners 03 OEP Research Supported By OEP through the numbers Days of Effort in 2,823 Past 12 months(1) Portfolio Company $2.28bn Spend Optimised(2) “Cross-Portfolio $170m+ Revenue” Generated(3) Portfolio Companies 39 Engaged in Past 12 months(1) Cash EBITDA $293m+ Savings Generated(2) UNPRI/RobecoSAM A+100% ESG Rating 04 Apax Partners KnowledgeNow 2016 05 KnowledgeNow: Future Foundations Shifting foundations in a turbulent world Insights on a year of unprecedented political and economic turmoil. Our experts unpick the trends and offer their thoughts on the road ahead. 06 Apax Partners KnowledgeNow 2016 Shifting foundations in a turbulent world continued In the face of a “frothy” environment, Micro- Andrew Sillitoe outlined the three pillars of sector expertise, geographical fl exibility and transformational ownership opportunities, that defi ne Apax, and zeroed in on macro- micro-theses over macro-bets. Apax Partners’ sector approach developed from the fi rm’s venture capital roots and knowledge predates that of many private equity peers. We overlay digital expertise across these Andrew Sillitoe Co-CEO, Apax Partners with Andrew Sillitoe, co-CEO, sectors and take a fl exible geographical Nico Hansen approach by moving our sector experts This has led to a focus on the micro-thesis Apax Partners, and , to the opportunities we see. We add Chief Investment Offi cer, Apax Partners over the macro-bet. Recent Apax Funds transformational ownership through acquisitions have tended to follow four key measures such as management themes: digital improvement, carve-out/ improvement or accelerated M&A operational improvement, international to generate superior returns. expansion and consolidation. Some investments fall into one category, but Apax is committed to striving to maintain many, such as Duck Creek Technologies its target returns, despite the fact that the and Vyaire Medical, fall into a number current low-interest rate environment and of them. high company valuations make this more challenging than in the past. Rather than High asset prices and cheap borrowing do paying highly for developed businesses mean it is a good time to sell – Apax Funds with sustained growth, Apax is searching has achieved realisations of $21.5 billion for companies at lower valuation where since 2014.(4) But against the backdrop of we can create value early through low, sometimes negative, interest rates transformational skills. we are refusing to drop our target returns – we believe that can leave little room for companies underperforming versus plan in uncertain times and compound potential for low returns. Apax has achieved... Event driven volatility 300 $21.5 billion UK Brexit vote of realisations since 2014(4) 250 Political unrest 3.4x Referendum 200 achieved on 2016 realisations(5) Elections 150 Elections Elections 100 50 Oct 15 Jan 16 Oct 16 Feb 17 Apr 17 Jun 17 Oct 17 June 15 May 16 Sept 16 Dec 16 Aug 17 Dec 17 Footnote reference (6) Footnote reference (7) 07 Nico Hansen delved deeper into the With asset prices high in the US, we are world’s economies to explain how Apax looking towards Europe and emerging is pivoting to markets and subsectors markets similar to Israel where valuations where lower valuations can be found. are lower on average. While we do focus on micro-theses, the macro-environment Public market valuations have continued is critical. Where we see a positive to rise throughout 2016 and are above macro-backdrop and moderate or low their fi ve-year averages in most markets valuation levels, it’s an incentive to around the globe, while private company deploy our resources to unearth those valuations are at 10.5x, trailing EBITDA in micro-opportunities. the second half of 2016. We are seeing how they are now back in line with levels Average PE buyout multiples seen in 2007 before the fi nancial crisis. (EV/LTM EBITDA)(8) At the same time, political uncertainty can 5.9 4.5 2008 cause signifi cant volatility. The UK’s Brexit 5.7 4.2 Nico Hansen Chief Investment 4.3 4.5 decision continues to have near-term 2009 4.3 4.0 Offi cer, Apax Partners economic repercussions while political 4.8 4.9 unrest in Turkey, the presidential elections 2010 5.0 3.7 in the US, the referendum on constitutional 5.0 4.2 2011 reform in Italy, as well as forthcoming 5.6 3.9 4.7 4.8 elections in France and Germany, all have 2012 5.5 3.7 scope to upset markets.