Being the private equity captive of a Fortune Global 500 financial services company has some obvious benefits, namely unfettered access to a huge chequebook. It also has some glaring drawbacks. Allianz Capital Partners (ACP) learnt this the hard way after its investment in Manroland, the world’s biggest newspaper printing machine maker, went to the wall on 25 November. With Germany’s biggest insurer, Allianz, linked to this national treasure’s bankruptcy, tongues have started wagging.
“They’ve been on the front page of the German papers, with Allianz accused of letting Manroland go out of business. I don’t think they appreciate that. They will struggle to do new stuff, particularly anything with a high operational risk,” says a GP. “For them, reputation is so important. If something goes wrong and people see the name Allianz attached to it, they don’t like that.”
Thirteen years ago, Goldman Sachs alumnus Thomas Putter set about launching Allianz’s in-house direct investment operations. He assembled a small team with Unilever exec Peter Gangsted and fellow Goldman graduate Stefan Sanne as his right-hand men.
Putter may have thrust ACP into Germany’s upper echelons, but his new team tripped at the first hurdle.Clubbing together with Clayton Dubilier & Rice, the captive wrote
a $150m (€112.5m) equity cheque in the $1.2bn buyout of jet maker Fairchild Dornier in 2000. It filed for bankruptcy in 2002. Later that year, Bundesdruckerei was rescued by the German government. Apax, which overpaid for the banknote printer in November 2000, was the biggest loser from the state bailout, but ACP joined in the syndication
of Bundesdruckerei, taking a ten per cent stake in the €1bn company and losing an estimated €40m. Despite this false start, Putter went on to earn serious returns and a lofty reputation.
“They’ve done some very big deals and were very active in the private equity association here. Putter headed up the BVK and that was a big thing for them. They had a good portfolio,” says one rival GP.
Reams of red tape and corporate reporting stifle the agility of small, and otherwise nimble, private equity teams. Autonomy starts looking like a luxury. And when juicy carry cheques are written, you can almost guarantee bitter board members will start getting political. Factor in regulatory capital pressures and it’s no coincidence that virtually every captive has found its way to freedom. Many figured ACP’s future independence was guaranteed, but its anticipated spin-out never came.
In mid-2009 Allianz announced that its fund of funds, infrastructure and renewables infrastructure divisions would be merged together under the Allianz Capital Partners brand. The rationalisation of back-office operations was canny. A new emphasis on infrastructure also made sense given post-crash regulatory capital pressures. If you ask Allianz, everything is shipshape and it simply decided to shift its focus, but it is still very much in the private equity game. In reality, it hasn’t made a direct investment in four years – and some say it is unlikely ever to do so again.
Officially, Putter left in August 2010, but he handed his notice in behind the scenes the previous year. Within weeks of his resignation all three of Allianz’s buyout managing directors jumped ship, as did Jonny Maxwell, the chief executive drafted in two years earlier to look after fund-of-funds operations.
“They did have a good reputation as they’re really the only truly local player in Germany. My sense is they have lost focus since Tom’s departure – Tom was of course a great communicator,” said one source who used to work at the firm.
Replacing Putter as interim general manager is Rainer Husmann, who has been with Allianz since it bought Dresdner Bank in 2002. But the search for a permanent replacement has been arduous. “They haven’t been able to find a permanent chief executive for ACP and have been in the market looking for two years now. They don’t have a vision, a strategy or a leader any more. The people who are running the place don’t have the professional respect of the team,” sums up one investor with knowledge of the firm.
Some say this lack of defined leadership led to Manroland’s demise. The company saw sales more than halve from nearly €2.1bn ($2.8bn) in 2006, when it was bought, to just €942m. With a scheduled listing axed as the IPO window slammed shut in 2008, the firm was stuck with the foundering printing machinery manufacturer. Three years passed before Manroland met its fate and left Allianz’s name splashed all over Germany’s papers. “If you talk to them they’re still there to do deals, but I don’t think that is very likely after this PR debacle,” says a source. If ACP is still in the game it will need to prove as much – and soon.
One of ACP’s most successful deals was for this Belgian wind turbine gearbox manufacturer. Bought in 2004 and sold just two years later to Suzlon Energy, Hansen netted the firm an IRR north of 80 per cent.
This food and beverage packaging maker was acquired in 2000 with €250m in equity from ACP. Two years later and it was taken over by America’s Ball Corporation, giving Allianz’s private equity team a return in excess of 40 per cent.
Bought in 2001 alongside Goldman Sachs and sold in 2004, this industrial gases specialist is yet another flagship deal and generated an IRR of 40 per cent.
If ACP has been turned off private equity, it still has companies to sell. Vending machine business Selecta, bought in 2007 for £772m, is rumoured to be coming to market after investment banks were called in for a beauty parade in October. It is thought to be worth around £800m.