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Andrea Illy: adapting a family business to a multinational world
JULY 20, 2019 | | Financial Times | by Rachel Sanderson.

*The coffee group chairman argues his style of capitalism is good for business, workers and the consumer*

Andrea Illy, third generation heir of the Illycaffè dynasty, last year struck an alliance with investment group JAB Holdings to produce and distribute Illy coffee capsules...he makes it clear that he does not intend to sell the closely held family company..... “It is a very simple principle about preserving our freedom,” he says of his and his family’s decision, one....Freedom is a word that comes up frequently in conversation with Mr Illy.....who espouses a sort of pick-and-mix version of capitalism, resolutely refusing to focus only on sales and profits. Illy argues his style of capitalism is not charity but good business.......Illy has paid its growers on average 30% more over market value for decades in order to maintain its supply of top Arabica beans. “....The company is rooted in the border city of Trieste....which is also ingrained in the nature of the family......globalisation and increasing competition in the coffee sector has forced Illy to adapt. Staying closely held does not work any more. Co-opetition is his new mantra."“It is like the way to adapt in the savannah. If you do not want to be prey to the big lion, you live in a tree.”"

Part of that adaptation has been the deal with JAB, which allowed Illy coffee capsules to be produced and distributed in supermarkets globally, something that Illy could not do alone......The global coffee industry has become increasingly like the beer tie-ups of the 1990s, with big groups such as JAB and Nestlé snapping up smaller companies. Illy has risked being squeezed between these behemoths and the microroasters emerging as the hip caffeine hit for millennials and Gen Z.....Bigger groups have circled Illy for years. Mr Illy says the family chose JAB because it had the technology he wanted and accepted a licensing agreement rather than an equity one.....To build its global presence, Mr Illy is now looking for a retail partner in the US to help launch Illy coffee bars in the world’s largest coffee market. He says he could even sell a slice of equity. But he is very specific who it would be to: a private financial investor, not an industrial group.....there have been other adaptations. Three years ago, Illy hired an outside chief executive — Massimiliano Pogliani, a former executive at Nestlé’s Nespresso — for the first time since the company was founded in 1933 by Mr Illy’s grandfather, Francesco. Mr Illy has also built a board including executives from clothing group Moncler and Italian cosmetics group Kiko...... studies show that family businesses often fail in the third generation. The move to hire outside management and governance comes as studies also show that family-owned, professionally-run companies are among the best performing in the long term. ......Mr Illy sees these alliances as the only way for a family business model to thrive and to not have to cede control to a multinational when “complexity is becoming too big for a single person to manage”.
.....good stewardship is good business......The Illy family is a supporter of arts and culture, including Trieste’s annual sailing regatta, the Barcolana, where hundreds of boats race across the bay. Mr Illy says this creates a virtuous circle: the more attractive Trieste becomes, the more talented people Illy can attract to work for it and the more visitors come to the city and raise its brand profile........A portrait of his father Ernesto hangs opposite his desk. “I put the painting there to ask him to control what I do,” Mr Illy says.

What, then, has he learnt from his family? “Society is made by the private sector, mostly. And if you want to improve society then we need to be able to pursue long-term goals which are beyond profitability, and then you have to be free and accountable only to yourself,” he says.

Three questions for Andrea Illy
Who is your leadership hero? I have three: Muhtar Kent, former chairman of Coca-Cola; my father; Sebastião Salgado [the photojournalist].

If you were not a CEO/leader, what would you be? A neurosurgeon.

What was the first leadership lesson you learnt? My father asked me when I turned 14 years old where I wanted to go to school. Do you want to start a journey to be a leader or do you want to have fun? I chose the first option and as a result chose boarding school in Switzerland over a local school at home. There I learnt about discipline and hard work but also about the power of a charismatic leader from my headmaster.
alliances  boards_&_directors_&_governance  climate_change  coffee  coopetition  dynasties  family  family_business  family-owned_businesses  financial_buyers  heirs  high-quality  Illycaffè  investors  JAB  licensing  Nestlé  premium  private_equity  privately_held_companies  stewardship  sustainability  the_counsel_of_the_dead  virtuous_cycles 
28 days ago by jerryking
White men run 98% of finance. Can philanthropy bring change?
June 16, 2019 | Financial Times | by Rob Manilla.

Q: How do you achieve change at the decision making level in the finance industry when diversity moves at glacial pace?
asset_management  diversity  endowments  hedge_funds  finance  foundations  Kresge  meritocratic  philanthropy  private_equity  real_estate  results-driven  social_enginering  structural_change  under-representation  white_men  women 
9 weeks ago by jerryking
How a private equity boom fuelled the world’s biggest law firm
June 6, 2019 | Financial Times | James Fontanella-Khan and Sujeet Indap in New York and Barney Thompson in London.

Jeff Hammes took the helm at a Chicago-based law firm called Kirkland & Ellis in 2010, with the aim of turning it into a world-beater, few in the industry thought he stood a chance.......known as a good litigation firm in Chicago with a decent mid-market private equity practice, in the blockbuster dealmaking world, however, the firm was largely irrelevant. Nobody took them seriously on Wall Street.....Fuelled by explosive growth in private equity, aggressive poaching of talent and most of all, a business model that resembles a freewheeling investment bank, Kirkland has become the highest-grossing law firm in the world.....This rise reflects the shift in the financial world’s balance of power since the financial crisis. Investment banks, the dominant force before 2008, have been eclipsed by private equity firms, which now sit on hundreds of billions of dollars of investment funds.

Kirkland thrived by hitching itself to this dealmaking activity. The firm presents with a relentless — many say ruthless — focus on growth, a phenomenal work ethic and a desire to up-end what it sees as a lazy hierarchy. Key questions: can its winning streak can continue? Will its private equity clients continue to prosper? how will Kirkland cope if and when the private equity boom ends? And can a firm with such a hard-charging culture survive in the long run?....Robert Smith’s Vista Equity has grown to manage assets from $1bn to $46 in a decade while working with Kirkland.....To establish Kirkland as a major player, Mr Hammes turned his attention to recruitment. ....poaching proven M&A experts and targeting all areas of dealmaking.....To entice the best lawyers to join its ranks, Kirkland managed to exploit a structural rigidity in its more traditional white-shoe and magic circle rivals. A dwindling but still significant number of elite firms remunerate equity partners using a “lockstep” model......
Kirkland sought rising stars in their late thirties who were at the bottom of this ladder, stuck in the queue for the highest share of profits. Part of its pitch was money — “With compensation, we can go as high as we want,” says one partner — but the other part was an almost unprecedented level of autonomy.
Big_Law  booming  business_development  Chicago  compensation  concentration_risk  dealmakers  deal-making  eat_what_you_kill  financial_crises  growth  hard-charging  high-end  hiring  howto  hustle  Kirkland_Ellis  law  law_firms  litigation  mid-market  organizational_culture  poaching  private_equity  recruiting  Robert_Smith  superstars  talent  turnover  Vista  Wall_Street  winner-take-all  work_ethic  world-class 
10 weeks ago by jerryking
victor vescovo
pe founder of insight private equity. deep sea exploer, et.
people  private_equity 
may 2019 by gablades
How to funnel capital to the American heartland
April 15, 2019 | Financial Times | by Bruce Katz.
* The Innovation Blind Spot, by Ross Baird.
* Ways must be found to rewire money flows in order to reverse the export of wealth
* A federal tax incentive intended to entice coastal capital into the heartland may end up helping to keep local capital local.

Over the past year, economically distressed communities across the US have been engaged in an intense discussion about mobilising private capital. Why? As mayors, governors, real estate developers, entrepreneurs and investors have learnt, buried in the 2017 Tax Cuts and Jobs Act was a provision that created a significant tax incentive to invest in low-income “opportunity zones” across the country......the law’s greatest effect, ironically, has been to unveil a treasure trove of wealth in communities throughout the nation. Some of the country’s largest investors are high-net-worth families in Kansas City, Missouri, and Philadelphia; insurance companies in Erie, Pennsylvania, and Milwaukee; universities in Birmingham, Alabama, and South Bend, Indiana; philanthropists in Cleveland and Detroit; and community foundations and pension funds in every state.

These pillars of wealth mostly invest their market-oriented equity capital outside their own communities, even though their own locales often possess globally significant research institutions, advanced industry companies, grand historic city centres and distinctive ecosystems of entrepreneurs. The wealth-export industry is not a natural phenomenon; it has been led and facilitated by a sophisticated network of wealth management companies, private equity firms, family offices and financial institutions that have narrow definitions of where and in what to invest.

The US, in other words, doesn’t have a capital problem; it has an organisational problem. So how can capital flows be rewired to reverse the export of wealth?

Three things stand out:

(1) Information matters. The opportunity zones incentive has encouraged US cities to create investment prospectuses to promote the competitive assets of their low-income communities and highlight projects that are investor-ready and promise competitive returns.

(2) norms and networks matter. The opportunity zone market will be enhanced by the creation of “capital stacks” that enable the financing of community products such as workforce housing, commercial real estate, small businesses (and minority-owned businesses in particular) and clean energy, to name just a few. Initial opportunity zone projects are already showing creative blends of public, private and civic capital that mix debt, subsidy and equity.

(3) institutions matter. Opportunity zones require cities to create and capitalise new institutions that can deploy capital at scale in sustained ways. Some models already exist. The Cincinnati Center City Development Corporation, backed by patient capital from Procter & Gamble, has driven the regeneration of the Over-the-Rhine neighbourhood during the past 15 years.

More institutional innovation, however, is needed. As Ross Baird, author of The Innovation Blind Spot, has argued, the US must create a new generation of community quarterbacks to provide budding entrepreneurs with business planning and mentoring, matching them with risk-tolerant equity. These efforts will succeed if they unleash the synergies that flow naturally from urban density. New institutions will not have to work alone, but hand-in-glove with the trusted financial firms that manage this locally-generated wealth.
books  capital_flows  cities  coastal_elites  community  economic_development  economically_disadvantaged  economies_of_scale  howto  industrial_policies  industrial_midwest  industrial_zones  institutions  investors  midwest  municipalities  P&G  PPP  packaging  private_equity  prospectuses  Red_States  rust-belt  venture_capital  high_net_worth  match-making  networks  network_density  property_development  rescue_investing  tax_codes  place-based 
april 2019 by jerryking
JAB’s Peter Harf: hire ambitious talent and give them a mission
February 16, 2019 | | Financial Times | by Leila Abboud and Arash Massoudi.

JAB oversees its portfolio of coffee, beverages, and casual dining companies. .....When everything was going wrong last year at Coty, the cosmetics company backed by investment group JAB Holdings, Peter Harf reacted with characteristic ruthlessness, replacing Coty’s chief financial officer and chief executive, and taking back the Coty chairmanship from his longtime associate, Bart Becht. Describing last year’s share price decline of more than 60% as “unacceptable” for JAB and its co-investors, Mr Harf says the situation “had to have serious consequences” even for his inner circle......Harf believes that identifying talented people — and incentivising them through performance-based pay — have been key to his success over his nearly 40-year career..... just as important to Harf is knowing when to jettison those who are no longer serving the mission he has overseen since he was 35: growing the wealth of Germany’s reclusive Reimann family who are behind JAB....Harf's vision was for JAB to be modelled on Berkshire Hathaway, the investment conglomerate built by his idol, Warren Buffett. Success would come not only from backing the right leaders but by patiently building brands, embarking on deals and taking companies public to cash in on bets....Harf felt he had assembled a dream team: “My mantra has always been that I need to hire people who are better than me. Lions hire lions and sheep hire other sheep.”

Three questions for Peter Harf
(1) Who is your leadership hero?

“Warren Buffett. Hands down. All this stuff that I intend to do to make JAB into a long-term investment vehicle, he does it to perfection. He’s the greatest investor in the world, and I want to be like him. If we invest as well as Warren, we’ve won. Very simple.”

(3) What was your first leadership lesson?

One of my biggest role models was Bruce Henderson, the founder of Boston Consulting Group. When I worked for him, I prepared a three-page analysis about a problem. It had 10 bullet points as the conclusion. He dismissed it as way too complicated and said: “Don’t try to field every ball.” He meant that if you wanted to be a good leader, you have to be able to focus on the important stuff first.
+++++++++++++++++++++++++++++++++++++++++++++++++++
The trouble often starts when leaders start listing five or seven or 11 priorities. As Jim Collins, the author of the best-selling management books “Good to Great” and “Built to Last,” is fond of saying: “If you have more than three priorities, you don’t have any.”
BCG  Berkshire_Hathaway  beverages  casual_dining  coffee  commitment  CPG  dealmakers  deal-making  departures  exits  family_office  family-owned_businesses  HBS  hiring  investors  JAB  Keurig  lifelong  mission-driven  private_equity  portfolio_management  ruthlessness  talent  troubleshooting  Warren_Buffett 
february 2019 by jerryking
JAB chair Bart Becht quits in split with partners
January 14, 2019 | Financial Times | Leila Abboud in Paris and Arash Massoudi.

Bart Becht's departure is the first outward display of tensions within JAB, created to manage the wealth of Germany’s billionaire Reimann family. The chairman of JAB Holdings, the acquisition-hungry owner of Pret A Manger and Keurig Dr Pepper, has quit after a five-year $50bn takeover spree led to a split with his two partners over the scale of the investment group’s dealmaking.

According to two people with direct knowledge of his decision, Bart Becht, a hard-charging 62-year-old consumer industry executive, stepped down after failing to convince JAB to scale back its takeover ambitions to focus on improving operations at its sprawling portfolio of companies.....The once-obscure investment vehicle has vaulted itself into the top tier of consumer products groups through acquisitions of high-profile US brands like Krispy Kreme, Peet’s Coffee and Covergirl owner Coty, competing directly with industry giants including Nestlé and Coca-Cola in coffee and L’Oreal in make-up......One person who has worked closely with JAB described Mr Becht’s decision as “undoubtedly a surprise”, especially since the trio of executives had only recently been raising money from outside investors and pitching themselves as long-term investors.

JAB operates in a similar way to a private equity investor, but with much longer time horizons. It is often willing to own portfolio companies for decades, often engineering an expansion via acquisitions.....The fundraising also coincided with a strategy shift as JAB exited investments in luxury and fashion to focus on what it calls premium food and beverage, casual dining, and coffee.
CPG  dealmakers  departures  exits  family_office  family-owned_businesses  hard-charging  investors  JAB  Keurig  private_equity  portfolio_management 
january 2019 by jerryking
[no title]
private equity returns actually realized by fund
private_equity 
november 2018 by rnschmidt
Tax-Free Acquisitions
great breakout of various tax deferred strategies for rolling over equity tax free in an acquisition.
tax  irc368  private_equity 
november 2018 by rnschmidt
rollover equity transactions: Frost Brown Todd Attorneys
Good explanation of tax-deferred structure for rolled equity.
private_equity  tax 
november 2018 by rnschmidt
How Canada's Serruya Family Made Some $300 Million Off A Bunch Of Faded Food-Service Brands
Jun 19, 2016, 07:15pm
How Canada's Serruya Family Made Some $300 Million Off A Bunch Of Faded Food-Service Brands

Amy Feldman
Forbes Staff
ice_cream  private_equity  Toronto  franchising  cold_storage  brands  foodservice  Serruya 
october 2018 by jerryking

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