Identify
We are all becoming increasingly conscious of
sustainability and the need to use finite resources in a
responsible way.
IFCO Systems, which owns and operates a pool of more than 100
million reusable plastic containers, plays into this trend by
replacing the traditional cardboard and wood containers that were
used to transport fruit and vegetables with plastic crates that can
each be used up to 100 times. A recent study found that these
reusable plastic containers reduce packaging waste by 95% and
require 29% less total energy. The company's pallet management
services operation offers recycling, back dock management and
supply services to wooden pallet users in the United States.
Apax Partners' Business Services team in Munich identified these
trends early on and saw in IFCO a company that was well placed to
benefit from moves towards a greater appreciation of sustainability
issues and also a continuing trend toward outsourcing amongst major
retailer groups.
Retail trend
What became clear was that retailers were increasingly outsourcing
logistics to specialists like IFCO. As well as enabling a retailer
to minimise its environmental impact, using a specialist provider
of reusable crates lowers the retailer's overall logistics costs
through improved product handling and space efficiency, as well as
packaging and waste disposal costs. Although cardboard is still the
dominant packaging in both Europe and the US, environmental and
cost pressures on retailers have led to a continual shift towards
reusable plastic packaging.
IFCO was acquired by the Apax Europe V fund in 2003. Apax
Partners' Michael Phillips, Ralf Gruss and Korbinian Knoblach
currently serve on the company's Supervisory Board.
Support
With €0.5bn of plastic crates on its balance sheet and
significant ongoing investment requirements to fund the expansion
of the plastic crate pool, IFCO's is a capital-intensive business,
which needed a long-term investor willing to support investment to
enable the company to fulfil its growth potential.
The Apax Europe V fund replaced the more short-term focused
shareholders at the time of investment with long-term equity and
also supported the company in practical ways, chiefly through its
experience in financing and governance.
Restructured financing
At the time of its acquisition by Apax Funds, the company had a
relatively weak reputation in the financing capital markets, which
hampered its growth plans. Concurrently with the investment of the
Apax Funds, the Apax team helped and supported the company to
re-finance and strengthen its debt structure such that future
growth was supported and financed through an appropriate mix of
long-term equity and debt.
Apax encouraged IFCO to grow both organically and by
acquisition, and the company added acquisitions in 2006, 2007 and
2008, including key competitors in the United States and Europe and
its market entry into the South American market. Apax aided this
process by supporting management in due diligence, deal structuring
and contract negotiations.
At the time of Apax Funds' original investment in IFCO, the US
market for reusable plastic crates was still in its infancy but had
enormous growth potential. The Apax team supported additional
investment in the core business as well as an acquisition in the US
which were instrumental in enabling IFCO to shape the form of the
market and to increase its market share and capture significant
retail customers. Leading retail groups such as WalMart, Kroger and
HEB are among the system partners of IFCO in the United States
today.
Despite significant capital investment, the company's debt
levels are at a modest 2x EBITDA, only slightly higher than they
were at the time of its acquisition by Apax Funds six years
ago.
Governance
Apax helped to strengthen the company's corporate governance,
replacing the single-tier board with a two-tier structure
consisting of a Board of Managing Directors, who are in charge of
managing the company, and a Supervisory Board, whose function is to
advise the Board of Managing Directors on the broader policy and
direction of the company. This new structure means that the
day-to-day operational expertise of the executive management is
bolstered by the contribution of the experienced,
commercially-minded Supervisory Board members brought in through
Apax's network.
The Apax team has continued to support IFCO's management team,
the senior members of which have remained unchanged since the time
of acquisition.
Realise
In November 2010, Apax Funds agreed to sell their stake in IFCO
Systems to the Australian logistics company Brambles Limited.
"Our successful investment in IFCO Systems demonstrates the
extensive expertise of Apax Partners in the Business Services area
and our team's ability to identify companies with strong potential
and promote their long-term growth. This is a prime example of Apax
successfully partnering with a strong management team in one of our
core industry sectors. IFCO is a leading player in the eco-friendly
reusable packaging sector and Brambles is the ideal partner to
maximise and develop its future potential", said Ralf Gruss,
Partner at Apax Partners.
Karl Pohler, CEO of IFCO Systems, added, "For seven years, Apax
was a loyal and long-term investor, which the entire management
team enjoyed working with to optimise the growth of IFCO. We look
forward to a continuation of IFCO´s growth story."