how repackaging in private equity works
a private equity firm looks for a company that is unprofitable or underperforming and buys it outright in the belief that the business can be turned around once the company is no longer public the private equity firm can take whatever measures it thinks will be effective such as selling off divisions replacing management or slashing overhead costs its goal may be to take the revamped company public with a new initial public offering ipo to sell the company outright to another private buyer or to merge it with another larger entity or entities in any case if the repackaging succeeds the private equity firm will make more money than it spent reviving the company most of the money used to purchase the company is borrowed as opposed to the cash on hand at the firm thus the transaction is usually termed a leveraged buyout cashing in on repackagingrepackaging with an eye to launching a new 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 1however this strategy appears to have lost its luster for the most part the number of initial public offerings brought to the market by private equity firms has been in decline since 2013 with a slight uptick in 2018 and then a surge in 2020 1private equity firms appear to have found easier and more lucrative ways to cash in on their acquisitions considering the government regulatory and shareholder scrutiny that public companies face burger king for example 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 launched a successful initial public offering in 2006 only four years later in the midst of the great recession burger king was in trouble again it was taken private again in a buyout by 3g capital today burger king is a subsidiary of restaurant brands international a fast food conglomerate that is headquartered in toronto canada but majority owned by 3g a brazilian company the conglomerate also owns the canadian coffee shop chain tim hortons and the fried chicken chain popeyes real world examplesprivate equity repackagings are far and wide and include panera bread the bakery 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 previously bought peet s coffee and tea and krispy kreme doughnuts as of 2021 panera bread may go public again as jab just completed an 800 million refinancing deal on the business 2staples was bought by sycamore partners for 6 9 billion also in 2017 staples had previously acquired its one time rival officemax and was worth approximately 19 billion in 2010 showing just how much the company had slipped 3 it has been assumed that sycamore was going to exit its investment in staples in 2020 through an ipo but that has yet to happen 4