Apax partners ad Xerium S.A. Essay
1. What tactics/actions did Apax take to enable it to acquire BTRP in an auction without over-paying? How did Apax add value to Xerium?
Apax took a well-designed strategy to bid for Xerium. First, they understood it was not a competitive auction. Secondly, they took advantage of the momentum and circumstances of the seller that was under distress. Finally, they spent huge resources to analyze and calculate the value of Xerium to Apax.
First, they analyzed the competitors in the auction. The team observed it was a very opaque industry with only few companies public, limiting the access to information. Luckily, Apax had a competitive advantage (Wangner’s expertise) in the industry which allows …show more content…
Divestiture is not discussed in the case, but we think it might also be an option. As is mentioned in the case, the two business units Xerium operates are totally different in terms of customers’ needs/treatment (high quality + commodity vs. reliability + specialty) and Xerium’s operations (R&D vs. on-site). Also, the main reason why Xerium failed to attract strategic buyers is its size (too big). Therefore, maybe separating its two business units and sell to different strategic buyers can increase not only the demand but also the transaction price. Since the current selling process is not fruitful and it looks bad to go back to talk to the third bidder, the new process will open a new round in which Apax and Xerium can re-choose their pool. However, this process will be very time consuming (this time not only in selling but also in the restructuring process). Also associated with the divestiture is the low morale of the current management team, who knows they will be fired when the business units are sold to the strategic buyers. Last but not least, the divestiture process will incur double consulting fees.
3. As part of #2 above, show the returns to Apax by taking the offer versus doing a leveraged recapitalization and selling later
The returns to Apax for taking the offer versus doing a leveraged recapitalization are 29% and