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Aldo Maccari, CEO of Candover Italy, part of the London-headquartered Candover Investment PLC private-equity house, talks to Phil Draper about his operation’s Ferretti Group investment and about future growth strategy. September 2007

SEPTEMBER 2007

Towards the end of ’06 the Ferretti Group surprised most of the industry when instead of floating on the Milan Stock Exchange for the second time as per its avowed plan, its then principal investor, the Permira Europe II private-equity fund — a part of what used to be Schroder Ventures and a longstanding Ferretti venture-capital investor — sold the majority of its controlling stake in the company privately to yet another private-equity firm.
The way it happened is interesting in itself. In its build-up to a stock market listing, it established what is known in investment banking circle as a ‘dual-track’ process. So, although all set to float and working towards that goal, it was simultaneously weighing up invited bids from assorted private and trade investors. Eventually a preferred bidder emerged as Candover Investments PLC. So the flotation was shelved.
But that was not the only surprise. The deal price effectively valued the burgeoning group at an incredible €1.7 billion — 10-11 times the forecasted EBITDA!
As things stand now, Candover now holds around 51 per cent of the shares — 40 per cent is in the hands of Ferretti Group management team, which is actually slightly more than it was before, and the remainder is retained by the Permira Europe II fund.
So what can we expect from the latest backers? Well safe to say we can certainly expect more of the same — relentless investment, relentless expansion — which all translates to relentless product-development initiatives — more new brands and even more market aggression — and very probably a few ‘choice’ acquisitions along the way, although nothing is being divulged on that score at the moment.
Suffice to say the new investors will require a great deal more to happen to this group before their own exit strategy, whenever that may be.
So what of Candover and its expectations?
Well let’s get a bit of background out of the way first. Candover Investments PLC claims to be one of Europe’s leading private-equity houses, having raised several funds and invested in a total of 133 buyouts worth getting on for €40 billion since its formation in 1980. Its current portfolio, the Candover 2005 Fund, raised €3.5 billion and thus far includes seven major investments, of which the Ferretti Group is one.
The others include the following: Capital Safety Group, a leading specialist designer and manufacturer of height safety and fall-protection equipment; Parques Reunidos, a regional attraction-park operation; Hilding Anders, a mattress and beds supplier; DX Services, a mail-services provider; EutotaxGlass, a source of automotive industry data intelligence; and UPC Norway, a cable operator.

'The deal price effectively valued the burgeoning group at an incredible €1.7 billion — 10-11 times the forecasted EBITDA!'

With Ferretti Group, Candover joins a growing list of private-equity funds attracted by the big returns and seeming solidity the top end of the luxury market. The boatbuilding operation, which employs over 3,000 people at 22 ‘production’ sites in Italy, Spain and in the USA, is the first to be managed by Candover new office in Milan, which is headed up by CEO Aldo Maccari. Maccari joined Candover in 2005, having formerly been managing director of BNP Paribas, and before that had spells with J P Morgan Chase and Barings.
“Certainly Permira did very well with its spells with Ferretti,” says Aldo Maccari. “Its investment strategy was broadly a build-up one… Ours will be a little different, however… We intend optimising costs and maximising commercial opportunities of what we have already got, while staying firmly in the premium sector… Our interest is only ever going to be at the premium end of the market, regardless of the size of the boat. Although we have smaller product, the 50-100ft (15-30m) sector is where we are especially strong, and we will be reinforcing that position, but we will have increasing presence bigger.”
The lure of the luxury sector is still very strong for private-equity funds, and not surprisingly when one checks out some of the statistics floating around the investment community for a number of years now concerning HNWI (high newt worth individuals) and UHNWI (ultra-high net worth individuals). For those that need qualification, a HNWI is deemed to have net assets of at least US$1 million (approx €700,000), a ‘liquid’ figure that excludes primary residences and consummables. Similarly an UHNWI is deemed to be worth in excess of US$30 million (approx €21 million) on the same measure. Overall those combined groups grew 11.4 per cent and weigh in at US$37.2 trillion (€26 trillion).

'The wealth of the world’s HNWIs increased by no less than 11.4 per cent during 2006 to US$37.2 trillion...' 


Wealth management specialist Merrill Lynch and financial service support company Cap Gemini contribute an interesting regular report on the subject, for instance. Their recently published 11th Annual World Wealth Report suggests the wealth of the world’s HNWIs increased by no less than 11.4 per cent during 2006 to US$37.2 trillion. In all the number of them increased by 8.3 per cent to around 9.5 million of them. Similarly the number of UHNWI grew 11.3 per cent to 94,970. The growth has been contributed globally, although Russia and China were among the top 10 countries with the fastest growing HNWI populations, growing incidentally by 15.5 per cent and 7.8 per cent respectively. The 27-country EU zone registered a growth of 6.4 per cent in this sector, the Middle East registered a growth of 12.9 per cent, and Latin America 12.5 per cent.
It is figures such as this that underpin Ferretti Group’s success and, of course, the success of its key competitors, in what is a truly global marketplace.
“Everyone seems to assume this (new-boat) market is still cyclical,” says Maccari. “But we’re really the living proof that cyclicality is not really with us any longer; or at least it is no longer with us at the premium end of the market, which is driven by that growing rich list… We’re not in the salaries market, but rather in the ‘accumulated capital’ sector, so not really cyclical at all… People these days are so much more confident with their wealth and want to enjoy it… Just about all luxury sectors are very prosperous still, whether its private aviation, jewellery, classic cars or the fine art market… We’re addressing the same sectors with the companies within the Ferretti Group.”
Worrying trends in North America don’t seem to put off Maccari either.

“Everyone seems to assume this (new-boat) market is still cyclical,” says Maccari. “But we’re really the living proof that cyclicality is not really with us any longer; or at least it is no longer with us at the premium end of the market, which is driven by that growing rich list…

“We all know there are serious problems in the USA, particularly under 40ft (12m),” says Maccari. “And yes the economy and the consumer climate are not at all good; such things are reflected in most mainstream boatbuilders results. But interestingly even in the US just now things are less cyclical at the premium end of the spectrum… There is a lot of untapped potential for the Ferretti Group in the USA... The group is in the process of a strategic review of what we do on the other side of the Atlantic, where at the moment the group’s represented exclusively by MarineMax.”
When quizzed as to whether the Ferretti Group forecasts still look good, Maccari smiles confidently. He says things are developing as predicted, although obviously it is still early days as far as Candover’s interest is concerned. “There are two issues involved. First is the global marketplace, which has really never been healthier, despite the odd slowness here and there… Consequently the Ferretti Group’s order book has never been bigger… The current value of it is €1.1 billion and the horizon is longer than ever before… Certainly we were comfortable with the scale of our investment otherwise we wouldn’t have done the deal.”
However, it is certainly true to say that the financial climate has altered over recent months. “Yes. Things are not as good today on that score as they were when we did the Ferretti deal,” says Maccari. “It is all an issue of availability of debt… Suffice to say banks’ attitudes to lending have changed a bit recently. Generally they are not now as happy, not as comfortable funding such deals… And so driving through multiples quite as high as ours are a lot less likely… The manageability of debt burdens is what drives them… But really it’s all a question of timing.”
Actually Candover’s biggest concern when evaluating the Ferretti Group growth potential was not demand, but rather infrastructure, particularly at the very top end of the market where location is a significant part of the location.
“This sector is a strange one though,” suggests Maccari. “It is not about following customers, but about creating what they want… We want to be in more markets with more products… Take, for instance, Riva, but one example of what is being done with one of the group’s brands. It has smaller boats, medium-size boats and larger boats in its range, so the focus is now to fill in the gaps in order to optimise that range offering… Similarly Ferretti Yachts has begun to re-examine its entry-level product, making sure the range catches the right kind of owner early… And the same approach is being taken with all of our activities.”

'"Profitability is ultimately more important to us. If I had to choose between turnover and profit, it would be profit every time..."'


Also important will be the development of areas of synergy, initiatives that will make the machine already in place even stronger, even more effective. But for now Maccari will not be drawn. “Certainly the group is developing some fantastic initiatives that will begin coming on stream soon and impact both.”
For Maccari the bottom line is the most important thing. “Eventually all these development initiatives will impact the business’s profitability. Profitability is ultimately more important to us. If I had to choose between turnover and profit, it would be profit every time. But of course if I get both I’ll be as happy as can be! Of course, the group’s managers will always want ‘capex’ to deliver their growth… It is our job to deliver the appropriate compromise.”
As to a build-up element, Maccari certainly doesn’t rule out future acquisitions. “We will always consider potential targets, of course, but acquisition for acquisition sake is not what we’re about. Any acquisition would have to be the right fit. Good management is a very scarce resource,” says Maccari. “Indeed in many respects human resources are the most important aspects of any deal we do, as the people reflect the potential, the future capabilities of the business.
For investors like Candover, Maccari says there are three major interest criteria. The first and most important is the management team, which must be made of the right entrepreneurial stuff. Second is the target company must have a good growth record and, more importantly, there must be an obvious future growth strategy in place.
A new chief executive officer has recently been installed to help drive the Ferretti Group forward. He is Vincenzo Cannatelli, a good team builder with strong international business development credentials. He has spent 10 years or so in the USA as CEO of Elsag Bailey Process Automation, a NASDAQ company listed on the New York Stock Exchange. “This industry is still really decades years behind the automotive sector in terms of its maturity,” says Maccari. “Cannatelli will definitely help us raise our game internally in terms of structure and outlook.”
Now raising the game is what Ferretti really is good at! Watch out world!

Ferretti Group background…
The Ferretti Group now ranks as Europe’s second-largest pleasureboat builder and, if its present growth rate continues apace, it could well end up pipping Groupe Bénéteau for top slot in the next year or two. Its graph is certainly quite a bit steeper at the moment. Globally we rank the Ferretti Group as third behind the Brunswick Corporation and Groupe Bénéteau respectively; and just ahead of old rival and sparring partner Azimut-Benetti and Genmar, which are now neck and neck.
Certainly what we now know as the Ferretti Group has come along way in just 10 short years. At the back end of the ‘90s Ferretti Spa was a relatively modest one-brand Italian motoryacht builder with an Italian Lire turnover that was the equivalent of around €37 million. Today Ferretti Group turnover is something like 25 times greater and its illustrious brand portfolio not only includes the original operation, now Ferretti Yachts, which is now not surprisingly bigger and better than ever, but also Pershing, Itama, CRN, Custom Line, Riva, Apreamare and Mochi Craft in Italy and Bertram in the USA.
At the moment the Ferretti Group portfolio accounts for no fewer than 60 production and semi-custom models from 7—46m (36—150ft) and the count is climbing, plus there is its significant superyacht construction capability, which currently extends up to around 72m (237ft) with the Clarena II project currently in build at CRN.
Overall Ferretti Group companies now employ around 3,000 people, including 220 ‘managers’. There are 22 ‘production’ sites in Italy, Spain and in the USA that add up to around 673,000m2 (7,240,000ft2) of site area. And it continues to grow. And if all that were not enough, it also now owns a number of specialist moulding, joinery and boat-maintenance and service companies to support its frontline operations, the biggest of which include Resin Sistem, Diesse and Zago in Italy and Spain-based big-yacht paint specialist Pinmar.
In recent years the Ferretti Group has sustained a CAGR (compound annual growth rate) in excess of 20 per cent, significantly more than a €14 billion-€15 billion global market, which is estimated to have had a CAGR of nearer 12 per cent.
During its ‘06/07 year the Ferretti Group’s ‘value of its production’ grew almost 21 per cent to €930 million based upon some 580 boats built. For comparison, its corresponding ‘05/06 year value of production figure reached €770 million on the sale of 470 or so boats, which in turn was up from €653 million the year and 430 or so boats. Its EBITDA for ‘05/06 reached 37.7 per cent or €118.4 million and its consolidated net profit increased 119 per cent to €26 million. The figures for ‘06/07 haven’t been released yet, but they will no doubt be similarly impressively.
And the projections for the ‘07/08 year ahead are equally optimistic. Its value of production for the period is almost certain to top €1 billion. And as of autumn this year the Ferretti Group order-book value was up to a record €1.1 billion. And around two-thirds of that order-book value is above 24.4m (80ft). So on that score things couldn’t be much better…
New owner Candover says its strategic plan for the business includes double-digit growth for at least the next three years.
Group exports account for around 75 per cent of its consolidated sales tally and the geographical breakdown is roughly as follows: 25 per cent Italy, 35 per cent EU, 15 per cent USA, and 25 per cent from ROW (rest of world). In all, the group now serves 80-plus dealers, between them covering no fewer than 100 different countries and 3,000 services points. Around 10 years ago Ferretti standing alone had just a dozen dealers.
These days Ferretti Group sales break down roughly as follows — Ferretti 33 per cent, Pershing 17 per cent, Itama two per cent, CRN/Custom Line 15 per cent, Riva 13 per cent, Apreamare five per cent, Bertram 11 per cent and Mochi four per cent.
Certainly plenty of money has been pumped back in. That’s how it has been grown. In excess of €200 million has been invested in the company over the past four to five years and a further €200 million plus over has been earmarked for the years ahead. That will go on facilities and infrastructure expansion, plus a relentless model-development programme, incredibly ambitious, even for an operation of this scale.
For more, www.candover.com or www.ferrettigroup.com.

© Phil Draper