The firm typically doubled profits in the businesses it bought, then on-sold them for about 30% more than their valuation on paper years later, Blanks said.
“These are big, established businesses that have market-leading positions that have sort of lost their way either on the public markets or as divisions of big multinational companies.”
For example, when Tegel was a subsidiary of Heinz, it was losing profitability because its executive bonuses were based on market share, not margins, Blanks said.
When PEP acquired the business, it changed the incentives structure and improved product mix and supply, increasing profits.
PEP’s most recent deal here was its partial investment in the freshly merged wealth firm FirstCape.
“We’re one of the biggest pools of capital in the market.” Blanks said.
Other deals Downunder included Mānuka Health, cinema company Hoyts, and toilet paper and tissue company Asaleo Care.
PEP’s first investment was Frucor in 1998 – a corporate carve-out from the New Zealand Apples & Pears Board which had an opportunity in a new product, an energy drink called V.
“26 years later, we’re seeing a very active market still for deals.”
Every year it typically considered up to 120 businesses to buy, and acted upon two to three of them.
But changes in interest rates created a sort of lull for the industry, with business owners less certain of how to value their business and therefore sell it.
“Restoring to normal is on its way.”
It was well-known for its purchase of Peters Ice Cream in Australia from Nestle, which it later reportedly sold in an A$450 million trade sale in 2014.
So, what was PEP’s best deal to date, and what NZ business does it want to buy next? Watch the episode of Markets with Madison above to find out.
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Disclaimer: The information provided in this programme is of a general nature, and is not intended to be personalised financial advice. We encourage you to seek appropriate advice from a qualified professional to suit your individual circumstances.
Madison Reidy is host and executive producer of the NZ Herald’s investment show Markets with Madison. She joined the Herald in 2022 after working in investment, and has covered business and economics for television and radio broadcasters.