Original Private Equity Strategies - How to Build a Global Niche Market Leader from Scratch

Abstract: In this paper, we study sources of value creation in private equity-backed buy-and-build strategies by performing a case study on Fidelio Capital's creation of Vimian - a now global and publicly listed animal health group. We find that the value created in this case is mainly attributable to four components, which are all well-aligned with Fidelio Capital's investment model. Firstly, Fidelio Capital enjoys an investment mandate with few limited partner restrictions. Secondly, targeted markets are growing, fragmented, non-professionalized, and consist of entrepreneurially driven companies. Thirdly, Fidelio Capital has an opportunistic yet price-disciplined approach to mergers and acquisitions, where add-ons are acquired on a stand-alone basis to fuel inorganic growth. Fourthly, Fidelio Capital applies a decentralized governance model that alongside talent attraction, wide incentive programs, and group-wide support functions enables faster decision-making - facilitating organic growth. Complementary to our qualitative analysis, we quantify what share of value creation is attributable to entry (buying low), engineering (improving Vimian), and exit (selling high). We find that approximately two-thirds of Fidelio Capital's value creation for Vimian is attributable to elements within Fidelio Capital's control.