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Copy of 3i Group's Investment In Little Sheep

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청하 김

on 3 December 2014

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Transcript of Copy of 3i Group's Investment In Little Sheep

Chungha Kim, Donghoon Lee,
Laura Fisher, Youkyeong Han

3i Group's Investment In Little Sheep
Background
Summary
Analysis
Conclusion
Little Sheep
3i Group
World's leading hotpot brand
Founded in 1999 by Zhang Gang
Over 300 chain restaurants in 10 different countries
Acquired by Yum! Brands Inc. in 2012 for $587 million
Multinational private equity and venture capital company
Market value $880 million
Annual Revenue $170 million
Market share ranks 2nd among China's restaurant chains
"Investors in Industry"
Focuses on making fewer, larger, sector-focused investments
People Program
provide portfolio firms with seasoned executives and experts to assist in its management and value-creation
Business Development Practice
provide portfolio firms with resources to expand their business internationally
3i's Investment in Little Sheep
In June 2006, 3i invested $20 million in Little Sheep
provide industry and management expertise
example of a successful private equity transaction in emerging markets
In 1999, entrepreneur Zhang Gang founded Little Sheep in Inner Mongolia
Immediate success- decision to expand the business into a franchise
Trademark Battle
poor trademark protection policy in China
took Little Sheep 7 years to be finally granted trademark protection in 2006
<Emergent Strategy>
Rapid Expansion!
Grab the market before other Little Sheeps emerge
Public Listing!
Diversified source of capital
Brand recognition
Little Sheep's Dilemma
Management Problems- weak control over its franchises
Downgrading of quality and services
Solution: Cooperation with 3i
3i Group provided Little Sheep with much needed
industry knowledge
and
management expertise
Lessons&Recommendations
equity firms’ industry and management expertise and commitment to add value might be more important than their financing capability
Open-mindedness plays a big role in the success of partnership
Interests and goals of the partnered companies have to align with each other
Why did 3i choose to invest in Little Sheep?
Extraordinary growth and brand name
Ease of standardization
3i was interested in Chinese restaurant industry
Food and beverage sector was growing twice as fast as China's GDP
China's economy was shifting towards consumption-led growth
Deng Xiao Ping's Economic Reforms
Opened up China to foreign business that wanted to invest in the country
Why did Little Sheep choose 3i?
Zhang Gang's business philosophy
"Many people grow a company like raising a pig. The pig gets fat, you kill it and make money. I grow my company like raising a son..."-Zhang Gang
"Helping a great business to realize its potential takes a lot more than just capital. It is ultimately about the people..." -Anna Cheung, 3i Partner
3i's commitment and expertise
Tapped into People Program to provide world-class experts with deep understanding in the restaurant business
3i's Advantage-
People Program
Little Sheep's thin management
Why did Little Sheep choose 3i?
Zhang Gang's business philosphy
"Many people grow a company like raising a pig. The pig gets fat, you kill it and make money. I grow my company like raising a son..."-Zhang Gang
"Helping a great business to realize its potential takes a lot more than just capital. It is ultimately about the people..." -Anna Cheung, 3i Partner
3i's commitment and expertise
Tapped into People Program to provide world-class experts with deep understanding in the restaurant business
3i's Advantage-
People Program
Little Sheep's thin management
Strengthening of the Management Board
Table of Contents
1. Summary&Background
2. Analysis
3. Conclusion&Questions
Full transcript