The Art of Cutting a Good Private Equity Deal

Picking winners from a raft of businesses available for funding is not easy. But it is what private equity players do to earn their keep. The relatively little-known face you see on our cover is one such winner discovered by Warburg Pincus (of which, more later), which tops Forbes’s list of top dealmakers this year.

Warburg is not the biggest in the business. Nor, can one say it has the best nose for deals. In 2007, it bought Bausch & Lomb at the top of the business cycle for $4.5 billion—a value that halved rather quickly in the post-Lehman bust. But when the folks at Warburg discovered they may have bought a near dud, they decided to fix things. They installed a new management team at B&L, and six years later sold the company for twice the amount they paid for it.

In this issue of Forbes India, we bring you a fascinating story related to another Warburg Pincus investment. It was nothing as big or as challenging as B&L, but it makes for interesting reading because the deal stands out in the current bleak Indian scenario for deals. For two reasons. First, unlike other PE deals, where you have a company and its owner seeking investments, in the case of Yogesh Mahansaria, Warburg found an entrepreneur with no company to run. They decided to keep him on ice till they found something worthy of him. Mahansaria was the man who built Balkrishna Tyres into an off-highway tyres exporter, but thanks to joint family ownership issues, he had to exit the company he revived. That’s when Warburg found him.
 
Second, Mahansaria got his growth vehicle not in India, but in Israel—where Alliance Tire was on the block when its owner ran into problems. After Warburg acquired it, Mahansaria turned it around and made further acquisitions to make it a global player with $500 million in revenues. Earlier this year, Warburg exited by selling Alliance Tire to KKR for a rumoured four-fold gain. It’s an inspiring story, both of entrepreneurship and deal-making.

We are also happy to publish Forbes Asia’s Fab 50—an eclectic mix of some of the best performers among Asia’s listed companies. Despite the slowdown, India accounts for nearly a fourth of the Fab 50 with 12 entries, one more than last year, while China saw a drop from 23 to 20 this year. Of the 12, the focus this year is on Asian Paints and Tata Consultancy Services. Among the other members of the Indian contingent in the Fab 50 are Dr Reddy’s, Lupin, Sun Pharma, Titan, Axis Bank, HDFC Bank, HCL Tech, ITC, Idea Cellular and Motherson Sumi. You have a treat ahead.

Best,
R Jagannathan
Editor-in-Chief, Forbes India
Email: r.jagannathan@network18online.com
Twitter id: @TheJaggi