triton september 2012 overview and lessons learnt from swedish spotlight on carema care
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TritonSeptember 2012
Overview and Lessons Learnt from Swedish Spotlight on Carema Care
Confidential 2
An investment in a fund is subject to various risks and should only be made after a careful review of the relevant documentation and following the consultation of a legal, tax or other adviser.
Triton is registered with the Jersey Financial Services Commission (the "Commission") pursuant to the Financial Services (Jersey) Law 1998 (the "FS Law") to provide fund services business as an investment adviser. The Commission is protected by the FS Law against liability arising from the discharge of its functions under the Law. The approval of the Commission in respect of this Presentation is not required and has been not sought.
This presentation (the "Presentation") which has been prepared by Triton Advisers Limited ("Triton" or the "Adviser") is strictly private and confidential and is intended only for the use of persons to whom it has specifically been given by the Adviser and, without the prior written consent of Triton, should neither be disclosed to any other person, company, partnership or other entity, nor reproduced in whole or in part. By accepting this Presentation you agree to be bound by the foregoing.
This Presentation is for information purposes only and should not be relied upon for any other purpose.
Neither Triton, nor any of its employees, advisers or agents accepts any responsibility for nor makes any representation of warranty, express or implied, as to the truth, accuracy or completeness of the information contained in this Presentation which is subject to further amendment, review and verification. This Presentation does not constitute or form part of or contain any invitation or offer to any person to underwrite, subscribe for, otherwise acquire or dispose of any interests in respect of any fund or advise persons to do so in any jurisdiction, nor shall it, or any part of it, form the basis of or be relied on in any connection with or act as an inducement to enter into any contract or commitment for such. No reliance may be placed for any purpose on the information or opinions contained in this Presentation, or on its completeness and no liability is accepted for any loss however arising from any use of this Presentation or its contents. Past developments and performances are no guarantee for any future developments and performances. This Presentation will be replaced by a full private placement memorandum in due course. Furthermore, this Presentation is only being directed to persons who are legally able to receive it in the jurisdiction in which they are situated.
Triton accordingly accepts no responsibility to any person for the completeness or accuracy of the information contained in this Presentation or for the consequences of any person placing reliance on the content of this Presentation for any purpose.
Disclaimer
3Confidential Triton
Value oriented, Operational Improvement driven investor
2.5x / 30% IRR objective , vintage and cycle independent
Industry expertise, local presence and international know-
how
Sector Focus : Business Services, Industrials and Consumer/
Health
German-speaking and Nordic countries
Out-of-favour, underperforming, overleveraged companies
€50 to €500 million businesses with significant value
creation potential through operational improvements
Leader in its markets. Founded and owned by its partners
Triton - Invest to Build Better more valuable Businesses
TritonBeteiligungsberatungGmbH`(Frankfurt)
•
Triton AdvisersLimited(Jersey)
TritonAdvisersSweden AB(1)
(Stockholm)
TritonAdvisersUK(London)
TritonAdvisers S.à r.l.(Luxembourg)
1) Triton Advisers Sweden is independent and separate from the Triton group of companies
Triton Focus – Circle of Competence
Business Services Industrials Consumer
Support Services
Wholesaling & Logistics
Industrial Goods
Building & Construction
Energy & Resources
Chemicals
Products & Retail
Health
4Confidential Triton
Invest and create value within our Circle of Competence (CoC)
Investment rationale, insights and
anglesType of Investment
Under-performing or below potential
Corporate carve-outs / ‘orphans’
Under-resourced
Private / public situations
Losses-to-profits / restructurings
Turn-arounds
Separation-of-parts
Complex situations
Debt / balance sheet restructurings
Over-leveraged businesses
Distressed opportunities
Lender(s) seeking new owners
Triton Invest within Circle of
Competence
Out-of-favour / under-resourced
businesses
€50 – €500million enterprise value
Significant realisable value creation
– Operational Improvements
– Buy & Build
– Separation of Parts
Viable realisation alternatives
Value > price + margin of safety
Factual / structured decision making
process
Active ownership / control / follow up
Sectors
Business Services
Support Services
Wholesaling & Logistics
Industrials
Industrial Goods
Building & Construction
Energy & Resources
Chemicals
Consumer
Products & Retail
HealthGeographies
DACHAustria
GermanySwitzerland
NordicsFinland
DenmarkNorwaySweden
31
2
Confidential 5
• Ambea is a private healthcare and care provider in Sweden and Finland owned by Triton, KKR and management
• The business consists of outpatient care, occupational health services, primary care and elderly care
• The Group has three major subsidiaries: Carema Care, Carema Healthcare and Mehiläinen
• Carema Care provides care services and nursing homes for disabled and elderly, Carema Healthcare runs primary care units, specialist healthcare services and psychiatric care operations and Mehiläinen provide privately and publicly funded healthcare services as well as publicly funded social services
• Ambea employs almost 13 000 people and operates 650 units with close to 7 500 care beds across care and health care. Net revenues in 2011 were 978 MEUR
Ambea – a leading private provider of healthcare and care services in the Nordic region
• Carema Care is the largest subsidiary of Ambea
• For a long time a premium provider or care services within the Swedish publicly financed care sector and currently the largest private care provider in Sweden
6Confidential Triton
Everyone is talking about Carema Care – but what really happened?
November 2011Media storm. 45 news
articles daily
May 2012A completely new image
appears. DN’s reporting is the focus
March 2010Triton and KKR acquire
Ambea
Strengthened quality work | New management | Story on Koppargården | Media storm | Conversion of Shareholder Loans | New CEO | Redistribution of resources
7Confidential Triton
Why the massive media attention?
A
PRIVATE EQUITY OWNED, TAX FINANCED, ELDERLY CARE BUSINESS
perceived as
AVOIDING TAXES
while simultaneously
PAY OUT BONUSES BASED ON FINANCIAL RESULTS
is accused for
LACKING IN QUALITY OF CARE
Private alternatives in public sector still controversial
Exposed users that are seen as powerless
Variable salary is an issue that engage
A breadth of interesting players: unknown investors and owners, national politicians sensitive to the debate, local politicians responsible for tenders and ultimately for quality, and 7 500 caretakers across the country
8Confidential Triton
PHASE 1: Carema Care discover deviations and takes action in Spring 2011
The analysis show deviations in deliverables at Koppargården
• Carema Care informs the municipality
• Management that does not meet quality and ethical standards leaves the company
• Errors are corrected and the quality work is strengthened
Discover deviations – takes action
Carema acts on deviations
9Confidential Triton
PHASE 2: The scrutiny starts and escalates in Autumn 2011
Media scrutiny and actions
Challenges
The public’s strong empathy for the residents- everyone has a grandmother or grandfather
Private Equity is perceived as short-term and profit maximizing
There were some quality deviations, but many of the reported incidents were investigated and proven untrue. Media on the other hand were uninterested in these aspects which made it a tough challenge
Media focused on a contradiction between good care and the possibility to make a profit. To explain the links between care quality and long-term return is hard when media has more exciting news to tell and no reason to help you.
The owners go out in a joint ad declaring the conversion of Share Holder Loans to Equity- Nov 9
A forceful outreach by Carema management correct the public opinion On weighing diapers- Dec 22
Carema Care’s President reveal the cancelation of all bonuses on live TV – Nov 10
10Confidential Triton
Key Messages
All instances where quality has lacked are unacceptable
Carema Care aim to offer the highest possible healthcare and care quality
Several powerful actions have been taken to secure quality
Since the new ownership, quality has steadily improved
The owners are prepared to do everything necessary to resolve the situation
Carema and Ambea are taking all necessary action to re-establish the public’s confidence
The owners assume full responsibility
PHASE 3: Forceful actions are taken
Ambea’s immediate actions:• Ambea’s board release action plan• Fast investigations of all potential quality
deviations• Open house at Koppargården for relatives and
media• Carema Care’s president participate in debates
on TV, radio and newspapers• Quality index initiative launched in largest daily
newspapers op-edTriton / KKR’s immediate actions• External quality system evaluation• Decision to appoint CMO• Customer ombudsman and whistle-blower
function• Removal of the bonus system• Public apology and action plan• Conversion of shareholder loans to equity• New Board-level competence• Increased transparency and visibility for Triton
Media scrutiny begins
Forceful actions taken
Further a
ction is ta
ken
11Confidential Triton
PHASE 4: Media’s scrutiny is reviewed in Spring 2012
Media’s scrutiny is reviewed
• Carema Care initiates an external review of the media’s handling of sources, among other things. Results of the report spreads; leading daily Expressen concludes that Dagens Nyheter (daily leading the scrutiny) has done wrong in several aspects of its review
• Weekly newspaper Dagens Samhälle go back to the sources and find more factual mistakes and that Dagens Nyheter did not portray a balanced picture of what actually happened
• The review spread to other leading media, including dailies Svenska Dagbladet and Sydsvenskan
• Think-tank Timbro, independently from Dagens Samhälle, produced an extensive report regarding the media scrutiny, drawing similiar conslusions to Dagens Samhälle
”It’s time to speak frankly about Carema” – Mats Edman, Editor at Dagens Samhälle
12Confidential Triton
Spring 2012: Continued actions to strengthen confidence
1. Increased transparency
2. Go on the offence
New Ambea CEO Redistribution of resources to the
units to improve deliverables
4. Show expertise and take control over the own agenda
Clear ambition: Carema Care will regain the position as perceived quality leader. Company now winning tenders again.
1. Admit mistakes
2. Increased transparency
• Building relationships• Transparency on website and in press
releases• Member of SVCA• Participates in debates and seminars• Accessibility for the media
From completely unknown to the general public to active participants in the debate. Remain as long-term and
dedicated owners.
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