| 3G Capital/Burger King (Restaurant Brands International) | General PE Industry | Short-Term Strategy from Greenfield’s Negative Analysis |
| “… 3G expanded Burger King’s operations via acquisitions into a multi-branded business…” “[3G] acquired Burger King for $4 billion, financed with $1.6 billion in equity and $2.4 billion in debt.” | Company expansion through vertical and horizontal integration. Acquisition through a leveraged buyout | “A greater dependence on debt to finance company expenses and projects…” |
| 3G executives and other managers are put onto the Burger King board and start to implement their internal strategy playbook. “Set clear aggressive goals with enthusiastic and aligned teams. Don’t over centralize the how, but the what. Maintain focus and ask the right but tough questions. Don’t manage the company, manage the people and they will manage the company.”—3G manager’s management approach playbook “The new management utilized a management by objectives (MBO) process to ensure a ‘focus on main initiatives’ and the prioritization of actions to support achievement of company results. This involved extensive benchmarking vis a vis peer companies and other objective indicators and using those benchmarks to set goals.” “Executives presented to the entire company quarterly regarding progress made on goals.” “The compensation system was reworked to incorporate a higher percentage of at-risk compensation with payouts based on the achievement of the KPIs.” | Members of the PE firm or selected outside managers are hired to run and manage the acquired company based on how the firm sees fit and how the firm wishes to see its approaches carried out. Frequent updates on acquired company transformation from executives Incorporation of a Key-Performance-Indicator (KPI) system to meet goals of management | “The use of executive compensation schemes that prioritize the satisfaction of short-term financial goals…” |
| “As a result of the restructuring, corporate headcount was reduced by nearly half, and the organizational structure was flattened.” “…following the 3G acquisition, the organization shifted its approach to hiring, prioritizing capabilities that are analytical in nature, the ability to think through problems and come up with good solutions that address the core of the issue.” | Corporate and management restructuring and reduction of employee headcount Acquisition of high value employees to assist more productively in business transformation | “Cuts in employment generally…” |
| “The 3G team focused on establishing an ownership culture.” “In 2010, employees were given the opportunity to reinvest the money they had made as public shareholders of Burger King into the equity of the newly privatized company.” | Create an ownership based culture where employees, not just at the senior management level, have an equity stake in the organization. KKR, one of the pioneers of the private equity industry and among the largest PE firms, has employed an employee ownership program in some of their acquired companies “In the 1980s, KKR sometimes relied on layoffs to cut costs. It now doles out ownership stakes in companies it buys to all levels of employees to encourage productivity.” | “Stock buybacks…” Although employee equity ownership and an “ownership culture” are not direct stock buybacks, they are a way of reducing the amount of floating shares on the public market, and capital going to employees to help them reinvest in the business diverts capital away from other corporate investments with possible net present values. “A focus on share price rather than the corporation’s value as a whole or the value of the corporation to its non-equity shareholders.” Incentivizing employees to use their earnings to reinvest in the business helps to raise the company’s share price. |