Case study: YBR Group

Generating record profits



In July 2005, 3i sold YBR Group for €1.8bn, generating record profits for management and 3i and a 4.2x money multiple. To find out how so much value was created read on.

YBR Group was formed in March 2004 when 3i and Veronis Suhler Stevenson (VSS) combined three directories businesses they had purchased separately: De  telefoongids, Fonecta and Mediatel. With operations in eight countries and an international presence, YBR Group is one of the fastest growing directory businesses in Europe. Its operations include printed and online directories, and search and directory assistance.

Benefiting from knowledge-based investing
The origins of YBR Group date back to 1997, when 3i backed Gary List to buyout Thomson Directories, the UK’s second largest operator, in a €133m buyout that turned 3i’s original €38m into nearly €200m – more than five times the original investment. 3i identified the yellow pages sector as a promising sector, at a time when the telecoms bubble had just burst and operators were offloading their directories businesses.

Capitalising on local relationships
In 2002 3i and VSS bought Fonecta for Û112m. Our relationship between 3i’s Finnish venture capital team and telecoms group Sonera, provided the inside track, whilst our Thomson Directories experience gave us the credibility. In 2003, 3i and VSS then led further buyouts, alongside new management teams, of De Telefoongids (Û500m) from KPN directories based in the Netherlands and Mediatel (Û270m) from Verizon directories based in Austria and central Europe. This brought the combined investment by 3i in these separate businesses to Û140m.

Strong performance through operational improvement
Benefiting from the Thomson experience, 3i supported management in driving through cost savings – especially in the area of printing. We also developed the electronic media side of the business, improved sales efficiency and took advantage of the fast-growing eastern European markets. Earnings grew from a pro-forma Û126m in 2002 to Û160m in 2005. Cash flow was particularly strong with over Û400m generated over the three years, and 3i was actively involved in implementing several smaller bolt-on acquisitions, especially in Finland.



A truly pan-European strategy
In 2004, working with advisers and management from 17 different nationalities, 3i merged Fonecta, De Telefoongids and Mediatel to form YBR Group. Creven O’Grady said: “3i brought back Gary List to act as Chairman and help drive through a number of organisational changes.” A refinancing of the combined group raised Û1bn of new
debt and delivered cash returns for 3i of Û224m, a cash-to-cash multiple of 1.5x.

The market recognises the success of 3i’s vision and business model
The merger outperformed the plan on the back of strong individual company trading and sharing of good management practices between the businesses. This success was recognised by the market and we considered floating the company, carrying out a further refinancing of the business or leading a secondary buyout. The result was a tightly-controlled auction, won by a consortium led by Australian Macquarie Capital Alliance, delivering a Û1.825bn sale price – more than 11 times the 2005 earnings – and proceeds of more than Û600m for 3i and its investors.



Gary List, Chairman of YBR Group, said: “3i was uniquely placed to achieve this. I can’t think of anyone else who could have had the market access to make the original investment in Fonecta, De Telefoongids and Mediatel and then the ability to put them together so successfully.”

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