Silver Fleet Capital Invests in PhaseOne

[Ben Rubinstein]

How long till we see the rebranded Olympus cameras with jewels attached bearing the proud name of 'phase one' and boasting of a heritage of um, something.

[synn]

When I saw the thread title, I expected some stellar "Doom and gloom" posts. Wasn't disappointed.
Will check back in a year to see how the hopes of the doom pundits were terribly smashed by reality.

[Manoli]

PhaseOne has seen some nice growth over the past couple of years (you can look up their public filings through the references on their Wikipedia page), so it will be interesting to see what they do with this nice windfall.

On closer examination (via your links), I don't think this is quite as benign as it first appeared. It seems this is NOT simply raising capital but selling a majority stake. The following is a Google translation of the Danish link below.

quote
Danish Phase One sold to the English capital fund

18 February 2014 - By Heidi Sejlund
The British private equity fund Silver Fleet Capital acquires 60 percent stake in Phase One and gets thus a majority holding in camera manufacturer.

With English Silver Fleet Capital as the new owner , is Phase One - there is a world leading manufacturer of camera systems for professional photographers - now ready to turbocharge growth.

- We find that there are some significant growth opportunities in the coming years . And it is necessary to grow even faster in order to keep the best people . It requires us to have a larger capital stock in the back , which we have now , says Henrik Håkonsson , CEO of Phase One , the exchange about the sale of 60 percent of the company shares.

What the English capital fund paid for a majority stake in Phase One were not disclosed , but according to the Exchange's information these are 500-600 million, which means that Phase One has an estimated market value of around 1 billion, the newspaper said .

Phase One has chosen partly to sell to Silver Fleet Capital as private equity are accustomed to act in China and Japan , which are some of Phase One major markets.
unquote
www.electronic-supply.dk/article/view/123462/danske_phase_one_solgt_til_engelsk_kapitalfond

If the report and the figures are correct then Phase One was valued at about $180 million USD / £110 million GBP, which seems incredibly low if all the previous profitability reports were to be believed. Based on figures from www.proff.dk/firma/phase-one-as/frederiksberg/fremstilling-af-optiske-instrumenter-og-fotografisk-udstyr/13477705-2/ , though their net operating profit and return on assets looked good, the liquidity ratio** did not. If true, this could explain why Phase chose to sell out sooner rather than later.

-
** the liquidity ratio expresses the company's ability to meet its short-term financial obligations, and is calculated as receivables plus cash as a percentage of short-term debt.
 

[eronald]

Looks like our dealer friends are going to get to know a new team at the head office.
I'm fairly sure the only thing guaranteed to remain as like now is after-sales and support.

Edmund

On closer examination (via your links), I don't think this is quite as benign as it first appeared. It seems this is NOT simply raising capital but selling a majority stake. The following is a Google translation of the Danish link below.

quote
Danish Phase One sold to the English capital fund

18 February 2014 - By Heidi Sejlund
The British private equity fund Silver Fleet Capital acquires 60 percent stake in Phase One and gets thus a majority holding in camera manufacturer.

With English Silver Fleet Capital as the new owner , is Phase One - there is a world leading manufacturer of camera systems for professional photographers - now ready to turbocharge growth.

- We find that there are some significant growth opportunities in the coming years . And it is necessary to grow even faster in order to keep the best people . It requires us to have a larger capital stock in the back , which we have now , says Henrik Håkonsson , CEO of Phase One , the exchange about the sale of 60 percent of the company shares.

What the English capital fund paid for a majority stake in Phase One were not disclosed , but according to the Exchange's information these are 500-600 million, which means that Phase One has an estimated market value of around 1 billion, the newspaper said .

Phase One has chosen partly to sell to Silver Fleet Capital as private equity are accustomed to act in China and Japan , which are some of Phase One major markets.
unquote
www.electronic-supply.dk/article/view/123462/danske_phase_one_solgt_til_engelsk_kapitalfond

If the report and the figures are correct then Phase One was valued at about $180 million USD / £110 million GBP, which seems incredibly low if all the previous profitability reports were to be believed. Based on figures from www.proff.dk/firma/phase-one-as/frederiksberg/fremstilling-af-optiske-instrumenter-og-fotografisk-udstyr/13477705-2/ , though their net operating profit and return on assets looked good, the liquidity ratio** did not. If true, this could explain why Phase chose to sell out sooner rather than later.

-
** the liquidity ratio expresses the company's ability to meet its short-term financial obligations, and is calculated as receivables plus cash as a percentage of short-term debt.
 

[ndevlin]

You have to think that Silverfleet is coming to this party with a shotgun, a priest and a bus ticket to Sweden.  Otherwise, this will get really expensive for them.

Interesting to be sure. Nobody makes this kind of investment, certainly not PE funds, without a clear plain for significantly increased profitability and a lucrative exit. 

Btw, this was a buyout, but hardly a pay-day.  The release is clear that senior management have had to roll their proceeds back into the company.

- N.

[RichDesmond]

Private equity firms buying a stake in a high-end, "boutique" business isn't always bad.

Those of you familiar with Ducati (an expensive, low volume Italian motorcycle) may remember the company was on the ropes back in 96-97. Texas Pacific Group came in, bought the business, dumped in a bunch of cash and business know-how. The wailing and gnashing of teeth on the Ducati forums was pretty intense. The "end of Ducati as we know it" was widely predicted. However, TPG did NOT mess with what made Ducati Ducati, they let the motorcycle people do their job. The business end they took care of, the company prospered, Ducati aficionados were pleased and TPG cashed out some years later with a tidy profit. Win win win...

[Manoli]

... this was a buyout, but hardly a pay-day.  The release is clear that senior management have had to roll their proceeds back into the company.

Anything but a payday.
quote
Silverfleet Capital will acquire a majority investment in Phase One from the existing management team, who will reinvest a significant amount of money for a substantial minority stake. Bank financing for the transaction is to be provided by Nordea.
unquote
http://www.silverfleetcapital.com/media-centre/news/silverfleet-capital-to-invest-in-phase-one-as/

Raising equity is one thing, selling a majority stake is another.

[Ken R]

"Silverfleet said in a statement that it will help the company to grow through the potential acquisition of complementary businesses or technology."

That does not seem like a bad thing at all…

also "in 2011 Blackstone Group bought a minority stake in Phase One rival Leica from investment firm ACM Projektentwicklung."

Leica is not doing bad at all

[Steve Hendrix]

It's really hard to say - but man you guys sure are some doom-riddled pessimists.

I don't know how it will end up - but to raise the substantial investment they're looking for to grow where they want to grow, perhaps majority ownership is a card they had to give up. At any rate, they chose to, and that is not something you choose to do lightly. As it seems Phase One has been doing quite well in recent years - I would think the new owners are onboard with the current and future strategy and are enthusiastic about helping to fund it. Alternatively - there were lots of rumors about Canon, etc, buying them. Don't know that I liked that idea any better, in fact I don't.

As far as Phase One/Leaf - I don't understand why this seems to vex people so much, especially those who like to take members edits and re-post them. 

There are many companies who have tiered products with different labels - Audi/Volkswagon comes to mind as an apt comparison. What you see as some sort of resource drain - with no basis of fact - could be quite the opposite. If Leaf were such an anchor dragging Phase down, I'm sure Phase wouldn't be maintaining the brand. And I don't agree that you can take everything that is in Leaf and combine it with Phase. Maybe you could - but that means you would want to - since the products, and especially the files do maintain their differences, it's not a matter of whether they can combine all in one, but whether they want to. And so far, it doesn't appear that they do.

Phase has been hitting homers - this wasn't a rescue line, this is something else. What that means 3 years from now, we shall see.


Steve Hendrix
Capture Integration

[Gigi]

Maybe, if it's done right, there is money to be made in making good products. 

And that capital is needed to make the necessary investments.

Sounds rather old-fashioned but might be true. It's likely that P1 management still care a lot about their company. They probably figured this was the best way to get investment capital.

[Steve Hendrix]

Maybe, if it's done right, there is money to be made in making good products. 

And that capital is needed to make the necessary investments.

Sounds rather old-fashioned but might be true. It's likely that P1 management still care a lot about their company. They probably figured this was the best way to get investment capital.

Phase One clearly has some very talented people and impressive IP assets. I could see where lack of funding could hold back some very interesting projects.

...and I hope that's the case!


Steve Hendrix
Capture Integration

[gerald.d]

As far as Phase One/Leaf - I don't understand why this seems to vex people so much, especially those who like to take members edits and re-post them. 


Steve Hendrix
Capture Integration

Clearly this is aimed at me.

"Vex"?

You know what that means, yes? It means to irritate or annoy.

Phase/Leaf doesn't irritate or annoy me. There isn't a single drop of emotional investment from me into either brand nor the company's existing structure.

It's simply that, to me, it doesn't make any sense whatsoever from a business perspective to run the two brands under one roof. This is NOT the same as Volkswagen. For goodness sake. Phase One turnover around US$50M a year. The scale simply isn't there.

And I at no point said that "Leaf were such an anchor dragging Phase down". It is quite possible that Leaf is profitable right now.

But it IS a fact that there are two brands producing and marketing MFDB's and cameras under one roof delivering a profit of only a few million dollars per year. So there WILL be inefficiencies inherent in that structure that could be addressed should a new majority owner decide to do so.

On the one hand, you claim "I don't agree that you can take everything that is in Leaf and combine it with Phase.", and then right after that, without even skipping a beat, you admit "Maybe you could". Can. Could. Same verb.

"The products, and especially the files do maintain their differences."

Come on. Let's be honest here. The Credo IS the IQ1 wearing slightly different clothes and running different firmware. There is absolutely nothing to prevent Phase from releasing their own WS versions of the IQ's. Do you seriously not believe that if Phase did that, their own product line would be enhanced? That their own brand would suffer?

As Doug rightly pointed out (and as I have absolutely the right to respond to), Canon do something along very similar lines with the 1Dx and 1Dc. But there are two fundamental differences. Firstly, those two products are aimed at totally different markets. And secondly - they do it under the same brand.

As for the files?

What is it that is behind those differences? I'm intrigued here, because I'm under the impression that - if they wanted to, Phase One could have a single button somewhere in the workflow that said "give me Leaf" or "give me Phase One".

"Phase has been hitting homers - this wasn't a rescue line, this is something else."

Clearly Phase One needed significant outside investment in order to grow. You do not sell your majority shareholding without good reason.

But I repeat once again.

I bet it was not in their strategy 3 years ago to sell out. So something hasn't gone to plan.

[gerald.d]

If the report and the figures are correct then Phase One was valued at about $180 million USD / £110 million GBP, which seems incredibly low if all the previous profitability reports were to be believed.

Both Canon and Nikon are valued with a P/E ratio of around 15.

Phase One made $5.5M in 2011. Let's be generous and say - based on claims by insiders - that profits doubled in the intervening years.

$180M sounds on the expensive side actually.

[eronald]

I wonder whether this going to be a thing like Xrite where the company gets resold every 3 or 4 years?
This seems to be a frequent pattern with private capital firms, for tax reasons.

Edmund

[Steve Hendrix]

Clearly this is aimed at me.

Do you think?   Are you going to re-post my edit? 

"Vex"?

You know what that means, yes? It means to irritate or annoy.

Phase/Leaf doesn't irritate or annoy me. There isn't a single drop of emotional investment from me into either brand nor the company's existing structure.

It's simply that, to me, it doesn't make any sense whatsoever from a business perspective to run the two brands under one roof. This is NOT the same as Volkswagen. For goodness sake. Phase One turnover around US$50M a year. The scale simply isn't there.

Yes of course I know what it means - though irritate and annoy are the two most extreme synonyms associated with the word. Generally, people - not you, only the re-posting edited posts was aimed at you - do seem vexed over the idea of Leaf and Phase creating inefficiencies.

What I see and where I come from is that many take positions on the wisdom of this situation when they have no real information about how the two brands provide any internal benefit from co-existing. It is assumed that there must be inefficiency and that is the only data point. It is the only data point that you can draw on, because you don't really know what is happening internally between Phase One and Leaf, strategically or operationally. That's not your fault - and neither do I. But I have a pretty good feeling that if it truly creates crippling inefficiencies, then it wouldn't be happening.

And I at no point said that "Leaf were such an anchor dragging Phase down". It is quite possible that Leaf is profitable right now.

I didn't say you did, this wasn't aimed at you (see above).

But it IS a fact that there are two brands producing and marketing MFDB's and cameras under one roof delivering a profit of only a few million dollars per year. So there WILL be inefficiencies inherent in that structure that could be addressed should a new majority owner decide to do so.

Quite possible.

On the one hand, you claim "I don't agree that you can take everything that is in Leaf and combine it with Phase.", and then right after that, without even skipping a beat, you admit "Maybe you could". Can. Could. Same verb.

"The products, and especially the files do maintain their differences."

Come on. Let's be honest here. The Credo IS the IQ1 wearing slightly different clothes and running different firmware. There is absolutely nothing to prevent Phase from releasing their own WS versions of the IQ's. Do you seriously not believe that if Phase did that, their own product line would be enhanced? That their own brand would suffer?

What I mean (meant) is that as one example, Phase One files have a certain look out of the box. Leaf files have a different look, use different profiles. Could they not use the same profiles, create the same look? They could - but it is certainly possible they choose not to. Maybe we would like Phase One products to use Leaf profiles out of the box. But maybe Phase One likes their own look. Or vice versa. It is true, though, that Leaf and Phase products became much more similar under the IQ/Credo design. If this trend continues, then...the separate branding may indeed not be practical.

As Doug rightly pointed out (and as I have absolutely the right to respond to), Canon do something along very similar lines with the 1Dx and 1Dc. But there are two fundamental differences. Firstly, those two products are aimed at totally different markets. And secondly - they do it under the same brand.

As for the files?

What is it that is behind those differences? I'm intrigued here, because I'm under the impression that - if they wanted to, Phase One could have a single button somewhere in the workflow that said "give me Leaf" or "give me Phase One".

"Phase has been hitting homers - this wasn't a rescue line, this is something else."

Clearly Phase One needed significant outside investment in order to grow. You do not sell your majority shareholding without good reason.

But I repeat once again.

I bet it was not in their strategy 3 years ago to sell out. So something hasn't gone to plan.

That's one way to look at it. Or perhaps their plans have succeeded to the point their ambitions and capabilities need funding to realize what they are capable of - which is a bit of a different take than simply "to grow".


Steve Hendrix
Capture Integration

[ErikKaffehr]

+1

Just to say, that money doesn't come without a price tag. The investor demands return on investment, that may be a good thing. Perhaps expanding the market?

Erik

Phase One clearly has some very talented people and impressive IP assets. I could see where lack of funding could hold back some very interesting projects.

...and I hope that's the case!


Steve Hendrix
Capture Integration

[EricWHiss]

Honestly I'm happy for Phase and am hopeful this will lead to good things for the photo community.   

Ok so Hasselblad came out with the Lunar and discontinued the V film camera after the VC's got involved and oh what's the new $1000 camera in a $10000 package called?
But Leica has done well with their turn with the investors, but maybe because they didn't give up total control?  I dunno but I'm a bit more optimistic about Phase doing better things than rebranding Japanese compact cameras with Ostrich testicle leather and extracting the value of the name by duping unsuspecting amateurs into thinking that something special had been added.   Phase never had the name recognition power that Leica and Hasselblad did amount the wealthy amateur crowd anyhow so probably couldn't make that typical play from the MBA playbook even if they wanted to.

I'd like to see better software and we'll probably see some mobile solutions plus maybe a lot more CMOS offerings.    Personally I'm also hoping to see more backs for the Rolleiflex Hy6 platform ( I already wrote I'm an optimist right?).

[synn]

It's almost comical how the analysis paralysis crowd in any given forum is the ones who are also the least concerned with creating any noteworthy work.

Carry on...

P.S. I love my leaf. I don't particularly care much for paying Phase prices or the phase "Look" for my files.

[gerald.d]

It's almost comical how the analysis paralysis crowd in any given forum is the ones who are also the least concerned with creating any noteworthy work.

Carry on...

P.S. I love my leaf. I don't particularly care much for paying Phase prices or the phase "Look" for my files.

And here we go with the ad hominems.

Stay classy!

[synn]

And here we go with the ad hominems.

Stay classy!

Certainly.
Champagne for you, sir?