Value creation through operating improvements in portfolio companies : the case of 3G Capital

Abstract

This thesis is an attempt to show how a group of three Brazilian businessmen were able to create a private equity firm (3G Capital) that has outperformed its competitors. We will first describe the evolution of the LBO industry, and explain why LBO firms are now forced to design new structures to support their portfolio companies in order to generate alphas that will boost their returns. 3G Capital will serve as an example proving that mastering operational engineering generates higher returns than top quartile competitors. We will then analyze the performance of three companies owned by the Brazilian trio, show that these companies have been able to outperform their peers since they were acquired and point out the key operational drivers that led to this performance. Eventually, based on the analysis of the portfolio companies, we will try to define the specificities of the 3G Playbook and study how it allowed its companies to consistently reach their goals.