It is interesting following private capital and innovation. At the most
basic level I see a pattern emerging:

- BigCo wants to divest slow moving parts of the business, low growth
areas, areas that require too much capital, sometimes too much
'innovation', or divest less interesting brands after a merger or
strategic review
- BigCo sells off the group to a private equity firm
- the private equity firm needs acquisitions like this as they have a
lot of money to spend (interest rates are too low, so banks and
insurance companies need some boost to their returns) and they need a
2X - 5X return in 3 - 5 years
- the divested company starts off with new management - or invigorated
managers who now own a stake in their business
- the divested company starts by reducing costs and making themselves
more efficient... but this does not provide the growth path that is
needed to justify an ultimate 2X - 5X return
- the divested company needs to 'innovate' to come up with new things,
new growth areas, new markets, etc and starts to invest in innovation
capacity
- eventually the focus on innovation starts to yield dividends for the
divested company...
- ... and demonstrates to a potential acquirer or the stock market that
this company is really a growth firm

- and while this is going on, the divested firm's actions in the
industry start to force their competitors to start innovating as
well... and thus the Innovation Arms Race goes on

So, who is impacted by this. Right now the chemicals industry has
experienced a surge of private equity investment. The next wave will be
larger manufacturers and consumer product companies, in my opinion.
What is clear for me is that the wall of private money - which needs
its huge return - is going to drive innovation wherever it hits.

Yours,

Mark Turrell
mark_turr...@imaginatik.com
www.imaginatik.com