Private Equity Deals with Capital Allocators

Classic Deal - Burger King by 3G Capital (S3.EP.09)

May 6, 2024

3G Capital's incredible success with Burger King, turning $1 billion into $28 billion. The owner-operator investing model and operational improvements were key. Discussion with Alex Behring and Daniel Schwartz covers the sourcing, deal dynamics, and business growth strategies.

01:11:33

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Quick takeaways

3G Capital's owner-operated investment model and focus on operational excellence led to the successful acquisition of Burger King.

3G Capital's strategic growth plan for Burger King emphasized efficiency, expansion, and a culture of ownership among employees.

3G Capital's expansion strategy included key acquisitions like Tim Hortons, Popeyes, and Firehouse Subs to drive global growth and innovation.

Deep dives

The Significance of Middle-Market Businesses in the Private Equity Industry

Middle-market businesses in the US, generating revenue between 25 million and a billion dollars, employ almost a third of the workforce and account for two-thirds of the total US private equity deal value. This sector, often overshadowed by big deals in headlines, plays a crucial role in the economy and the private equity landscape.

Start Fresh: Redefine Expenses Without Assumptions

01:23

Prepare Thoroughly Before Pursuing Investments

01:25

Success is About Long-term Vision and Bold Bets

00:59

Invest in Resilience: Choose Understandable Businesses with Moats

01:31

Introduction

2min

3G Capital's Burger King Investment Success Story

26min

Strategies for Growth and Efficiency in Acquisition

26min

Franchise Business Model Success

6min

Strategic Capital Allocation and Industry Criteria

7min

Exploring Hobbies, Philanthropy, and Work Ethic of the Interviewees

2min

Personal and Professional Reflections on Mentorship and Business Strategies

3min

3G Capital’s buyout of Burger King may be the most successful private equity deal you’ve never heard about. Over the last fourteen years, or the length of a typical private equity fund, 3G turned a $1 billion investment into $28 billion in value. The annual dividends from the investment accruing to 3G today are around 70% of its invested capital. The deal is one of the highest earning buyouts ever.

3G is an organization with a storied history. Founded by Jorge Paolo Lemann, Carlos Alberto Sicupira, and Marcel Herrmann Telles, the group created an owner-operator model of investing. They rose to prominence through building the largest beer company in the world, initially buying local brewer Brahma in 1989, expanding it and merging with a competitor to become AmBev in 1999, merging with Interbrew to become ImBev in 2004, and taking over Anheuser Busch in 2008 to become AB InBev.

Twenty years ago, Alex Behring, a young star on their team, moved to the US to form 3G Capital and take the approach abroad.

Burger King was the second largest hamburger fast food chain after McDonalds in 2010 when 3G took it private. What it accomplished since then has been extraordinary.

My guests to discuss 3G and the deal are Alex Behring and Daniel Schwartz. Co-Managing Partners of 3G Capital.

Our conversation covers the history of 3G, Alex's journey to form 3G Capital, and the 3G playbook. We then dive into the deal, covering the sourcing and deal dynamics, improving operations, growing the business, taking the company public unexpectedly, and reloading to buy Tim Horton’s, Popeye’s, and Firehouse Subs. Today’s Burger King is part of Restaurant Brands International (QSR), a public company with a $32 billion market cap and $50 billion enterprise value.

This classic deal will widen your aperture on what’s possible with a long-term, compounding holding period and operational excellence.

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Private Equity Deals with Capital Allocators

Classic Deal - Burger King by 3G Capital (S3.EP.09)

Podcast summary created with Snipd AI

Quick takeaways

Deep dives

The Significance of Middle-Market Businesses in the Private Equity Industry

3G Capital's Remarkable Buyout of Burger King

Growth Strategy and Operational Enhancements at Burger King

Acquiring Tim Hortons: A Strategic Move in the Franchise Business Model

Expanding the Franchise Portfolio: Towards Continued Growth with Future Acquisitions

Start Fresh: Redefine Expenses Without Assumptions

Prepare Thoroughly Before Pursuing Investments

Success is About Long-term Vision and Bold Bets

Invest in Resilience: Choose Understandable Businesses with Moats

Remember Everything You Learn from Podcasts