Private Equity Deals with Capital Allocators

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

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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.

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INSIGHT

3G Capital Owner-Operator Model

3G Capital follows an owner-operator model that combines top leadership with frontline business people.
Their value creation follows phases: efficiency, organic growth, then inorganic growth via acquisitions.

ADVICE

Implement Zero-Based Budgeting

Use zero-based budgeting to challenge existing expenses and start cost planning from zero.
Compare spending internally and externally to set accountability and tighten budgets.

ANECDOTE

Alex Behring's Burger King Connection

Alex Behring was a longtime Burger King fan, even eating there daily as a teen in Miami.
The brand's size surpassed its business scale, revealing growth potential for 3G Capital's take-private.

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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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