EPSTEIN
page 4 / 345 . OCR, unverified
new version which I don't plan to sign). You have a copy but basically it says that they
pay us for every deal we get involved with and invest in Brazil - in addition to the
retainer of 1.5M/yr, a 2% fee over any investment w/ a U551M minimum fee per deal.
Current portfolio's are 5 companies, we sourced all 5 and these are the best performing
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assets globally. As an example, Allied, a mobile & tech distributor, went organically from
750M to 3.2Billion in sales in a 3 year period. We at pacific converted our 2% in equity in
this and other deals and that is held through a usufruct contract w/ OEP's investment
vehicle in each deal. We've always been more than aligned in the deals we sourced as
we invested more than any individual partner, sat in the board and added value locally
helping them grow.
The context for this agreement was that they wanted to do deals in Brazil and I could get
them into any company and also negotiate and get us to win the deals that were good, a
good entry value, then sat in the board and monitored the investments. Despite them
asking me to join OEP as a partner after a few years of agreement, I never did because I
did not want to work for a large bank, had other businesses in Pacific that did not
compete directly (a real estate and a growth investment fund) and, did not want to be
tied up w/ a partner who could change their mind for some unforseen reason, deciding
to leave Brazil. This is exactly what is happening in a way as JPM decided to spin off OEP
and force the sale of the portfolio companies.
2. In january 2012 they sent 2 guys to live in SP and said it was to "help" me and my
team execute as we had too much of a deal flow to handle alone. One of the guys stayed
in our offices for 2 months learning everything we did. As months went by, these 2 guys
(http://www.oneequity.com/Team/location/Sao-Paulo) started taking the deals and
running - going to meetings on their own and not acting as team members, literally by-
passing on deals we sourced. At that time, I renegotiated my deal w/ OEP and included
the clause that we would participate in everything they did. Rick Smith, whom I dealt
with clearly stated we would be in every deal, sourcing it or not, and the contract
reflects that. Over time, to make sure the guys in NY knew what we were up to, I flew up
there every quarter and presented what we sourced and what deals we were working
on, boards and added value, including for their portfolio's that were not based in Brazil
but wanted to do business here. But the reality is that the OEP guys in Brazil were
jealous and wanted to show they could live w/o us, or, needed to justify their presence.
Some things made this worse, for example, when jamie dimon came to brazil, for the
small exclusive reception, the JPM CEO invited only me and not them ( because they
were junior, and because I helped the bank bring in a dozen of new private banking
clients every year as he said), or, the portfolio companies and partners of One Equity
elsewhere, when coming to Brazil, asked me for help, and not them, as the two could
not get them into the owners of the companies/clients or decision makers that would
generate real business. So thats how things got worse.
3. The fee for the deal in question is Unicoba, an industrial battery-component and led
company. I did not like the deal, but worked on it and it closed in late september of
2013. Pacific did not co-invest, it was our option not to and we elected that our fee be
paid in cash. Key reason was that they sell to government and I have in my contract that
I do not deal w/ government. When we sent the invoice, they asked us for additional
info (what exactly we did for the deal) which they had never asked for previously. On
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top, they said this was due to new JPM requirements. Then, after we sent the info, Rick
Smith, senior guy, said he would speak w/ me personally in his next trip to Brazil, which
happened in early December. In August of last year Rick said OEP would cut all of their
outside advisors and consultants, except for Pacific. In December he said they would no
longer renew our agreement at current terms and that he was told by the Brazil OEP
guys that the fee for the Unicoba deal was not merited because we did not do the work
as expected. They never, ever, sent any email or complained about our work or quality
during the process. On the contrary, we have a ton of praising emails over time and
thank you emails to the team on this deal. But the Brazil guys, in December, cut us off
from the MMM (weekly partners' meeting), took our names out of the investment
memo sent to the Investment Committee, and started selectively cutting us off
everything we were working on. In December they gave us a new version of the
agreement that they wanted to sign w/ us which basically pays a zero fixed fee and only
a variable 2% fee. I did not want to renew anyway, but did not say anything as we