What does the flotation of Saga prove?

Charterhouse (Private Equity company) bought Saga in October 2004 in a £1.35bn management buy-out deal from Roger de Haan. The price accounted for about 13 times earnings before interest, tax, depreciation and amortization.

Three years later it looks as if it will be floated on the UK stock market. Estimates range from £2 bn to £3 bn.

During the time the company has been in the hands of the private equity firm, turnover has jumped by 80% to £689.1m while earnings before tax, depreciation, interest and amortization are up almost 69 per cent to £158.2m. It is estimated that 80% of the company’s profits come from its financial services business (health, motor and home insurance and savings products)
The number of staff employed has grown by more than 28 per cent over the same period to 3,854.

It looks like the MD of the company will make around £200 million from the deal and other members of staff will see a rise in their bank balances of £46,000 (according to the FT).

So what does this tell us about what appears to be a significant growth in business performance?

Was Saga badly run under the previously management?
Did the previous owners sell too cheaply?
Is the new management team a group of magicians?
Does the organic growth of the over-50s market, driven by demographic change, account for the performance improvement?

I am sure the answer is that that all of these points have contributed to the increase in the company’s value and we will not really know the real reasons until the financial figures are published, pre-flotation.

From what I can see, Saga has not done anything materially different during the past 30 months other than sell it Radio stations.

I am sure the company has benefited from the injection of new professional management. I also guess that it was previously sold too cheaply.

I think the main explanation for Saga's success is that it is now a more focused and better managed company that has benefited from a fast growing market (over-50s), with low levels of churn in its older customers and a moderately competitive product line.

But, I still have my doubts about the long term position of the company since its new generation of over-50s customers will be far more demanding than its large but continuously diminishing older customer base.
Dick Stroud