Fundraising launches in DACH Cinven grabs SLV-Group ... - Unquote

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Central and Eastern Europe unquote CEE market: Catching up fast The unquote” Central and Eastern Europe Congress, held this month in London, gave delegates a valuable insight into the reshaping of the PE landscape postcrisis, and the new investment opportunities arising as the region catches up fast on the way to recovery. Greg Gille reports Following a tough couple of years post-financial crisis, it would seem that CEE countries are now marching on to better days, and are in some respects catching up to their more established Western neighbours. Deal activity in the first quarter has already surpassed the whole of 2010 by a large margin, with unquote” recording in excess of €1bn worth of transactions – including the €370m buyout of Polish grocery store operator Zabka Polska by Mid Europa. Confidence, while not unchecked, is back among deal-doers, as our recent survey of CEE industry participants indicates. 68% of respondents expect a rise in activity for the region in 2011; and at a time when LPs are said to be increasingly looking to emerging markets such as Asia, 78% of respondents expect LP appetite for CEE funds to stay the same or even rise slightly. Panellists at the congress highlighted that private equity in the most mature CEE countries – notably Poland and the Czech Republic – increasingly shares similar features with its Western counterpart and can benefit from good infrastructure, available debt financing, experienced management and process-driven businesses. Good assets therefore command multiples not unlike those seen in the UK or in France: “Valuations are high and will continue to be so. More and more quality is coming to the market and that will justify the high prices,” noted Riverside Europe Partners vice president Ludek Palata. According to the unquote” CEE survey, 45% of respondents indeed expect pricing to stay in the 7-9x EBITDA range going forward. As most European GPs are set to go fundraising in the next couple of years – and CEE players are no exception – SJ Berwin partner Sonya Pauls highlighted that CEE funds are “firmly in line with ILPA guidelines” and are therefore well positioned to attract LPs: the “fund as a whole” model is the most commonly used, and corporate governance is just as strong as in the rest of Europe. That said, speakers at the congress also stressed that CEE cannot be considered as a uniform region in terms of investments. Some countries – notably in the Balkans – still have ground to cover before attracting as much attention as the likes of Poland: “Some CEE countries compete for capital with GPs in France, the UK or Germany. Others have a higher hurdle to overcome,” warned Harbourvest vice-president Till Burges. Furthermore, as Arx Equity partner Brian Wardrop noted, FX risks and their impact on portfolio companies cannot be overlooked when investing in the region. Mark Florman, the new BVCA CEO, also urged delegates not to downplay the impact of the AIFMD and upcoming regulation in general. According to him, smaller firms across Europe are going to be slowed down by the numerous processes introduced by the directive. Finally Tomáš Sedláček, chief macroeconomic strategist at ČSOB, warned investors not to overlook the importance of large deficits in most CEE countries, even if strong growth is back. Sobering remarks aside, congress delegates remain optimistic regarding the potential for CEE dealflow to pick up throughout the year – and maybe steal the West’s thunder on more than one occasion. ■ 10 UNQUOTE APRIL 11 ENTIRE CONTENTS COPYRIGHT 2011 INCISIVE MEDIA INVESTMENTS LTD www.unquote.com/dach
unquote healthcare sector Private equity nursing healthcare providers The beginning of the year has seen private equity investors eager to tap into Europe’s healthcare services market. Could this growing and resilient sector be the perfect investment in a troubled economic climate? Greg Gille reports While the life sciences sector largely remains the turf of venture houses and highly specialised funds, it would seem that generalist players have woken up to the possibilities offered by another growing segment of the healthcare market. Although signs of the renewed interest for the sector were already visible towards the end of last year, 2011 started with a flurry of investments in private healthcare providers. Advent International kicked things off in January with the £925m buyout of Priory Group from RBS. The mental health and specialist care services provider apparently turned a few heads around as Advent had to fend off competition from rival firms such as Bain, Blackstone and Cinven in the auction process. This is a testament to Priory’s health: the company posted a £123.3m turnover in 2002, which had doubled to £242.2m by 2008 and further increased to £256.7m in 2009. Its profits also rose from £40.7m in 2008 to £86m the following year. Still in the UK, Carlyle is building a dental care giant with its acquisition of Integrated Dental Holdings from Bank of America Merrill Lynch Capital Partners. It is merging it with Palamon-backed Associated Dental Practices and the enlarged group will be worth around £600m, roughly 10x its £55-60m combined EBITDA. Across the pond, the French private clinics market also looks attractive to Bridgepoint, as the firm announced two investments earlier this month: its mid-market team Bridgepoint Development Capital (BDC) acquired a majority stake in clinics operator Compagnie Stéphanoise de Santé (C2S), while Bridgepoint Europe IV backed the OBO of Médipôle Sud Santé – a deal that valued the company at more than €200m. Retirement homes and homecare providers also proved popular over the past few months, with a number of smaller deals being completed. At a time when buyout houses are on the lookout for resilient assets, able to make the most of a lacklustre economic environment, the European private healthcare market trends seem increasingly attractive to investors: “We had been looking at the private clinics sector for a long time. It benefits from favourable demographic trends – you can reliably count on a 2-3% market growth per year. This visibility is hard to come by in other sectors,” notes BDC partner Pierre Colasson, who led the acquisition of C2S. An ageing population and demand for better patient care aside, private healthcare providers are also likely to benefit from the ongoing efforts undertaken by European governments to tackle deficits and ease the burden of costly public establishments. This is particularly relevant in the UK – with the coalition government looking to significantly downsize the public sector – and was one of the factors at play in the buyout of Priory: Advent believes private healthcare providers are likely to be commissioned to supply an increasing number of services on behalf of the public sector over the coming year. This is not to say that the sector is a particularly easy one to penetrate, as it is often capital-intensive and requires GPs to navigate tight regulatory frameworks. This can, however, be viewed as another strength, according to Colasson: “The heavily regulated nature of the market – which presents a few drawbacks, notably in terms of prices charged for the services – can also be seen as an attractive factor, since it guarantees high barriers to entry.” By limiting competition, this could enable GPs already invested in the market to take advantage of the consolidation opportunities it offers. Indeed, the private healthcare services sector is for the moment rather fragmented, with a myriad of small independent outfits operating on a local scale – similar in that regard to the recruitment services market, which also witnessed several buyand-build transactions taking place at the end of 2010. This was another key driver in most of the aforementioned deals, as private equity owners will look for relevant bolt-ons in order to benefit from both economies of scale and a wider customers base. Dealflow in the healthcare services sector should therefore keep investors busy in the coming months, as today’s buyouts pave the way for tomorrow’s acquisition finance deals. ENTIRE CONTENTS COPYRIGHT 2011 INCISIVE MEDIA INVESTMENTS LTD UNQUOTE APRIL 11 11 www.unquote.com/dach
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Fundraising launches in DACH Cinven grabs SLV-Group ... - Unquote

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