Firstly, Lion Capital acquired eyewear retailer Alain Afflelou - Unquote

More documents

Recommendations

Info

14 unquote.com/analysis Trade winds blowing Once attractive for their low costs, emerging markets are increasingly offering exit routes for European private equity houses. How important is a local presence? Kimberly Romaine reports Lyndon Lea, partner at Lion Capital, says that emerging markets investors are becoming more interested in European firms Go back 10 years, and talk of China and India centred around low-cost manufacturing. Now, unquote” has recorded six sales of European private equity-backed businesses to trade buyers in these emerging markets in the last 18 months, with Lion Capital’s sale of UK cereal business Weetabix to China’s Bright Food for £1.2bn the latest in Europe. That week, Indian drugmaker Piramal Healthcare bought US-based healthcare data provider Decision Resources Group from Providence Equity Partners for $635m. A month earlier, Duke Street sold Adelie Food to India Hospitality for $350m, and, in December 2010, Italy’s Investindustrial reaped a 3.6x multiple when it sold Italmatch Chemicals to a Chinese investor, a few months after opening a Shanghai office. At the end of last year, Shandong Heavy Industry Group bought luxury Italian yacht-maker Ferretti for €220m. The business had been backed by Arle (then Candover). Issue 5 – June 2012
15 unquote.com/analysis “There are numbers of companies sitting on large amounts of cash. They are being encouraged, as a matter of Chinese national policy, to have more international brands” Jonathan Reardon, Pinsent Masons There may be more to come, with Permira’s Bird’s Eye attracting interest from Thai firm Charoen Pokphand Foods in what could be a £2.5bn sale. Lion is also eyeing up another sale to an Asian trade buyer. “Big companies in China are hungry to do deals,” says Jonathan Reardon, Pinsent Masons’ head of corporate in Asia. Bright Food approached Lion for the iconic British brand – Lion’s first deal as an independent operator: “There were many approaches over the years, some of which were entertained and others which were turned away outright. So to let Weetabix go, we would have to realise a significant price or know that we could share in the continuing upside,” explains Lyndon Lea, partner at Lion Capital. Bright Food offered both: by taking a 60% stake in the deal, Lion will ultimately make at least 4.7x money, and maybe more when the remaining stake is eventually sold. Bright Food’s acquisition of Weetabix marked a high point in the acquirer’s two-year quest to snap up international brands: it had previously attempted, unsuccessfully, to buy yogurt business Yoplait, sugar company Sucrogen, consumer giant United Biscuits and nutritional company GNC in the US. Its luck in Australasia was better, with two brands in its portfolio from the region. “We will see more of this trend,” says Reardon. “There are numbers of companies – state-owned enterprises and privately owned – sitting on large amounts of cash. They are being encouraged, as a matter of Chinese national policy, to have more international brands. There are also strategic reasons, as domestic business alone becomes more challenging or the international target can add more to the Chinese domestic business through technology, for example.” In a recent survey conducted by Grant Thornton, 46% of privately held businesses in mainland China indicated an intention to grow through acquisition over the next three years. This is up markedly from 26% a year earlier. “Acquiring an established western brand lends authenticity to the purchaser, while the purchaser has access to new markets and possibly more efficient manufacturing techniques to help grow profit,” says Simon Turner, managing partner at Inflexion Private Equity. The fact that Chinese corporates are looking at private equity-backed businesses may also be an indirect consequence of changes to the UK Takeover Code, which last September made delisting a business listed in the UK more difficult – and privately held companies relatively more attractive targets. “Chinese companies are relatively new to the game of outbound expansion and acquisitions. They are learning through experience, so the more straightforward the deal and the more professional support they get, the more likely it is to complete,” says Reardon. Who you know or what you know? Relationships often play a big role in deals, especially in new markets – but whether the relationship requires a local presence polarises opinion. “It’s extremely helpful to have a presence on the ground to identify opportunities for potential buyers of assets or acquisition and expansion opportunities,” explains Reardon. Inflexion is the latest to have announced a presence in each of China, India and Brazil, joining the ranks of LDC, Cinven, Terra Firma, Baird and Bridgepoint in terms of an emerging markets presence. Providence established its Hong Kong and New Delhi offices in 2007 and its Beijing office earlier this year, while Summit opened an office in Mumbai in February. The GP stated its intention to increase its investment activity in India, but also that it will be used to provide support to US and European portfolio companies looking to expand in the region – namely Belkin, Ogone and Snap Fitness. But who needs the relationship? It depends on the goals, says Daniel Domberger, director at Livingstone Partners: “If a GP intends to be very operationally involved with a target and it is seeking or has business in China or India, then it can make sense for that GP to be on the ground. It will also depend on the volume of investments the house makes.” Issue 5 – June 2012
Page 1 and 2: france June 2012
Page 3 and 4: 3 unquote.com/france Kimberly Romai
Page 5 and 6: 5 Overview unquote.com/france EDF s
Page 7 and 8: 7 Analysis unquote.com/france our f
Page 9 and 10: 9 DEALS unquote.com/france the firm
Page 11 and 12: 11 DEALS unquote.com/france EARLY-S
Page 13: The Complete European Private Equit
Page 17 and 18: 17 unquote.com/analysis “I have b
Page 19 and 20: 19 unquote.com/analysis “I have s
Page 21 and 22: 21 unquote.com/analysis illustrated
Page 23 and 24: 23 unquote.com/analysis EU assets r
Page 25 and 26: 25 unquote.com/analysis Company val
Page 27 and 28: 27 unquote.com/people “There is a
Page 29 and 30: 29 unquote.com/people McDermott pic
Page 31 and 32: 31 unquote.com/people YFM appoints
Page 33 and 34: 33 unquote.com/funds Vista Equity P
Page 35 and 36: 35 unquote.com/funds Caixa Capital
Page 37 and 38: 37 pan-European deals index SECTOR
Page 39 and 40: 39 unquote.com/france A BE CH Austr
Page 41 and 42: Subscription Packages and Reports T

Firstly, Lion Capital acquired eyewear retailer Alain Afflelou - Unquote

You also want an ePaper? Increase the reach of your titles

Delete template?

Save as template?