The Wolseley deal, which Cinven secured for £135.5m (E239m) in April, will be the fourth time Rubicon Partners will lead the management team in a Cinven investee company.
The third time around, Rubicon delivered a 30% internal rate of return for Cinven, after it restored to health and found buyers for the 30 of the 33 companies that made up Vector Industries.
Cinven will be looking for a similar or better return from its Wolseley investment. Guy Davison, a director at the private equity house, expects Cinven to exit from the deal within three years.
“Wolseley is a very disparate group of businesses,” he remarks with some understatement. The businesses acquired form Wolseley comprise the agricultural, cable management, industrial, motor and photographic businesses in the conglomerate's manufacturing division.
“What we will do is sell a fair number of businesses, concentrate on a number of those left and build them up in due course. Whatever happens Wolseley will not be what it is at the moment, which is a whole host of different bits and pieces.”
Mr Davison believes there are similar opportunities still up for grabs in the “unloved” manufacturing, engineering and distribution sectors.
He reckons there are plenty of stable businesses out there with strong cashflows and, in certain circumstances, very strong positions, which he says for private equity investors “is quite an attractive proposition.”
Mr Davison says while competition for investments is strong in the larger European buy-out market, it is probably not as a fierce as elsewhere.
He says vendors want to be sure there is a first-class management ready to carry on the business. The strong track record of Rubicon Partners gives Cinven an edge over the competition in cutting a deal like Wolseley.
“To buy such a group of disparate businesses, you have to have a very clear management solution to this.”
“Many people might wish to buy a business like Wolseley, but because there isn't a management solution, they shy way.”