While the economic situation in Europe remains uncertain at best — and downright scary at worst — UK buyout house Permira sees great opportunity in the chaos.
The firm, which recently reported in its annual review strong growth and performance in 2011, said the situation in Europe “plays to the strengths [the firm] derive[s] from … strong local teams and deep sector insights. Europe in particular remains a very attractive place to invest. This complex and fragmented region has historically generated better returns for investors than more transparent markets such as the US.
“Today’s depressed asset valuations and dearth of financing are creating very attractively priced opportunities for long-term suppliers of capital,” the firm said. “The competitive dynamics in Europe have become increasingly attractive since the financial crisis, as some firms retrench from Europe and demand for capital increases driven by market uncertainty.”
Today's depressed asset valuations and dearth of financing are creating very attractively priced opportunities for long-term suppliers of capital.
Valuations increased 15 percent across Permira Europe II, Permira Europe III and Permira IV – the three active funds, the firm said in the annual review. Increases were driven by “sustained strong operating performance of many of the funds’ portfolio companies, in particular in Permira IV, the 2006 fund”, the firm said.
Fund IV valuations rose by 21 percent from 31 December 2010 to 31 December 2011, the firm said. Growth was pronounced, with earnings before interest, taxation, depreciation and amortisation rising 32 percent on a weighted basis for the 12 months to the end of December 2011.
“[Growth] came largely through a combination of significant exposure to fast-growing international economies and from positive fundamental sector trends, which make them less tied to macro-economic developments in Europe,” according to Tom Lister, co-managing partner at Permira.
Permira highlighted its investment in Hugo Boss, which experienced 34 percent EBITDA growth last year, according to the annual review. Also highlighted was the sale of animal nutrition specialist Provimi, which was sold to Cargill in November for a 2.3x return on the original investment.
Earlier this month, Permira — along with News Corporation — sold software company NDS to tech giant Cisco for $5 billion, reaping a 2.2x return.
The firm has been raising its fifth fund, targeting €6.5 billion, which it launched late last year.