If there was a ranking entitled “Europe's most notorious private equity investments in the 21th Century”, surely the AA would sit near the top. The UK vehicle recovery service, which is owned by London-based private equity giants Permira and CVC Capital Partners, sparked the ongoing confrontation between Permira and the GMB trade union, which in turn caused the particular storm currently raging about the merits of private equity as a form of company ownership.
But despite the controversy surrounding the deal, those that are financially exposed to it appear to have little to complain about.
Year-end results published in March by SVG Capital, the listed private equity investor best known for being Permira's largest client, indicate that the AA is performing well. At 31 December 2006, SVG's stake in the AA was valued at £39.8 million, up from £34 million a year ago. The increase in value was due to operational improvements and improved earnings, according to an SVG results statement.
In addition, the AA last year completed its second recapitalisation since the takeover. The deal returned 80 percent of cost to investors and took total proceeds to 1.1x capital invested. With the £39.8 million in unrealised value still sitting in SVG's books, it is no surprise that the London-based LP is speaking highly of the deal.
In an interview with sister publication PrivateEquityOnline.com, SVG chairman Nick Ferguson said the AA was one of the strongest performers in the SVG portfolio. He said the business was ahead on all its financial metrics, while vehicle recovery times – the most important indicator of operating efficiency – were also improving.
SVG has huge exposure to Permira funds, and contributed €2.8 billion to the €11 billion vehicle the firm raised last year. According to Ferguson, the 2006 fund is currently 24 percent invested.
SVG reported a 25 percent increase in net asset value for 2006.
Commenting on the outlook for private equity, however, Ferguson sounded a note of caution: “The signs that we are in the second part of an ‘up-cycle’ are increasing. Multiples paid are rising and so are interest rates, and the spreads between those are therefore narrowing. So far these markets have proved resistant to recent economic and political problems. Whether this will continue in the face of either increasing inflation or a specific market reverse remains to be seen.”
BRIDGEPOINT BUYS ONE, EXITS ONE
Pan-European private equity firm Bridgepoint has made its second German investment and has sold one of its portfolio companies. Bridgepoint has bought a majority stake in Dragenopharm Apotheker, a German contract manufacturing business for the European generic prescription drug market, for an undisclosed amount. Headquartered in Bavaria, Dragenopharm generated sales of about €68 million ($89.1 million) in 2006. Meanwhile, Bridgepoint has sold WT Foods, a UK-based ethnic and speciality foods supplier, to Caribbean listed company GraceKennedy for an undisclosed amount. WT Foods has annual sales of about £60 million (€88.1 million, $115.6 million). Bridgepoint had previously sold Noon Products, a division of WT Foods, to quoted Irish food company Kerry Group for £124 million in August 2005. The private equity firm's previous German investment was Rodenstock, a German manufacturer of lenses and frames, in December.
ADVENT VENTURES BACKS CUSTOMER FEEDBACK BUSINESS
Advent Venture Partners, a London-based venture capital firm, has invested $5 million (€3.8 million) in customer feedback provider Fizzback Group. The investment comes from the firm's fourth fund, which closed in December 2004. Founded in 2004, Fizzback was initially backed by angel investor The Accelerator Group. Advent Ventures has more than £500 million (€734.7 million, $963.2 million) under management. The firm recently invested €15 million in Speciality European Pharma, a European pharmaceuticals company, which it founded in 2006.
EQT COMPLETES DOUBLE
Northern European private equity firm EQT has bought Dako, a Danish cancer diagnostics company, for DKK7.3 billion (€980 million; $1.3 billion). The deal is the third investment from the firm's €4.25 billion EQT V Fund. Founded by Niels Harboe in 1966, Dako generated sales of nearly DKK1.7 billion in 2006. The private equity firm has also bought Scandic Hotels, the largest hotel chain in the Nordic region, from Hilton Hotels for €833 million. Scandic generated sales of more than SEK6 billion (€650 million; $850 million) in 2006. EQT manages about €10.5 billion in 10 funds.
BOWMARK CONSOLIDATES SCHOOL TRAVEL SECTOR
London-based mid-market firm Bowmark Capital has completed its fourth deal in the school travel sector with the acquisition of Kuoni Travel's School and Student Tours business for an undisclosed amount. The School Travel Group, the platform company that Bowmark Capital created in 2004, has completed four acquisitions since that date. These include STS Travel in 2004, Equity Travel in 2005 and Pavilion Tours in 2006. The company has annual sales of about £60 million (€88.1 million, $115.6 million). Bowmark sold Medscreen, a drug testing services provider, in November 2006, generating an IRR of 52 percent.
BAIRD BUYS DANISH MEDICAL COMPANY
Baird Capital Partners Europe has led a management buyout of Amoena, a manufacturer of breast prostheses, bras and swimwear for women who have had breast cancer surgery. The private equity firm bought the company for €102.3 million ($134.1 million) from Coloplast, a Danish medical company. The firm's other deals in the healthcare sector include Choices, a provider of supported living and residential care services for people with learning disabilities; Castlecare, a provider of educational and residential treatment programmes; and Ultralase, a chain of corrective eye laser clinics. Founded in 1971, Baird Capital Partners Europe is the UK private equity business of Robert Baird and has more than €750 million under management.
DUNEDIN EXITS TWO PORTFOLIO COMPANIES
UK mid-market firm Dunedin Capital Partners has exited two of its portfolio companies, generating impressive money multiples in the process. The firm backed the £60 million (€88.1 million; $115.6 million) management buyout of Manchester-based asset finance group Davenham in 2000 and provided a second round of financing in 2001. Dunedin realised part of its investment when it floated the company on AIM in 2005, and has now sold its remaining stake. The investment returned a money multiple of 4.3 times and an IRR of 32 percent. Dunedin supported the £22 million management buyout of UK-based travel agent Portman Holdings in 1996, which was led by NatWest Ventures (now Bridgepoint). London-based secondary private equity firm Vision Capital has now bought the business in a deal that has generated a money multiple of 3.6 times and an IRR of 16 percent.
FORD SELLS ASTON MARTIN TO INTERNATIONAL CONSORTIUM
US car manufacturer Ford has sold luxury sports car company Aston Martin for $848 million (€644 million) to a private equity consortium led by UK motor racing veteran David Richards. The consortium includes two Kuwaiti-based investment groups – Adeem Investment and Investment Dar – and US banker John Sinders. Richards, who is the founder and chairman of engineering company Prodrive, will become Aston Martin's non-executive chairman. Ford bought a 75 percent stake in the company in 1987 and decided to sell after a record loss-making year in 2006. Aston Martin is one of the UK's most iconic sports car companies, and has featured regularly in James Bond films. The spy originally drove an Aston Martin on screen in the 1964 film Goldfinger and, most recently, in Casino Royale.
ATLANTIC BRIDGE CONSORTIUM ACQUIRES TELECOM BUSINESS
A consortium of private equity firms led by Atlantic Bridge Ventures has acquired Logica CMG's telecom products business for £265 million (€393.6 million, $509.7 million). The deal is the ninth investment from Atlantic Bridge's first fund, which is about 70 percent invested. Atlantic Bridge leads the consortium with Larry Quinn, the former chief executive and chairman of Logica Mobile Networks. The two other biggest consortium members are Access Industries, a US-based investment firm, and International Investment & Underwriting (IIU), Irish entrepreneur Dermot Desmond's private equity vehicle. The business, which is to be renamed Acision, is the world's leading provider of converged mobile messaging solutions. In 2005, it generated sales of £254 million and EBITDA of £23 million.
STIRLING SQUARE IN HIGHWAY SAFETY DEAL
Stirling Square Capital Partners and Diamond Castle have bought global highway safety solutions business Public Safety Equipment from Seton House for an undisclosed sum. Public Safety Equipment employs nearly 800 people and operates from four locations in the UK and US. David Smith leads the management team. Founded in 2002, London-based Stirling Square manages $280 million (€213 million), with a cornerstone investment from Citigroup. Diamond Castle is a New York-based private equity firm with $1.85 billion under management.
CVC MAKES FOURTH DANISH INVESTMENT
Private equity firm CVC Capital Partners has made its fourth investment in Denmark with the acquisition of health and beauty retail chain Matas for an undisclosed amount. Matas operates 292 stores and generated sales of €390 million ($511.1 million) in 2006. The company was previously a co-operative, all of its stores being owner-operated. CVC has acquired 206 stores from 125 store owners and has entered into conditional agreements to acquire an additional 45 stores during the next three years. The private equity firm's other deals in Denmark included the 2005 acquisition of Post Danmark, the country's national postal operator, and the 2003 acquisition of DT Group, the largest retailer of building materials in the Nordic region. CVC's first investment in Denmark was the 1997 acquisition of computer equipment distributor EET Nordic.
ABN AMRO CAPITAL DOUBLES UP
ABN AMRO Capital has bought Dutch manufacturer Vetus Den Ouden and a stake in Dutch media company Sdu. Allianz Capital Partners and ABN AMRO Capital have each acquired a 50 percent stake in Sdu from the Dutch state. Fifteen parties, including trade buyers and other private equity firms, competed in the auction. Sdu generated more than €200 million ($262 million) of sales in 2006. ABN AMRO's previous deals in the media sector include the acquisition in 2002 of Puzzler Media, a UK publisher of puzzle magazines, and the purchase in 2000 of Quantum Business Media, a UK publisher of business-to-business magazines. The firm has bought Vetus Den Ouden, a manufacturer of nautical equipment and marine diesel engines, from Amsterdam-based private equity firm AlpInvest Partners for an undisclosed amount. The business generated sales of €54 million in 2006. ABN AMRO Capital completed nine European buyouts with an aggregate deal value of €1.3 billion and realised seven investments in 2006.
CCMP WINS €685M BOC EDWARDS AUCTION
US buyout firm CCMP Capital Advisors has won a €685 million ($902 million) auction for BOC Edwards, a vacuum equipment business previously owned by German engineering company Linde. The business already has manufacturing facilities and a large customer base in Asia, and, under CCMP's ownership, aims to expand its presence in the region further. Both trade buyers and private equity firms competed in the Deutsche Bank-run auction. The deal includes a clause whereby CCMP will pay Linde a further €65 million when it exits its investment in the business. BOC Edwards was a subsidiary of the UKbased BOC Group, which Linde bought for €12 billion in 2006.
BLACKSTONE EXITS SOUTHERN CROSS
US alternative assets giant The Blackstone Group has completed its exit from UK nursing home operator Southern Cross, after selling its remaining 21.8 percent stake for £169 million (€247 million; $326 million). Morgan Stanley sold the 41 million shares on Blackstone's behalf, for 412 pence each, which values the company at about £770 million. The buyout firm originally bought an 88 percent stake in the company in 2004 for about £162 million
FASHIONABLE DEAL FOR HGCAPITAL
Private equity firm HgCapital has bought Americana International, a UK-based fashion retailer, in a £190 million (€279 million; $366 million) secondary buyout. The business, which owns the Bench and Hooch leisurewear brands, was originally backed by UK investor ISIS Equity Partners in August 2003. ISIS acquired a 36 percent stake for £6.4 million, but this has since been diluted to 11 percent after two recapitalisations. The business had sales of more than £80 million in 2006. This is Hg's second consumer deal in recent times.
DUKE STREET GOES FOR A BURTON's
UK buyout firm Duke Street Capital has sealed its latest acquisition in the food sector, buying UK snack maker Burton's Foods, previously owned by HM Capital, in a deal thought to be worth more than £200 million. Burton's makes some of the UK's best known biscuit brands including Jammie Dodgers and Wagon Wheels and also manufactures snacks under licence for companies like UK chocolate maker Cadbury and Anglo-Dutch conglomerate Unilever. In addition to its core UK market, it also exports to Scandinavia, the US and France. The company had revenues of about £300 million last year. Duke Street said it plans to continue growing the company organically and through further acquisitions.
GRESHAM HITS MARK WITH £105M IT DEAL
Gresham Private Equity, a UK midmarket private equity specialist, has fought off competition from a trade buyer to win backing for its bid to take ICM Computer Group, an IT company, private. The buyout firm has made a 100 percent cash offer worth £105 million, which should end ICM's spell on the London Stock Exchange. Phoenix, a rival IT group, had been mulling a bid via a court-driven scheme of arrangement, which depends on a board recommendation, but now looks an unlikely suitor.