Return of the trade buyer

Strategic buyers with cash laden balance sheets are back. Buyout firms should profit from the resurgence, writes Nicholas Lockley.

Nicholas Lockley

Apax’s improved and victorious bid for Emap’s business to business unit should perhaps have come as no surprise.

The news flow of recent weeks has highlighted a number of trends:

Private equity in Central and Eastern Europe is booming with a spate of deals, both exits and investment, and team hires.

Mid-market buyout are holding firm around the globe. There has been no let up in deals up to the £1 billion mark.

Finally the trade buyer is beginning to show signs of prevailing after years of private equity dominance.

So for Apax, the Emap deal has ticked two out of three boxes. No CEE component, but the deal is comfortably within reach of cautious bankers.

And it is surely telling that Apax had been able to improve its offer, where other pure-play private equity consortia fell away a fortnight ago, when Emap withdrew the business to business unit from sale.

Details of the financing have yet to emerge, so it is impossible to say whether GMG stumped up the additional capital to get the deal over the line, but it seems likely, given the strength of the media group’s balance sheet since it sold down its holding in Trader Media.

That too was a deal hatched with Apax, which paid £650 million for a minority share in the specialist media group.

This week, a source close to the sale of power distribution business Moeller said for the first time in years trade buyers felt they had a level playing field. Five of them tried to bid for the business.

In that instance, the field was so level, the financial sponsors decided to stay home.

This is obviously a mixed blessing. Increased competition from cash-rich trade buyers will make it harder to do deals. But as refinancings become trickier to execute and secondary buyouts diminish, at least one exit route, a sale to a strategic buyer, remains viable.