Naxicap Partners has acquired a majority stake in ITAL Express Group alongside its director Patrice Claverie and the management team. 

CAPZA is reinvesting in the operation alongside co-investors Nord Est Expansion, Euro Capital and CEGEE Capital.

Founded in 1975, France-based ITAL Express is a spare parts distributor for the maintenance and repair of vehicles and equipment, including industrial vehicles, utility vehicles, tractors and agricultural machinery.

Supported by CAPZA since 2019, ITAL Express has expanded ranges and diversified distribution channels, namely digital. It also completed bolt-on acquisitions with Consogarage in 2019 (garage equipment and tools), Anjou Diffusion in 2020 (technical bearing and transmission parts for agricultural machines) and DPM Motis in 2023 (spare parts for gardening and forestry equipment).

French GP Naxicap Partners will look to diversify ITAL Express’ offering, both by supporting organic growth and through new acquisitions in France and internationally.

ADVISERS

Buyside
UBS (corporate finance)
Deloitte (financial due diligence)
Roland Berger (commercial due diligence)
Edge Avocats (legal)
Keels Avocats (legal)
Nabarro Beraud (legal)

Sellside
Alantra (corporate finance)
Piotraut-Giné Avocats (legal)
Eight Advisory (financial due diligence)
Indéfi (commercial due diligence)

Squire Patton Boggs has appointed Chris Hastings as a partner in its financial services practice group in London.  

Hastings joins from Eversheds Sutherland, and is a finance lawyer focused on leveraged and acquisition financing. 

He acts for private equity firms and their portfolio companies, corporate borrowers and private credit funds in relation to transactions at all levels of capital structures.  

His recent work includes acting for Inflexion on its acquisition of a minority stake in The Goat Agency (and its subsequent sale to WPP); for Aurelius on its carve-out of UK property services provider TM Group from Dye & Durham; and for Pollen Street Capital on its acquisition of Assessio.

On the private credit side, he has advised the London-based teams of Tresmares Capital and Eurazeo on midmarket direct lending mandates to support domestic and international PE-backed businesses.

Baltic-focused private equity firm Livonia Partners has invested in supply chain IT solutions provider Telema via its €157m Fund II.

Telema is an operator of electronic data interchange (EDI) and e-invoicing operator in the Baltics, offering IT solutions for automated data flow in the supply chain. 

From its offices in Tallinn, Riga and Vilnius, Telema transfers, converts, monitors and processes electronic trade documents such as orders, invoices, delivery notes and other commercial documents. More than 5,500 shops and 1,500 suppliers use Telema's EDI network. 

The company’s clients span 68 countries including the Baltics, Nordics, Germany, Japan and Australia. 

The GP's previous investments include employee wellness benefit platform Stebby, heat pump and green home climate solutions provider Bestair, and communication solutions provider Wildix.

Livonia Partners, established in 2015, counts Swedbank, the European Bank for Reconstruction and Development and the European Investment Fund among its LPs.

ADVISERS

Cobalt (legal)
PwC (financial and tax due diligence)

Archimed-backed Carso has acquired three firms: Arace Laboratori, AQCF and a carve-out from diagnostic group AC Environnement.

Based in Vénissieux, France, Carso specialises in purity testing in the environment, healthcare, food, pharma, criminal forensics and health-at-work sectors.

Founded in 2007, Arace Laboratori is an Italian environment and food safety testing group; AQCF is a French-based food safety group that provides consulting services; while the corporate carve-out comprises the grouping of three high-capacity asbestos testing laboratories acquired from French real estate environmental diagnostics group AC Environnement.

Archimed funded the acquisitions alongside shareholders CAPZA Flex Equity Mid-Market and Siparex.

The acquisitions were financed with equity injections by the shareholders and a debt facility provided by Tikehau Capital, established for the company by majority owner Archimed.

Archimed said the acquisitions will allow Carso to consolidate the business's presence in the food purity testing market. In terms of value creation, the GP will support Carso in strengthening and expanding its footprint across Europe, while consolidating its presence in France. 

The M&A operation brings the total number of acquisitions completed by Carso under current ownership to five, and follows the acquisitions of Italy-focused food safety specialist Agro.biolab, and French environmental testing laboratory Analy-co.

Several potential deals are also in negotiation, the GP said in a statement. 

Archimed acquired Carso through its now fully invested MED Platform I fund, which closed with commitments of €1.5bn in 2020, reported at the time as a record for the PE healthcare-focused firm.

Since Archimed's acquisition in 2021, Carso's annual revenue has risen 33% to €255m in the current fiscal year, the GP said in a statement.

The fund and its successor, MED Platform II, which closed at €3.5bn in June, seeks opportunities in the European and North American mid-cap healthcare sectors, buying majority stakes between €100m and €500m.

With €8bn of AUM, Archimed focuses exclusively on healthcare industries, eyeing sectors such as biopharma products, consumer health, healthcare IT, in-vitro diagnostics, life science tools and biologic services, medtech and pharma services.

Central European investor Innova Capital has closed its latest fund Innova/7 on €407m, surpassing both its initial €350m target and €400m hard-cap.

The fund attracted commitments from foreign institutional and commercial investors from Europe and North America, as well as Polish investors, whose total share is now more than 25%.

Innova/7 will target digitisation and modern technology integration in the business and financial services, industrials, and consumer and lifestyle (including healthcare) sectors.

The GP, which operates from Poland, typically invests in buyouts in midsized enterprises. 

The first of Innova/7's investments was completed in May 2023 when the PE firm acquired NETOPIA Group, a Romanian payment services provider.

Subsequently, Innova Capital invested in R-GOL, a multi-brand distributor of football merchandise; EMI Group, which provides gate and handling systems; Pfleiderer Polska, a wood-based boards manufacturer; Dimark Manufacture, which supplies baggage handling systems automation business; and CloudFerro, which provides cloud services to the European space sector.

Innova has fully divested Innova/5 and completed its first large exit from Innova/6. The firm plans to use the sixth fund's remaining assets for further add-on acquisitions within the existing portfolio.

Since its inception in 1994, Innova has invested close to €1.4bn in almost 70 companies across 10 countries in the Central Europe region.

Innova senior partner Krzysztof Kulig was responsible for the fundraise.

UK PE firm Rockpool Investments has invested in Scottish software consultancy firm 2i Testing.

Headquartered in Edinburgh, 2i provides engineering services that de-risk digital transformation programmes.

Rockpool typically provides funding of between £5 and £15m to profitable, UK-based private companies.

The PE firm said it has been impressed by 2i’s "proactive" investment in people and automation products, as well as its "strategic partner approach" to working with clients.

The funding will assist 2i by expanding its service and product range organically and via bolt-on acquisitions.

Rockpool has invested more than £675m since inception. Its 2i investment was led by Guy Nieuwenhuys and Will Beckett.

ADVISERS

Rockpool
Stephenson Harwood (legal)
Saffery (financial due diligence and tax)
Palladium Digital (technical due diligence)
Continuum (organisational due diligence)
Claritas (tax)

2i
Moore Kingston Smith (corporate finance and tax)
Bird & Bird (legal)

Abris Capital Partners has sold 100% of the shares in Polish healthcare provider Scanmed for an undisclosed sum.

Scanmed has been bought by the American Heart of Poland Group, which is backed by the Italian hospital group Gruppo San Donato.

Headquartered in Warsaw, Scanmed is the largest privately owned diversified in-patient group in Poland, operating 37 facilities across the country, including seven hospitals and 18 medical centers.

Abris acquired the business in November 2020 via its €500m Fund III.

During Abris’s ownership, the company introduced new therapeutic areas and grew the scale of multi-profile hospitals. 

The firm also supported Scanmed with an ambitious buy-and-build programme, completing the add-on acquisitions of Ars Medical in 2022, Med-Lux in 2023, and Centrum Rehabilitacji in Chorzów and Vital Medic in 2024. 

ADVISERS 

Greenberg Traurig (legal)

Deloitte (corporate finance and tax)

German investment firm Quantum Capital Partners (QCP) has completed the sale of Leichtmetall Aluminium to UAE-based Emirates Global Aluminium (EGA).

Leichtmetall, which generated revenue of €250m in 2022, is a German specialty foundry, producing standard and large diameter hard-alloyed aluminium billets, utilising a high proportion of recycled aluminium as input material. Leichtmetall has customers in Germany, Italy and France.

QCP acquired the company in 2014 as “an underperforming asset”. During the last 10 years, Leichtmetall increased its staff by 50%, tripled its revenues and increased operating profits by 1,500%, the firm said in a statement.

The deal, first announced in March, is EGA’s first major acquisition since it was formed through the merger of Dubai Aluminium and Emirates Aluminium a decade ago. 

EGA produces premium aluminium, with operations from bauxite mining to cast primary aluminium. Last year, EGA sold 2.75 million tonnes of cast metal to more than 400 customers in over 50 countries. 

Abdulnasser Bin Kalban, chief executive at Emirates Global Aluminium, said the acquisition of Leichtmetall adds significant value to EGA, alongside the recycling facility it is building in Abu Dhabi.

Based in Munich, QCP specialises in corporate carve-outs. 

ADVISERS

QCP
Houlihan Lokey (corporate finance)
TRACC Legal (legal)

Nordic private asset firm CapMan, through its special situations strategy, has become the majority owner in infrastructure construction business TerraWise.

The company’s key personnel will remain significant minority owners.

Operating in Finland's Uusimaa and Pirkanmaa regions, TerraWise's operations focus on landscaping and urban construction, land and infrastructure construction, and excavation. 

The company's clients are primarily cities and municipalities, housing cooperatives and construction companies. It employs close to 160 people.

TerraWise said it turned the business back to profitability during the past year and a half, and has significantly built up its order book during the first half of 2024.

CapMan, which has more than €5bn in assets under management, said its objective is to strengthen TerraWise’s position in the green and urban landscaping and infrastructure construction space.

Tuomas Saarinen will continue as the portfolio company’s CEO.

Few industries had a tougher hangover from the Covid-19 pandemic than cinema chains. For those that emerged intact from the lockdown periods, encouraging customers back into theatres and away from their new-found allegiance to streaming sites proved an extended challenge. 

Helping the chains meet that challenge – one that further intensified as inflation pushed up running costs – has proved a fruitful endeavour for BGF, which last week announced a successful exit from digital cinema software solutions and service provider, Unique X.

Unique X successfully scaled its operations and proved to be "incredibly resilient", including during the Covid-19 pandemic, Spencer Woods, investor at BGF, tells Real Deals. The portco managed to nearly triple its Ebitda from the point of investment to exit, he says

“Despite the impact of Covid-19 on the business, during our six-year holding period Unique X continued to perform well, winning several new contracts, evolving its product offering and expanding internationally,” notes Woods. 

According to Harvard Business School research published in 2020, PE managers believed that 40% of their portfolio companies would be moderately negatively affected and 10% could be very negatively affected by the pandemic. 

In April, BGF announced the exit of its investment as the Manchester-based business secured a new deal of up to $80m in a Series-C funding round, securing commitments from Kartesia, a pan-European specialist provider of financing solutions for SME companies.

Despite the impact of Covid-19 on the business, during our six-year holding period Unique X continued to perform well, winning several new contracts, evolving its product offering and expanding internationally
Spencer Woods, investor at BGF

“It’s another great example of BGF’s investment model, which allows us to form long-term, minority-led partnerships with ambitious businesses and management teams looking to scale. This exit has delivered a strong return on our investment and we wish the business all the best on the next stage of its journey,” Woods says. 

Two-years observation

Unique X provides intelligent autonomous cost-saving solutions and revenue-generating fully managed content services, operating in 90 countries across the globe, delivering more than 200,000 movies and 1.1 billion cinema advertising spots per year. It cites 20th Century Fox, Odeon Cinemas and Warner Bros among its clients.

Woods highlights that BGF first became aware of Unique X in 2016, and monitored the company for two years.

“We first became aware of the firm following an introduction through our adviser network. We maintained contact and were impressed by the technology and progress of the business scaling, before completing a £15m investment in 2018,” the investment professional highlights.

According to the allocator, Unique X represented an attractive investment proposition thanks to an experienced management team, a highly scalable, profitable and cash-generative business model, and a clear focus to expand internationally.

“The company also had a strong customer base, underpinned by long-term recurring revenue contracts and an excellent market position,” he adds.

The value creation strategy was based on four pillars.

“Our strategy was principally driven by continued growth of the company’s software revenues. In addition, the business focused on investing in new technologies, expanding its suite of products and growing its customer base globally,” Woods highlights. 

We first became aware of the firm following an introduction through our adviser network. We maintained contact and were impressed by the technology and progress of the business scaling, before completing a £15m investment in 2018
Spencer Woods, investor at BGF

In September 2021, the digital entertainment specialist announced the acquisition of Switzerland-based theatrical content services company Diagonalfilm, with the intention to further expand its services and strengthen the Swiss cinema ecosystem.

A robust pipeline

When asked about BGF’s current pipeline, Woods reveals an appetite towards the UK and believes in the growth potential of the North of England. 

According to the allocator, the region has a strong reputation in sectors including tech, education and healthcare, with the GP expecting these to remain resilient in the future. 

“As with any difficult economic backdrop, strong, well-capitalised businesses in resilient sectors will find opportunities to seize market share, particularly from less nimble, over-leveraged rivals,” he explains.

“As a patient, long-term investor, we aren’t constrained by timeframes associated with typical PE houses so we can focus on driving growth and value creation, enabling portfolio companies to realise their potential at a timeframe best suited to their needs,” he concludes. 

Set up in 2011, BGF has since then invested £3.9bn in more than 550 companies, making it the most active investor in the UK and Ireland. BGF is a minority, non-controlling equity partner.

The GP recently completed a multimillion-pound investment in sports marketing business Eleven Media and has also recently announced its sale of Hydrock, a London-based multi-award-winning engineering design, energy and sustainability consultancy.

Goldman Sachs Alternatives is to take a majority stake in French independent wealth manager Crystal.

The acquisition comes four years after Seven2, formerly Apax Partners, acquired a majority holding in Crystal. Seven2 will retain about 25% in the wealth manager alongside GS Alternatives' private equity business and Crystal’s management team, led by Bruno Narchal and Jean-Maximilien Vancayezeele.

Crystal was founded in 1992 and completed 26 build-ups in the period since Seven2's investment. It recently announced it would acquire French investment solutions provider Primonial Ingénierie & Développement, financial advisory Opti Finance and wealth management consultant RDFI.

Following completion of the latest acquisitions, Crystal will have AUM of €22bn, revenues of €300m and a client base of 90,000 families served by 1,000 employees.

ADVISERS 

Seven2
Weil, Gotshal & Manges (legal)

Goldman Sachs Alternatives
Latham & Watkins (legal)

Hypax has carved out Precision Colour Printing (PCP) from Claverley Group, a Midlands-based media group.

Formed in 1979 and headquartered in Telford, PCP provides commercial printing, finishing and fulfilment services to publishers and holiday companies. The company has 200 employees across its four UK sites.

London- and Berlin-based investment firm Hypax specialises in midmarket corporate carve-outs.

The investor said PCP has been impacted by effects of the Covid-19 pandemic on the printing market, exacerbated by rising energy costs and input prices, which is in line with the wider industry.

This transaction will enable the business to refocus efforts, which includes further investment in product workflow improvements and energy efficiency to reduce its cost base.

The buyer said Claverley Group decided to dispose of PCP to focus on its core business activities. The seller will continue to be a customer of the business.

Bluewater has sold subsea operations specialist Rovop to US-based marine transportation business, Edison Chouest Offshore.

Based in Aberdeen, Scotland, Rovop is a provider of remotely-operated vehicle (ROV) services to the energy sector.

Midmarket PE firm Bluewater focuses on the energy sector and currently manages $2.5bn across a portfolio of 19 companies.

The GP first backed Rovopin 2017 through its second fund, before investing further in the business alongside then part-owner BGF in 2020. 

Bluewater subsequently assumed full ownership in September 2022 and facilitated a $25m investment from Canadian global infrastructure and real assets manager Cordiant Capital, with a view to spur continued growth.

Rovophas has expanded internationally and enhanced its operations in low-carbon industries since its investment, according to Bluewater.

For the fiscal year ending 31 March 2023, Rovop reported a 31% increase in revenue, reaching £53m, and is expected to report continued growth in the following year, according to the seller.

Dutch investor Nordian has acquired Goedhart Convenience and Qizini to create a new European player in the convenience food industry.

The two firms are being spun off from their existing parent companies to form a single group catering to the Benelux region. 

Goedhart Convenience produces pre-packed convenience food concepts for the retail, gas station and food service industries. The company has one production location in Leeuwarden, the Netherlands, and currently has around 100 employees. 

The company was previously part of natural oil and fat solution provider specialist Goedhart & Borgesius Group, founded by the Borgesius family, which also invested in the deal. 

Qizini produces fresh and frozen convenience food, such as sandwiches, wraps and hot snacks, aimed at the aviation and retail industries. The company has two production locations in Alphen aan de Rijn and Losser, the Netherlands, and currently employs around 250 people. The company was previously part of sushi and other convenience food products supplier Natsu Foods Holding GmbH & Co.

The new group aims to serve customers across a wide range of sectors, including retail, food service and aviation, the GP said in a statement.

Its value creation strategy will particularly focus on capitalising on themes such as automation and sustainability, while developing its product offering with an eye on customer experience.

The two companies together generate a turnover of approximately €145m, according to Nordian.

Founded in 2014, Nordian focuses on majority stake investments in medium-sized Dutch companies and has so far invested in more than 30 companies, and provides support in areas such as strategy, financing, and mergers and acquisitions.

The GP typically targets businesses with Ebitda of €3-15m, while ticket sizes typically start from €10m. 

CapMan's Growth Equity III fund has reached its hard-cap of €130m.

The fundraise exceeds the size of the team's previous fund, CapMan Growth II, which closed on €97m.

CapMan Growth’s investor base consists mainly of Finnish institutional investors and entrepreneurs, including several founders of CapMan Growth’s portfolio companies.

The new fund will continue the strategy of its predecessor, offering Finnish entrepreneurs an alternative to selling the majority of their business, through a partial exit, while also supporting growth.

The Finnish growth investor will make "significant" minority investments in entrepreneur-led growth companies with revenues ranging between €10m and €200m. 

Since its inception, CapMan Growth has invested mainly in technology-enabled service companies, technology and software companies, and healthcare.

The new fund made its first investment at the beginning of April when it invested in environmental technology company Tana.

Since 2017, CapMan Growth has raised more than €300m.

CapMan overall has more than €5bn in assets under management, employing about 200 professionals in Helsinki, Jyväskylä, Stockholm, Copenhagen, Oslo, London and Luxembourg. It has been listed on Nasdaq Helsinki since 2001.

PAI Partners has carved out the European rehabilitation business of Fresenius Vamed, a global provider of services for hospitals and other healthcare facilities.

Vamed is currently a fully consolidated subsidiary of Austrian healthcare company Fresenius. PAI – through its c.€920m midmarket fund – will hold a 67% stake and Fresenius will hold a 33% stake upon the completion of the transaction.

Vamed’s rehabilitation business operates 67 clinics and care centres across Germany, Austria, Switzerland, the Czech Republic and the UK, serving more than 100,000 patients annually. 

The rehabilitation business has an enterprise value of €853m and generated revenues of about €1bn last year, according to statement by Fresenius. 

The rehabilitation business is Vamed’s largest business unit. Its portfolio ranges from project development and planning to the total operational management of healthcare facilities and providing services to patients.

Similar investments by PAI in the healthcare sector include DomusVi, a European provider of residential elderly care.

The Vamed deal represents the firm’s 20th carve-out since inception.

ADVISERS

PAI Partners
Willkie Farr & Gallagher (legal)
Alvarez & Marsal (financial due diligence)
ISP Healthcare (commercial due diligence)

Fresenius
UBS (corporate finance)
Latham & Watkins (legal)

Milan-based GP Arca Fondi and Italian investor Alto Partners have purchased 100% of Italian medication and cosmetic firm Eurosirel from founders Ernersto and Alberto Leonelli. 

Headquartered in Milan, Eurosirel specialises in the production and marketing of devices for medication and cosmetics, with a customer base that includes large-scale retail trade operators, pharmacies, specialised retailers and pharmaceutical companies.

The deal was completed via a special purpose vehicle (SPV) controlled and managed on an equal basis by funds Arca Space Capital and Alto Capital V.

Arca Fondi is aiming for growth and international expansion of Eurosirel both organically and via acquisitions, Arca Fondi said in a statement.

Its value creation strategy includes the development of new products and proprietary technologies to expand its customer service capabilities, the GP added.

Eurosirel currently employs 130 people and posted a turnover of €62m in 2023, with an Ebitda of approximately €11m. Sales CAGR over the past 10 years was in excess of 10%, according to the statement.

Arca Space Capital held a first close in August 2023 at €130m and has a target size of €250m.

The Article 8 buyout fund targets investments with a focus on energy transition, ageing populations and the circular economy. Its target deal sizes range from €20m to €60m in companies with a turnover of up to €300m, and focuses on niche Italian sectors such as automotive machinery, components and pharmaceuticals.

The fund received backing from institutional investors thanks to its focus on the real economy, with big players such as Fondo Italiano D’Investimento supporting Arca Space Capital with two funds. 

Read more about Arca Fondi’s view on the current Italian PE market landscape and its strategic approach to co-investment partnerships here.

ADVISERS

Arca Fondi
OC&C (business)
Giovannelli Studio Legale (legal)
Spada Partners (financial & tax)
Erm (ESG)

Eurosirel
Marcianesi & Associati (financial & tax)
Orrick (legal)

The handling of a previous investment was instrumental in helping Danish PE firm GRO Capital clinch the acquisition of data management software provider DigitalRoute, the buyer's co-founder and lead investment partner tells Real Deals.

GRO Capital, which targets investment in Northern European b2b software businesses, acquired DigitalRoute from Swedish GP Neqst last week – investing out of its GRO Fund III, which closed on €600m in March 2022.

The firm intends to follow a similar value creation journey with DigitalRoute as it did with its investment in Swedish business Tacton, Lars Lunde says. 

Lunde cites the PE firm’s Tacton investment – a 'configure, price, and quote' (CPQ) software provider which he backed in 2017 as lead investor through GRO Fund I and sold last summer – when pitching to DigitalRoute’s existing shareholders.

“It actually took a little bit of persuasion to get Neqst to sell,” says Lunde, noting that it was in ongoing discussions with DigitalRoute and the shareholders for a number of years.

It actually took a little bit of persuasion to get Neqst to sell
Lars Lunde, GRO Capital

Founded in 2000 and headquartered in Stockholm, DigitalRoute provides usage data management software, with its main areas of application being billing and revenue management. The company has more than 200 employees across its nine offices around the world, generating SEK400m (€34.3m) in turnover.

Neqst first backed DigitalRoute in 2008 - and in which it most recently held a 94% stake - according to the seller’s website.

The 16-year holding period can be attributed to Neqst’s open-ended fund nature, allowing the firm to hold assets for extended periods of time.

Lunde says Neqst had been through a “big journey” with DigitalRoute, supporting the company’s as it grew from its “solid” position within the telecommunication vertical into the evolving enterprise market. The seller also transitioned the business from on-premises to the cloud.

To convince the shareholders, GRO alluded to its active ownership model, which aims to add value by scaling the commercial and product side of the business. Given the growing market, it is an apt time to change hands to achieve that scale, says Lunde.

Angles

The partners behind Copenhagen-based GRO, which has approximately €1bn in AUM, have been investors in more than 25 technology and software-related companies across various verticals. The whole quote-to-cash value chain has been a strategic investment area at the PE firm for many years.

Tacton was also in the quote-to-cash value chain, specifically CPQ software.

“DigitalRoute is an important part of this value chain, especially when business models become complex and large scale,” says Lunde, noting that he has known DigitalRoute for many years.

With DigitalRoute, GRO says it is buying into the shift towards subscription and usage-based models, which it believes are transforming “many industries”.

The partner highlights DigitalRoute’s legacy in handling the complex data management task linked to telco subscriptions, with the telco sector having become usage-based very early on.

“It is an industry characterised by millions of users on various subscription plans roaming many networks. That creates a lot of data complexity, which needs to be managed and understood in an automated fashion to bill you in the right way,” he explains.

According to Lunde, many new verticals have ventured into usage-based business models during the last decade, such as the energy sector or the transportation sector, where there is an increasing number of car-sharing business models, which rely on usage-based pricing.

The holy grail for many verticals is to build recurrency through product-as-a-service business models, which will increase the need for user data management
Lars Lunde, GRO Capital

“The holy grail for many verticals is to build recurrency through product-as-a-service business models, which will increase the need for user data management,” the partner emphasises. “At its core, DigitalRoute is good at managing very complex datasets and ultimately dumbing them down to something that the billing systems can handle at scale.

“This is increasingly needed across many verticals. Many software solution providers have converted to subscription business models during the last decade and now many are considering introducing usage-based modules on top.”

DigitalRoute added that GRO is the “ideal partner” to help it expand its offerings to new and existing customer segments, citing the investor’s track record of supporting B2B software companies at strategic and operational levels.

The DigitalRoute acquisition is GRO’s sixth investment in Sweden, which is the GP’s second biggest market after Denmark. The firm’s geographic remit also includes other Nordic countries and DACH.

Limerston Capital-backed Cormica has acquired TPM Laboratories (TPM) in a seven-figure deal.

Founded in 2001 and based in New Jersey, TPM is a contract testing laboratory, delivering analytical services to the pharmaceutical and chemical industries, including analytical research and development, quality control, and stability storage and testing services. 

Cormica is a UK-based medical device, combination product and pharmaceutical testing group that aims to support life science manufacturers and innovators to launch their products.

The firm said in a statement that the deal will allow it to focus on strategic expansion of its capabilities, service line offering and international footprint, with a particular focus on the US.

The GP added that it is "proactively" working on further acquisitions in Europe and North America. 

As part of the acquisition, TPM founder Rupa Iyer will continue to lead her team in the US.

Limerston Capital acquired Portsmouth-based medical devices testing service provider WMP Group in September 2021. Dover-based tech laboratory Medical Engineering Technologies was acquired in May 2022, forming Cormica Group.

Founded in 2015 and with more than £300m of AUM, London-based Limerston Capital seeks opportunities in the UK midmarket arena. The firm targets businesses with Ebitda between £5m and £15m.

Last March, the GP announced the closing of its second fund on £245m. Read more about its strategic approach to deployment here.

PwC has appointed Charles Chang as a partner in its corporate finance team in London, focusing on midmarket software M&A.

Chang, who has 20 years of experience and has advised on £20bn worth of software M&A deals in Europe, joins from digital economy-focused advisers Arma Partners, where he was a managing director.  

While at Arma, he was involved in the sale of large software companies to private equity firms and international strategic buyers, and in portfolio acquisitions for clients. 

Prior to Arma, Chang worked at the Canadian Bankers Association in Toronto and at the chemicals M&A firm Valence Group, now Piper Sandler, in London.

Synova has generated a 3x return on the sale of its portfolio company MK Test Systems, following a 10-year holding period.

The company has been bought by London Stock Exchange (LSE) listed Halma, a British group of safety equipment companies making products for hazard detection and life protection.

In a filing to LSE, Halma said it has bought the company for £44m, on a cash- and debt-free basis. MK Test Systems' unaudited revenue for the 12 months to March 2024 was £12.4m. 

The deal sees MK Test Systems become a standalone company within Halma's safety sector, led by its current management team.

MK Test Systems provides specialist automatic electrical testing software and services for OEMs and MROs within the rail, aerospace, and oil and gas sectors.

Synova backed the £20m buyout of MK Test in 2014.

According to the firm, it built a team around managing director Jason Evans; invested “heavily” in completely re-engineering MK Test Systems' solutions with new software and hardware platforms; and developed new, safety-critical solutions for the aerospace industry, as well as using entering new markets such as rail, oil and gas, and electric vehicles. 

The company now has a presence in North America, Latin America and Asia.

ADVISERS

Synova
Stephens (corporate finance)
Osborne Clarke (legal)
KPMG (financial due diligence)
CIL (commercial due diligence)

London-listed Bridgepoint Group is to invest in French risk manager Forward Global, in a deal that values the portco at more than €200m.

Bridgepoint, which will make the investment via its Bridgepoint Development Capital IV (BDC VI) vehicle, said the investment will help support Forward’s growth plans, specifically expansion into the US and M&A opportunities.

Founded in 2018, Forward provides risk management services in areas including cybersecurity, litigation and regulatory intelligence, and strategic communications. The firm has completed 10 acquisitions since its founding.

Forward announced last month that it had entered into exclusive negotiations with Bridgepoint over it taking a minority stake in the Paris-headquartered firm, alongside existing minority shareholders, RAISE Invest and Rives Croissance.

BDC IV, which targets lower midmarket firms, invests €40-150m per company and was raised in 2020. The latest transaction is its 16th platform investment – and the sixth in France – by BDC IV. Bridgepoint announced in January that BDC IV had made a strategic investment in British cloud and digital transformation services provider Kerv Group.

ADVISERS

Forward Global
Hogan Lovells, Axipiter, Schoups, Sheppard Mullin (legal) 
LEK Consulting (strategic audit)
Oderis (financial audit)
Indefi (ESG)
Natixis Partners (corporate finance) 
Callisto (management due diligence)

Bridgepoint
Proskauer Rose, Arsene Taxand, and DLA Piper (legal & structuring)
BCG (strategic audit)
KPMG (financial audit)
PwC (legal, tax, social, and ESG audits)
Clearwater (corporate fiinance)

Bruin Capital has acquired a majority stake in Dutch tech firm PlayGreen.

The deal values the company at more than $100m, according to media reports. 

Founded in 1997 and headquartered in Waddinxveen, the Netherlands, PlayGreen is a horticultural technology company that comprises two main subsidiaries: Stadium Grow Lighting and ALVA Technology.  

Altogether, the group specialises in the design, development and manufacturing of innovative lighting solutions for grass-growing in controlled environments, such as golf courses, tennis courts and football fields. 

With the transaction, the GP said in a statement that its focus will be on increasing PlayGreen’s presence globally, with a particular eye on the US. In order to achieve this, the GP's focal point will be on both organic growth and acquisitions, targeting the acquisition of complementary products, technology and services.

PlayGreen’s current client base includes Tottenham Hotspur, Bayern Munich, FC Barcelona, Arsenal, the Dallas Cowboys, Milwaukee Brewers, Boston Red Sox and the Wimbledon tennis championships, among others.

The company’s offerings comprise turf management solutions including LED grow light systems, UVC light machines and turf fans.

Founded in 2015, Bruin Capital seeks opportunities in the sports sector. Since its launch, the firm has raised more than $1bn in committed capital and has closed nearly 40 acquisitions.

Its current portfolio includes sports fans-focused media firm Fair Play Sports Media, golf-focused tech specialist Full Swing and food service provider for the sport industry Proof of the Pudding.

In February, the GP invested a minority stake in Box to Box Films, a London-based production company best known for the Netflix hit Formula 1: Drive to Survive. 

New York-based Bruin Capital declined to comment on the media reports when contacted by Real Deals.

This article was amended on 2 May to include the reponse to a request for comment from Bruin Capital. 

BGF has sold Hydrock, an engineering design, energy and sustainability consultancy, reaping a 6x return and a 40% IRR following a six-year hold.

The exit has been made to Stantec, an engineering services company listed on the Toronto and New York Stock Exchanges.

Headquartered in Bristol, Hydrock has a staff of 950 across 22 offices in the UK. BGF originally invested £5.6m in March 2018. 

According to BGF, Hydrock has scaled its operations and expanded into new geographies and service lines under the firm’s stewardship. 

During BGF’s investment period, Hydrock increased its annual revenue from £30m to £84m. 

ADVISERS

BGF and Hydrock
KPMG (corporate finance)
Freeths (legal)

Stantec
DLA Piper (legal advice)
Stantec (financial due diligence)
EY (tax)

German investment firm Afinum Management has exited its stake in FAST LTA to Summa Equity for an undisclosed sum.

FAST LTA is a software company focusing on archiving, storage and recovery of data. The Munich-based company was founded in 2006 and was acquired by Afinum in 2019.

Under Afinum’s ownership, FAST LTA more than tripled Ebitda and diversified its product portfolio, customer base and international footprint. 

The sale represents the fourth exit of Afinum 8.

FAST LTA generated revenue of €25m in 2023.

Summa Equity has invested in the company via its €2.3bn Article 9 Fund III.

Midmarket GP Inflexion has sold Automotive Transformation Group (ATG) to global automotive technology company Keyloop. 

The deal was valued at just under €200m and achieved a return of more than 6x, Real Deals has learned.

Headquartered in Kent, ATG provides automotive retailing solutions across digital, retention and data services, with a client base that includes retailers, manufacturers, financiers and fleet suppliers. 

Its products are currently being used in 85 countries around the world and translated into 30 languages, according to its website.

Inflexion intially invested in Autofutura In 2018 through its Enterprise Fund IV. The 2016 buyout fund targeted opportunities in consumer products and services (B2C), and business products and services (B2B) sectors. 

During the five-year holding period, the GP has supported a diversified strategy that included M&A, technology enhancement and international expansion. 

“Transformational M&A and technological innovation drove significant earnings growth,” a spokesperson told Real Deals. 

In the first year of ownership, the GP supported the business as it completed the transformational merger between Autofutura and GForces, doubling the size of the business and rebranding as ATG. 

During the ownership, ATG also completed add-on acquisitions of suppliers of loyalty solutions for manufacturers, finance companies, and retailers Chrysalis and B2B car service provider Salesmaster.

“ATG also drove an international rollout strategy across Europe and the Middle East, integrating ATG’s technology stack, delivering the first global omnichannel retail solution for the automotive market,” the spokesperson added.

ATG’s current client base includes Mercedes-Benz, Jaguar Land Rover, Ford Credit, Marshall Group and Jardine Motors.

In 2023, Inflexion completed eight exits, with a total of £3.9bn returned over the previous three years, the GP said in a statement.

The 2023 exits collectively delivered a gross return of 2.9x and an average IRR of 20%, with average Ebitda growth of 82% during Inflexion’s investment period, the GP added.

In April, Inflexion-backed CNX Therapeutics acquired two CNS products from Eisai, the French sales subsidiary of international pharmaceutical company Eisai Co, for €56.5m, excluding inventory and working capital. Read more about the deal here. 

ADVISERS

Inflexion
Houlihan Lokey (legal)
Taylor Wessing (legal)
DWF (legal)
Deloitte (financial due diligence and tax)

Family law lender Level has raised £10m, comprising a £5m equity capital investment from family office Kendal Capital and a £5m debt investment from Correlation Risk Partners.

The investment is Kendal's sixth, Real Deals has learned.

Launched in 2017 and based in the UK, Level is an FCA-regulated lender to clients and law firms in family law proceedings, probate and other related matters.

Level has also acquired probate lender Tower Street Finance, which, according to the portfolio company, exposes it to a new market that it expects to grow rapidly due to lengthy probate service processing delays and as individuals require support amid the cost-of-living crisis.

Kendal Capital’s co-founder and former CEO and founder of Bayport financial services, Grant Kurland, joins a board of advisers that includes Neil Purslow, CIO and founder of Therium Capital, and Richard Avery-Wright, CEO and founder of 1818 Venture Capital, also a major investor in the business.

The co-founder of Tower Street Finance, Jim Sission, and two key employees will join the Level team, bringing the headcount to 20.

Three broad trends are worth noting in private equity’s secondary market. The first is the simplest: the sheer growth of this area of the industry. Secondary deal volumes have increased at a compounded annual growth rate of almost 15% since 2013, from a total of about $5bn in the mid-2000s to more than $100bn today. Of course, that still leaves secondaries a tiny fragment of the whole market – but it also means each additional percentage point of growth would represent a large sum in absolute terms.

Estimated secondary market size

Source: Pictet Alternative Advisors, as at 31 December 2023. For illustrative purposes only.

The second trend is worth exploring in more detail but requires some context. There are several ways in which a secondary transaction can reach the market:

• LP-led deals: when an existing investor in a fund seeks to sell their stake before the fund’s planned liquidation
• GP-led deals: when the manager of a fund seeks to move a portfolio company or companies into a continuation vehicle, rather than exit entirely
• Secondary direct: when an early investor (particularly in venture capital) seeks to realise their stake in a private company rather than wait for an IPO or the full sale of the business.

Historically, LP-led secondaries have dominated the market – but that is changing. From accounting for just 7% of all secondary volume a decade ago, GP-led transactions comprised almost half the market last year.

Share of GP-led transactions, 2013 v 2023 (%)

Source: Pictet Alternative Advisors, as at 31 December 2023. For illustrative purposes only.

Why is this the case and what does it mean for investors? As suggested by the name, GP-led secondaries are driven by the fund’s manager. They will typically identify one or several high-quality companies in their existing portfolio that they would like to retain for longer than their fund’s lifespan, because they see additional upside that could be realised with a longer hold period. So to provide the scheduled liquidity that their existing LPs expect, the GP brings in secondary investors to capitalise a new fund they will manage and buy the asset(s) for that continuation vehicle.

From accounting for just 7% of all secondary volume a decade ago, GP-led transactions comprised almost half the market last year

Put that thought process in the context of the well-known exit drought of the past few years and it becomes clearer why GP-led secondaries are becoming more common. GPs don’t want to sell into weaker markets, LPs still want distributions, so secondaries are one answer.

The inevitable question raised by this, however, is whether the GPs are holding onto their golden assets in such secondaries or simply kicking their tin cans further down the road. It is too early to speak in aggregate about the quality of the companies in the current secondary boom but we can say that LPs do have ways to create value for themselves in these deals.

The first and most important means is entry pricing, which takes us to the third trend. Secondary pricing on average in the buyout space was 99% of NAV as recently as 2017 – meaning secondary opportunities were only available at a 1% discount. The pandemic took secondary buyout pricing down to 89% of NAV in 2020 but it bounced back to 97% a year later. 

The dampened market sentiment of 2022-23, though, brought much wider discounts – with average secondary buyouts at 84% of NAV in both years. This is clearly more interesting to investors but the greater margin of safety still doesn’t tell us whether gold or tin is being bought.

The growth of the secondary market is broadening and deepening the opportunity set

For that, we need to employ not only thorough due diligence on the underlying assets (where investors can benefit from greater transparency and access to information than in primary funds, because the companies are already known), but also as many other value-creation levers as possible. These include – among others – deferred payments, earn-out structures, and diversifying vintage exposure for a favourable mix of likely near-term exits and longer-term potential.

So while there are of course no guarantees with any investments, we see the combination of these trends creating compelling opportunities for disciplined and experienced investors. The growth of the secondary market is broadening and deepening the opportunity set, the rise of GP-led transactions is in many cases bringing high-quality assets to market, and the wider discounts are opening better entry points. Secondary deals will very much be a primary area of interest for the private equity industry in the years ahead.

 Thibaud Roulin is head of North America private equity, Pictet Alternative Advisors

This content was produced in association with

The Riverside Company-backed Dastex Reinraumzubehör (Dastex) has completed the acquisition of Arbeidsmiljø og Energiteknikk AS (AET) from RA Service and Management.

Founded more than 30 years ago and based in Kongsberg, Norway, AET is a distributor of third-party consumables and laboratory cleaning equipment, catering to sectors including pharmaceutical, semiconductors and healthcare.

Founded in 1979 and headquartered in Muggensturm, Germany, Dastex distributes cleanroom garments and consumables in Europe.

The acquisition of AET will help Dastex with its aims to extend its geographical footprint. Establishing a direct presence in Norway will strengthen its position in the Nordics.

The GP said its focus will be on increasing commercial and marketing efforts across Norway, stimulating "commercial synergies" and capitalising on cross-selling opportunities.

Riverside acquired Dastex and its first add-on Vita Verita in March 2023. The GP said in a statement at the time that it aimed to establish a platform targeting cleanroom contamination control, with a focus on both organic growth and acquisitions.

With the transaction, AET’s current CEO Barbro Reiersøl will continue to lead the Norwegian operations under the Dastex group umbrella.

Established in 1988 and headquartered in New York, The Riverside Company eyes businesses valued at up to $400m. The firm's international private equity and structured capital portfolios include more than 140 companies.

Investment bank Lincoln International has appointed Dr Simon von Witzleben as managing director in the firm's valuations and opinions group, based in London.

von Witzleben joins from Kroll (formerly Duff & Phelps), where he was managing director and co-head of EMEA transaction opinions.

He has more than a decade of experience advising on mergers and acquisitions, recapitalisations, carve-outs and GP-led secondary transactions.

von Witzleben will head Lincoln’s European transaction opinions business, providing fairness and solvency opinion advisory services to private equity firms, public and private companies, and boards of directors.

In 2023, Lincoln’s global valuations and opinions group completed more than 50 transaction opinions.

Orthobiologics company Locate Bio has raised £9.2m following an oversubscribed funding round for a clinical study of treatment for debilitating orthopaedic conditions. 

The UK-based firm secured funding from existing shareholders Mercia Ventures and BGF, as well as new investors. The funding will be used for the clinical study of its LDGraft product, a bone graft substitute for spinal fusion that was last year granted Breakthrough Device designation from the US Food and Drug Administration.

Locate Bio, a spinout from the University of Nottingham, announced in September 2021 that it had secured £10m of equity investment in a previous oversubscribed funding round. 

Mercia Ventures is part of Mercia Asset Management and invests up to £10m across all sectors, specialising in software, consumer, healthcare and deeptech.

BGF, established in 2011, has invested over £3.9bn in more than 560 companies, including £200m in life sciences.

Parisian venture capital firm Ventech has achieved a 36x return on the sale of its portfolio company Believe.

A consortium composed of Believe's founder and CEO Denis Ladegaillerie, EQT, and Californian investment firm TCV, has acquired a block of 71.92% of Believe's capital – 12% of which was bought from Ventech – and will initiate a Public Tender Offer for the remaining shares at €15 per share.

The sale of the Ventech stake has been valued at €175m. The company overall has been valued at €1.52bn.

According to Ventech, the divestment represents France’s biggest venture capital exit, in multiple terms, of the past decade. 

Ventech made its initial investment through its Ventech Capital III fund, which closed on €150m in 2007. 

Founded in 2005, Believe is a digital music company employing 1,651 people in more than 50 countries, which aims to support independent artists and labels. Its portfolio of brands include TuneCore, Nuclear Blast, Naïve, Groove Attack and AllPoints. Believe is listed in compartment A of Euronext Paris.

Ventech is a global early-stage venture capital firm, founded in 1998. Since its inception, Ventech has raised more than €900m.

The VC is currently raising its Ventech VI fund, having had an initial closing in mid-2023. The vehicle has a target of €225m.

Nordic PE firm Polaris has secured a majority stake in Swedish engineering consultancy group Vinnergi.

Vinnergi, which develops telecommunications, electrical power and construction infrastructure, has 25 local offices throughout Sweden and more than 500 employees. The firm was established in 2017 and had a turnover of SEK765m in 2023.

Polaris's investment is made in partnership with management and a group of employees.

Polaris announced in March that former CapMan Buyout managing partner Johan Pålsson had joined the firm as a partner within its.private equity team, while Camilla Ringsted, most recently an associate director at Bain, had joined as associate director.

Polaris has obtained capital commitments of more than €2bn and raised five funds since 1998. It has investments in more than 50 firms, has completed more than 100 add-ons and currently owns 16 companies with a total turnover of over €750m.

Gideon Valkin, who has formerly worked at Monzo, Yonder and ClearScore, has launched Andrena Ventures, a $12m solo GP fund to back fintechs at pre-seed and seed stage. 

The fund has reached its first close with a final close planned for later in the year. In parallel, the vehicle has also completed its first investment in Nustom, a new AI-powered software-building startup from Monzo co-founding CTO Jonas Templestein. 

The inaugural fund is backed by seven VCs from the Forbes ‘Midas List’, as well as Entrée Capital; RTP Global; Taavet Hinrikus and Sten Tamkivi (co-founders of Wise and Teleport); Cherry Ventures managing partners Filip Dames, Christian Meerman, Sophia Bendz; David Haber, fintech GP at Andreessen Horowitz; and Firat Ileri, managing partner at Hummingbird Ventures. 

Valkin has spent 15 years in the VC ecosystem as a founder, operator and investor.

Goldman Sachs Alternatives is to buy UK environmental risk reduction and advisory firm Adler & Allan from an affiliate of Sun European Partners. 

The Sun European affiliate acquired Harrogate, UK-based Adler & Allan in November 2020, which has subsequently more than doubled in size. It has completed nine add-ons, strengthened its management team and shifted away from hydrocarbons into renewable energy. 

Adler & Allan plans to expand via both organic growth and M&A activity. The firm’s leadership team will remain in place, led by current group CEO Henrik Pedersen.

Sun European affiliates have invested in more than 540 companies globally, with a turnover of approximately €4bn. Private Equity at Goldman Sachs Alternatives has invested more than $75bn since its inception in 1986.

ADVISERS

Sun European
Houlihan Lokey (corporate finance)
OC&C (commercial due diligence)
KPMG (financial due diligence and tax)
Weil, Gotshal & Manges LLP (legal)

Goldman Sachs
Linklaters (legal)
EY Parthenon (commercial due diligence)
KPMG (financial due diligence and tax)

UK and Ireland PE firm BGF has completed a multimillion-pound investment in sports marketing business Eleven Sports Media.

Founded in 2009 with offices in the UK's Northwest, Eleven constructs local partner programmes for rights holders at global sporting venues, including Yankee Stadium and London Stadium. 

It provides local businesses with a growth platform through fan, club and community engagement.

BGF said in a statement that it will support the business’s international growth and increase Eleven’s foothold in the US market, which already accounts for more than half of overall sales according to a statement by the GP.

In terms of value creation, Eleven plans to keep on growing the team in its Manchester office and make strategic hires in the US, as part of plans for opening a new office in Charlotte, US in 2025.

Eleven entered the US through its partnership with New York City Football Club in 2021, and the business has since added American Football teams Carolina Panthers, New Orleans Saints and New York Jets.

Current partnerships also include the Premier League, NFL, EFL and NBA, among others.

Partner at BGF Josh Bean has joined the Eleven board as non-executive director.

Established in 2011, minority, non-controlling partner BGF explores opportunities in the UK and Ireland, and has invested £4bn in more than 560 companies, 

Last week, BGF invested £3.25m in Boxphish, a Leeds-based human risk management platform. Read more about the deal here.

ADVISERS

BGF
DLA Piper (Legal)
Hurst (Tax DD)
Squire Patton Boggs (legal)
RSM (tax structuring)

Automation is top of Nexxus Iberia’s shopping list following its purchase of Spanish supermarket equipment manufacturer Creaciones Marsanz, the investor’s lead partner Juan Pedro Dávila tells Real Deals. Though in the process of implementing an enterprise resource planning (ERP) system, there is still a lot to be done for its newest portco, he adds.

Founded in 1965 and based in Madrid, Creaciones Marsanz is a family-owned retail equipment manufacturer, including shopping carts, handling and logistics equipment, commercial shelving, entrance and exit devices, and checkout counters for national and international retailers.

Spanish GP Nexxus Iberia acquired a majority stake in Creaciones Marsanz last week, marking the first investment from its Nexxus Iberia Private Equity Fund II, which held a final close on €241m earlier this year.

“Today, Creaciones Marsanz’s three small factories – and overall company – lack automation. Processes are manual and basic,” says Dávila. “Going from mainly manual to automated processes requires a detailed plan and time, as well as having both operations and the financial department linked together. It is a project that will take over a year, but we’re comfortable with that.”

It is a project that will take over a year, but we’re comfortable with that
Juan Pedro Dávila, Nexxus Iberia

Noting the substantial value to be generated in exchange for the work, the partner added that the grocery market industry is one of the most resilient during a potential crisis.

In Spain, the sector remained flat during the global financial crisis, and has grown every year since 2013, according to the investor.

Deal origination

Established in 2016, Nexxus Iberia is an affiliate of Mexican alternative asset manager Nexxus Capital. Having already invested its first fund, the PE firm typically invests in Spanish and Portuguese small- to midsized companies, a criteria that applies to Creaciones Marsanz.

The deal was brought to Nexxus by advisory firm Alanza DTE, which the buyer has been working with for "many" years. From there, a conversation took place between the GP and the portco, with no other PE firms involved in the process.

Though Nexxus applied its usual due diligence process, it still took seven months from the GP becoming aware of the deal to completing it.

“Typical family-owned businesses with little available analytical information make the investment process more cumbersome,” Dávila says.

That said, Nexxus, committed to closing the deal, was able to gain the retiring shareholders' trust.

Value creation

The portfolio company had 179 employees and a turnover of €33m last year. Nexxus Iberia's ambition is to double the size of the company.

Further to automating processes, reaching its value creation goals will also involve launching new products, reinforcing the management team and internationalising the company.

Marsanz’s main clients are Spanish retailers, but the portco already sells about a third abroad – including to Portugal, France and the UK, as well as some Latin American countries – with the intention to increase its presence in Europe and LatAm.

We usually do a digitalisation plan that takes between one and two and a half years to implement, to make sure that we can leverage all the technology that makes sense for the company
Juan Pedro Dávila, Nexxus Iberia

While focused on supermarkets, the business also provides trolleys for other industries, such as logistics companies, airports and hotels.

Today, approximately 20% of the company’s sales have been from these additional lines of businesses, and the GP intends to boost those as part of its plans.

On the broader digitalisation project, Dávila says: “We usually do a digitalisation plan that takes between one and two and a half years to implement, to make sure that we can leverage all the technology that makes sense for the company and that it is able to absorb.”

Creaciones Marsanz joins Nexxus Iberia's current portfolio of companies, which includes Mirplay, OFG, Solutex and La Margarita.

ADVISERS

Nexxus Iberia 
Pinsent Masons (legal)
EY (commercial, financial and ESG due diligence, and tax)
Aon (insurance due diligence)

Creaciones Marsanz
Alanza DTE (corporate finance)
Garrido (legal)

With impact funds’ $200bn of dry powder competing for a relatively small number of assets, eye-watering valuations have taken ‘pure play’ impact businesses beyond the reach of most private equity houses.

However, there’s a growing opportunity for priced-out investors to think smart and find alternative routes to generating value within their portfolio.

It requires impact to be viewed not as a binary investment strategy, but a chance to identify and amplify impact-led growth within portfolio businesses’ existing products and services.

Leveraging existing impact

To be considered an impact business, most funds require a high percentage of products and services to be delivering positive social or environmental outcomes. This has seen capital naturally flow towards assets where the effect is clear and obvious, such as renewable energy, agritech or healthcare.

But this is quite a narrow and limiting view of impact.

There are plenty of non-impact companies with products or services that deliver significant environmental and social gains. Often this impact remains ‘under the radar’ as these benefits are not captured, measured and considered as part of a wider investment strategy by either management teams or their backers.

Viewed through a data-led lens, these businesses have an opportunity to fully understand their impact and leverage to drive growth, provide resilience and enhance valuations.

It makes qualifying and quantifying impact an interesting and attractive consideration for private equity.

Impact is everywhere

Management teams and investors appreciate how important ESG performance is to raising finance and delivering long-term sustainable value. But it’s clear that many companies which don’t align themselves closely to concepts like purpose and impact are generating significant positive outcomes for society and the environment.

One ‘traditional’ telecoms provider we worked with, for example, was delivering services that were:

• Increasing connectivity to rural communities
• Stimulating job creation and business growth
• Supporting access to critical services including health
• Facilitating the development of smart cities
• Enabling the expansion of electric vehicle networks.

When these benefits were quantified using robust ESG metrics, it was clear the company was making a significant tangible difference to economic growth, societal improvement and low-carbon transition.

Another good example is a fire and security specialist. Ongoing development of its market-leading product portfolio resulted in the business increasing the lifespan of its solutions and replacing physical maintenance requirements with remote digital interventions.

As management’s principal focus was on technology innovation and manufacturing efficiency, how its product and process innovations were helping significantly reduce emissions wasn’t a primary consideration, and therefore wasn’t being measured.

Now this tangible impact is being qualified, reported on and embedded as a key differentiator in a highly competitive market.

A transformative understanding

With these examples, and many other private equity-backed businesses, identifying and capturing impact has been transformative. Through analysis and measurement, they have been able to successfully define their impact and incorporate metrics and strategies into their growth and exit plans.

Crucially, they haven’t had to suddenly pivot to become ‘purpose-led’.

Instead, it has provided fresh impetus, strategic direction and focus. They are now pursuing new opportunities that deliver even more impact… thereby unlocking additional value creation and investment opportunities. It’s helping inspire, guide and motivate management teams, and is acting as a key differentiator with customers and talent.

It has also been the trigger to embed good ESG practices that will ultimately support continuous improvement, ongoing innovation, resilience and exit valuations.

If you can’t measure it…

Unlocking the opportunities presented by impact requires a strategic approach to ESG that aligns businesses to the requirements of all stakeholders… from customers through to lenders.

There isn’t a standardised method by which the midmarket analyses how products and services are delivering impact. Therefore, management teams and their backers need to look at how best practice ESG reporting frameworks can evolve to include impact.

These frameworks will help maintain focus on key operational factors, create consistent reporting models and inform delivery plans within operational enhancement and investment strategies.

A key value driver

Taking a less binary view of impact enables private equity to identify new opportunities within their portfolio and pipeline. It supports fundraising, LP communications and underpins the credibility of private equity investors’ ESG messaging.

Ultimately, impact is relevant to everyone and all companies can deliver it. Unlocking this potential requires us to better identify and quantify impact and incorporate it into strategic business growth.

Impact is highly prized by the market, so evidencing and increasing it will help lower the cost of debt, broaden buyer pools, drive competition and ultimately increase valuations at exit.

Jo Daley is director, head of impact at Clearwater International

This content was produced in association with

Swiss investor Ufenau Capital Partners has acquired German engineering firm IPP Group through its Ufenau Fund VII, which held its first and final close on €1bn in April 2022.

Headquartered in Kiel, Germany, IPP provides engineering services for infrastructure and energy projects. 

With more than 150 employees spread over eight sites, the business delivers planning and surveillance for critical infrastructure projects, such as road renovations, water and wastewater systems, and hydrogen plants.

With Ufenau's investment, IPP intends to consolidate the infrastructure-focused engineering services market via bolt-on acquisitions. Simultaneously, IPP will continue to invest in the expansion of its services, employee recruitment and digitalisation.

Headquartered at Lake Zurich, Ufenau focuses on investments in service companies in German-speaking Europe, Iberia, Poland, the Benelux region and the UK.

Since 2011, Ufenau has invested in more than 350 service companies in Europe and currently advises capital of €3bn.

Ardian, through its expansion team, has entered into exclusive negotiations for a “record-breaking” fundraising round to support human resources sevice provider HR Path.

Founded in Paris in 2001, HR Path offers services ranging from HR strategy consulting (Advise) to HR services (Implement) and payroll outsourcing (Run).

With a workforce of 1,800, the business currently generates annual sales of €215m.

Ardian currently manages or advises $164bn of assets, spanning private equity, real assets and credit.

The GP, alongside Société Générale Capital Partenaires (SGCP), first invested in HR Path in the summer of 2015.

Ardian, Activa Capital and SGCP further invested €30m in April 2017.

The funds raised will be used to accelerate the company’s international expansion and extend its value proposition.

Ardian’s deal team comprised Arthur De Salins, Marie Arnaud-Battandier, Steven Barrois, Pierre Peslerbe and Sibylle Bourgeois.

ADVISERS

Ardian
Latham & Watkins (legal)
KPMG Avocats (legal)
Indéfi (commercial due diligence)
Eight Advisory (financial due diligence)

TDR Capital and I Squared Capital have successfully bid for listed Spanish certification firm Applus Services.

The pair's winning offer of €12.78 per share was confirmed by the Spanish markets regulator, CNMV, following an auction process.

The successful bidding entity, Amber Equity Company, will now enter an acceptance period for Applus Services.

“We are delighted to have won out in what was a long and intensive process,” said I Squared senior partner Mohammed el Gazzar. “We are looking forward to working with the leadership team in the coming weeks and months to ensure a smooth transition to private ownership.”

Applus – which provides testing, inspection and certification services to the automotive, energy and industry, and laboratories markets – reported revenue of €2.06bn in 2023 and employs more than 26,000 people in over 70 countries.

According to the investor, Applus recently moved its focus to higher-growth opportunities in labs, renewables, power and infra segments. It added that the deal positions Applus for changing industry dynamics, which includes regulatory scrutiny, the shift to more sustainable transport and electrification.

With more than $38bn in assets under management, I Squared is a global infrastructure investor headquartered in Miami.

TDR, which has more than €15bn in assets under management, said it typically holds controlling interests in European companies beyond the industry average.

TDR managing partner Gary Lindsay said: “This is an excellent outcome for the public market investors who backed Applus. We now believe that the business should be better for all stakeholders, without the constraints and short-term focus imposed by the public market.”

This deal follows the take-private of Aggreko PLC in August 2021, which was jointly completed by the two firms.

London-based Agathos Management has invested in UK survey firm Plowman Craven.

It is the fourth investment from the PE firm’s Fund II, which launched in 2021, and Agathos’s 12th investment overall.

Based in Harpenden, UK, Plowman Craven provides measurement survey and consultancy services to the commercial property, logistics, infrastructure and rail sectors. 

It has 180 employees across its HQ and offices in Central London, Birmingham, Ahmedabad and New York.

Established in 2014, Agathos invests in UK founder-owned and managed businesses valued at up to £25m.

The GP said Plowman Craven is well positioned to benefit from long-term market drivers in the sector, including continued adoption of 3D modelling methods, automation in the logistics sector and ESG regulation in the broader property sector.

Agathos’s capital injection will be used to accelerate Plowman Craven's international growth, develop its geotech capabilities and client digital services, and target bolt-on acquisitions.

The transaction also facilitates Plowman Craven's long-planned succession goals, with managing director Andy Molloy retiring after spending 15 years steering the company. He oversaw a management buyout in 2012.

David Locker, who has been operations director since joining the business in 2016, will succeed Molloy as CEO.

Adrian Ringrose, former CEO of Interserve and serial non-executive director, will join the board as non-executive chair.

Hugh Costello, John Butterworth and Chanelle Jones led the transaction from Agathos. Costello and Butterworth have also joined the Plowman Craven board. 

ADVISERS

Agathos
Stephenson Harwood (legal)
FRP (debt advisory)
Grant Thornton (financial due diligence and tax)
CIL (commercial due diligence)
Continuum (organisational due diligence)

Plowman Craven
Sherrards (legal)
CMS (tax)

Infrastructure and private debt are the most attractive asset classes, with 71% of institutional investors expecting to increase allocation to each during the next one to two years, according to a recent survey by State Street Corporation.

State Street examined the allocations of 480 institutional investors across North America, Latin America, Europe and Asia-Pacific for its third annual private markets survey.

However, in the longer term, private equity is set to return to favour, with 73% of surveyed investors planning to increase allocations to the asset during the next three to five years, the survey noted.

Some 33% of respondents also expect to decrease their exposure to private equity, compared to 54% in real estate and 29% in infrastructure and private debt. 

Despite investors seeing macro challenges abating, their impact is expected to continue in the near term. To overcome this, institutional investors expect private market sponsors to adjust their strategies – exploring fresh market niches, tapping new sources of funding and hiring staff in specialist areas.

Institutions surveyed remain sceptical about prospects for increased retail investment in private markets, but see potential for legislation (like ELTIF and LTAF) to open options and drive flows. Of those surveyed, 54% believe current investment products do not make the asset classes suitable for retail investors, while about 49% believe there is strong demand for access to private markets among retail or DC investors.

 IT services and consulting firm Valtech has completed the take-private of digital services provider Kin + Carta.

The transaction, which values Kin + Carta at £239m, has been funded by a combination of shareholder equity and external debt, and sees Kin + Carta delist from the London Stock Exchange. 

In December, Kin + Carta announced it had received an offer of 130 pence per share from Valtech following unsuccessful bids from Apax Partners.

Kin + Carta declined an offer of £203m from Apax in October 2023, citing concerns around undervaluation. Apax subsequently increased its offer to 120 pence per share, valuing the company at £220m, before Valtech submitted its offering.

Acquiring Kin + Carta will bring Valtech close to delivering $1bn in revenue, BC Partners said in a statement. 

The deal represents the latest take-private of a UK company by a private equity firm.

Valtech, a portfolio company of BC Partners since 2021, describes itself as an "experience innovation" company and has a team of 6,000 professionals in 23 countries. It leverages data, AI, creativity and technology to serve brands like L’Oreal, LVMH, Mars, P&G, Volkswagen, and Dolby.

“A lot of people say private equity is all about numbers but, to a large extent, success also depends on soft skills and, of course, on selecting the right management teams,” observes Robert Knorr, managing partner at MidEuropa, reflecting on his experience at the firm.

This year, Knorr has two reasons to celebrate – first, his firm’s 25th anniversary, and second, his recent accolade at the Real Deals Private Equity Awards, where he was named Mid-Cap Private Equity Investment Leader of the Year. 

Established in 1999, MidEuropa has cemented its credibility as an investment firm by becoming a steady mainstay in the Central Europe (CE) private equity landscape following a string of success stories.

Knorr, who has been with the firm from the outset, believes the CE region has flourished in the past 25 years – characterised partly by its association with NATO and the EU – as it integrates with its western neighbours. The region has matured and so has MidEuropa, as it seeks to capitalise on the trends that CE has to offer and to improve private equity involvement in investments in the region.

Compelling proposition

Private equity’s penetration into CE has lagged more mature markets such as the UK, the Nordics and even Italy and Spain (which are much smaller regions), despite having a population of more than 100 million and GDP of about €2trn. PE in the region accounts for 0.11% of GDP, compared to 0.50% in Western European countries such as France and the UK, claims Knorr.

According to Knorr, this offers “a compelling long-term proposition for investors like MidEuropa, with the headroom for PE growth in the region being clear, especially as these economies continue to mature and develop”.

He cites Romania and Bulgaria’s recent entry into the free-movement Schengen Zone as another reason why private equity investments are poised to increase in the region in the next 5-10 years, “opening up a pool of opportunities”, which MidEuropa is heavily banking on as it enters its 25th year of operations. 

However, the path may not be that easy. For many years, the wider Central and Eastern European (CEE) region has struggled to activate its local LPs. Pension funds from the region, for instance, are not yet allowed to invest in private equity. Though sources of capital that GPs could potentially access have grown in the past five to 10 years (including EBRD, and EIF which wasn’t the case 25 years ago), the void left by local investors will need to be navigated by the firm as it seeks to bridge a gap.

As the firm enters its silver jubilee year, Knorr recalls how its focus has evolved.

“In the first decade of our activity, the region was still transitioning from the fall of the Soviet bloc, which drove rapid change across liberalisation of markets, privatisation, and infrastructure investment. Then in the 2010s, we saw a large rise in consumer spending with disposable incomes rising, further integration with the EU, and private healthcare on the rise. This of course shaped many of our major retail and consumer successes such as Zabka, Profi and Allegro.”

Currently, the CE region seems to be benefiting from trends which are “markedly more global” in their reach, in MidEuropa’s view.

Knorr explains: “The huge focus on technology, sustainability and digital integration has seen CE emerge as a key nearshoring destination with a regional digital valley developing off the back of growing international investment from multinationals like Intel, Microsoft and Google. This is a major opportunity for MidEuropa, which aims to support regional champions in becoming global players.”

Landmark year 

MidEuropa is currently deploying its fifth fund, an €800m vintage that closed in 2019. In total, the GP has invested more than €6bn through buyouts, co-investments and continuation funds since inception. 

Simultaneously, the firm is this year realising its Fund IV, which closed in 2014. Throughout 2024, MidEuropa will also look at exiting “selected” investments from its Fund V. The firm maintains a silence on its upcoming fundraising plans. 

In the firm’s view, 2023 was a “record year” for MidEuropa in terms of realisations, which saw the sponsor exit five companies. Realisations from last year are on track to return about €1bn in proceeds. 

To continue the momentum, the firm will continue to look at exits this year but will also accelerate its focus on the deployment side because, in Knorr’s view, the environment appears to have settled. “We have been waiting on several opportunities for the past year or so and they finally seem to be coming to fruition now,” he reveals. 

Knorr adds: “Currently, MidEuropa is a single-strategy GP but having a strong brand name in CE also paves the way for us to start thinking about other strategies. Although they’re not imminent, we are always thinking about possible adjacent strategies like credit and infrastructure.”

Growing international investment from multinationals like Intel, Microsoft and Google is a major opportunity for MidEuropa, which aims to support regional champions in becoming global players

Adapting to change 

A quarter century marks an integral milestone in a firm’s journey, but is also a testament to the ups and downs that usually precede this pivotal point. In Knorr’s opinion, certain things have stood the firm in good stead in the past two and half decades. 

The managing partner elaborates: “Over the past couple of years, we have devised some techniques to ensure we can deliver the perfect exit. One of the ways of achieving this is to ensure exit readiness of businesses. Therefore, starting year two – once we have put in place the appropriate pillars of value creation – we like to have the business ready for sale. Even though we know it’s too early and we’re unlikely to sell, we like to have the business ready. We also like to be attuned to the environment and build some flexibility in our strategies.

“For instance, we have observed that many sponsors don’t like to be in big auctions these days, so we have tweaked the way we approach exits and favour bilateral or small processes. Our exit processes are crafted in a way that if a particular buyer advances and the price is at the right level, we are prepared to grant them exclusivity. We are trying to provide greater certainty for buyers, because the times are difficult, and you’re trying to maximise valuation.”

Endless has bought UK-based metal-recycling business Enablelink.

Founded in 2007, Enablelink processes more than 300,000 tonnes of material per year. 

Based in the Birmingham area, Enablelink operates from three production sites and specialises in the acquisition, processing and distribution of ferrous and non-ferrous material. The company employs a staff of 60 and had turnover of £110m in its most recent financial year.

Recent investments from Endless include Hovis, and oils and fats business KTC.

The acquisition is the fifth platform investment from Endless Fund V, which closed on £400m in 2020. 

ADVISERS

Endless
Walker Morris (legal)
KPMG (tax)
Aon (insurance)
Kroll (commercial due diligence)

Enablelink
Finvos (corporate finance)
Shoosmiths (legal)

Accountancy firm Shaw Gibbs has completed its sixth bolt-on with the acquisition of Martin and Company, an accountancy and tax advisory practice with offices in Hampshire and Oxfordshire.

The merger brings in additional expertise in the farming and agricultural sector, landed estates and private-client spaces, Apiary Capital said in a statement.

The lower midmarket firm invested in Shaw Gibbs in November 2022 to support the management team’s buy-and-build strategy. Since then, the business has grown from around 100 people to more than 400 based across 10 offices in central and southern England.

Last week, Apiary Capital announced the close of its oversubscribed second fund on £240m. The private equity firm also recently signed its first exit.

Providence Equity Partners has acquired VivaGym Group from Bridges Fund Management for an undisclosed sum.

VivaGym operates 104 gyms with more than 315,000 members across Spain and Portugal. 

Bridges invested in VivaGym in 2015 when its footprint spanned just 15 gyms in Spain. In the past, the firm has also backed The Gym Group, a UK-based affordable gym operator that is now listed on the London Stock Exchange. 

According to Bridges, the firm helped VivaGym in expanding its footprint through new openings and strategic bolt-on acquisitions – Fitness Hut, Duet Fit and Happy Gym – during its nine-year holding period. 

VivaGym’s management team, who will continue leading the business post-closing, are reinvesting alongside Providence, as is Ares Management Corporation, VivaGym’s primary lender.

Headquartered in Rhode Island, US, Providence invests in media, communications, education and technology. Its portfolio of investments includes Real Madrid and Superstruct Entertainment. 

ADVISERS

Providence Equity Partners
Roland Berger
PwC
CBRE
West Monroe
Uría Menendez
Allen & Overy

Bridges Fund Management
Canaccord Genuity
KPMG
Deloitte
Eversheds Sutherland 

Beech Tree Private Equity has invested in energy and utilities consultancy Sustainable Energy First, with Investec providing further funding.

Founded in 1997 and based in Lancashire, UK, Sustainable Energy First aims to help clients reduce their carbon footprint. The customer base accounts for 3.5% of the UK’s power consumption by businesses.

Beech Tree typically invests in profitable businesses across technology, tech-enabled services and financial services.

The PE firm will invest in the portco’s service capabilities, data and technology, supplementing its growth with bolt-on acquisitions.

Sustainable Energy First’s objective is to decarbonise the UK’s business community by 327,000 tonnes CO2e by 2028.

ADVISERS

Beech Tree Private Equity
DLA Piper (legal)
EY (financial due diligence)
Alvarez & Marsal (tax)
CIL (commercial due diligence)
Clearwater (debt advisory)

Sustainable Energy First
KPMG (corporate finance)
Penningtons (legal)
Beyond Corporate (legal)
RSM (tax)

Miura Partners has backed Bianna in the creation of a new waste management equipment business, Bianna Renting Services.

The new line of business has been financed through a capital increase, seeing the GP acquire a 20% stake in Bianna through its Impact Fund.

Founded in 1990 and based in Girona, Spain, Bianna designs, manufactures and maintains turnkey equipment and facilities for waste treatment and valorisation. It has four production centres and six branches across Europe and Latin America.

In 2023, the company generated more than €50m in revenue, with annual sales growth exceeding 20% since 2019.

The new line of business will look to offer a rental service for equipment and turnkey facilities from Bianna, designed to provide access to the company’s technology while avoiding the expenses and concerns linked to ownership.

Consumer investor L Catterton has acquired a majority stake in beauty brand KIKO Milano from the founding Percassi Family, who will retain a “significant” stake in the portfolio company.

Founded in Bergamo, Italy in 1997 by Antonio and Stefano Percassi, KIKO sells eye, lip and face makeup and skincare. 

As well as an e-commerce platform, KIKO has a retail network of more than 1,100 stores in 66 countries spanning Europe, Asia and the Middle East. The business recorded net revenue of approximately €800m in 2023.

L Catterton manages approximately $35bn of equity capital across private equity, credit and real estate. 

The GP said KIKO’s “unrivalled” scale, first-to-market advantage, and ability to provide “unmatched” product offerings at accessible prices position the company for global success.

L Catterton has invested in more than 30 beauty brands, including Intercos, Elemis, ETVOS, Maria Nilla and Oddity. Since its inception in 1989, the firm has made approximately 275 consumer investments overall.

The PE firm, supported by senior adviser John Demsey, will leverage its experience in the cosmetics sector and network of commercial opportunities and talent to help KIKO pursue an omnichannel strategy and establish new geographical footprints, such as the US.

Antonio Percassi will retain his position as president of KIKO.

ADVISERS

L Catterton
Bonelli Erede (legal)
PwC

Percassi Family
BofA Securities (corporate finance)
Intesa Sanpaolo (corporate finance)
BNP Paribas
Gatti Pavesi Bianchi Ludovici (legal)
Deloitte

According to figures from the Real Deals Data Hub, the last four full quarters from the beginning of April 2023 have seen 552 growth capital (including bolt-ons) and buyout deals worth an estimated €54.3bn across the UK/ROI. 

At a quarterly level, while there was some growth in the middle part of 2023, with overall numbers increasing from 131 in Q2 to 145 in Q3, the final three months of the year saw contraction in almost all of the regional groupings. But, after falling back to just 120 deals in Q4, activity has once again picked up in the first part of 2024, with deal numbers climbing back to a five-quarter high of 156.

Perhaps the most promising feature of the latest batch of quarterly statistics is that activity grew in almost all of the UK’s regions (see the Quarterly Market Tracker on page 26, for a detailed breakdown). Only the Southeast saw any fall in numbers and this was marginal (from 23 in Q4 to 22). As one would expect, London continues to provide the bulk of dealflow at a regional level, but the groupings of Northwest and Wales put in a strong showing, with 91 deals in the 12 months to the end of March 2024, closely followed by the Southeast (86) and the Midlands (East and West combined), with 52. 

What’s more, the recently released Private Equity Value Report clearly underlines that a good number of this cohort of newly backed companies will go on to become the growth stars of the next few years. 

The report, published by Real Deals in association with BDO, identified UK businesses that were PE-backed at the end of 2020 and tracked their profit and sales growth in the three full financial years from that point. 

The results were spectacular: the 210 businesses in the main sample (those with the highest Ebitda growth in each of 10 regions defined by BDO), generated Ebitda of £2.49bn on sales of £13.16bn. More impressively still, these 210 businesses recorded average Ebitda CAGR of a massive 100.9% and saw sales rise by almost 27% per annum during the period analysed. Although there were examples of exceptional growth stories across the UK, the top-performing companies in the three largest regions – London, the Southeast and Northwest (excluding Wales/ROI) – were the most impressive, with Ebitda growth of 156%, 139% and 133% respectively. 

Analysing the sample by sector showed that companies in the consumer, business services and manufacturing spaces were the best represented, with top companies growing their profits by well over 90%. As BDO’s head of global private equity Jamie Austin rightly reminds us: “We should never forget where the real magic happens; it’s in the businesses, in the management teams and in their entrepreneurial spirit.” 

Read the Private Equity Value Report here.

According to the latest figures from the Real Deals Data Hub, activity in the later-stage European PE space failed to rebound from a quiet final quarter in 2023. In all, 575 buyout and growth capital deals were recorded in the first three months of 2024, two fewer than the previous quarter. And, after some signs of life in the larger deal brackets in the second half of 2023, dealflow in this space has once again fallen away, meaning that the overall quarterly value has fallen more significantly – down almost 11% from €54bn in Q4 to €48.2bn between January and the end of March. 

However, the long-running trend that has seen growth capital deals fill some of the space left by dwindling buyout numbers continues, fuelled by ongoing bolt-on activity by European PE-backed firms. Overall, while the number of buyouts recorded dropped by 4.4% to 240 in Q124, growth-stage deals (which includes both bolt-ons and later stage venture situations) rose modestly by almost 3% to 335 transactions. 

In overall terms, however, activity in the midmarket enjoyed a relatively robust period, with deal numbers rising in each of the three size brackets. In total, the number of midmarket deals (defined as those with an EV or investment size between €25m and €500m) increased from 232 in Q4 to 265 in Q1. The value of deals in this space also grew, but by a much more modest 3.5% to €23.7bn. In contrast, the number and overall value of large-cap deals fell back considerably after having recovered some lost ground in the second half of 2023. While 24 €500m+ deals worth almost €30bn were recorded in Q4, this slipped to 16 deals worth €23.4bn in the first three months of this year. 

From a regional perspective, there were only two growth stories in Q1, though both of these involved important regions in the wider European context: the UK rebounded strongly after an especially quiet fourth quarter, recording 156 deals (a 30% increase and the highest seen since before 2023) worth €16bn; and dealflow in the DACH region also rose by nearly 10% to 84 deals, though the absence of larger transactions here led to a heavy fall in aggregate value. 

In contrast, the number and overall value of large-cap deals fell back considerably after having recovered some lost ground in the second half of 2023. While 24 €500m+ deals worth almost €30bn were recorded in Q4, this slipped to 16 deals worth €23.4bn in the first three months of this year

As has been the sentiment in most of the previous quarterly reports, the persisting instability of local and international markets, and ongoing conflicts in Eastern Europe and the Middle East, make it difficult to see any meaningful uptick in PE dealflow in the near future. But PE practitioners are nothing if not resourceful and adaptable, so neither is it likely that dealflow will erode in any significant way.

Dealflow by size bracket

After a relatively consistent year in 2023, which saw three of the four quarters registering more than 100 deals, the small-cap segment fell back to the lowest level seen since before 2023. In total, just 91 sub-€25m deals were announced between January and March – a near-20% drop from the 112 seen in Q4. The aggregate value of these deals also fell by 24% from €1.56bn in Q4 to €1.18bn in Q1. 

In complete contrast, the midmarket (€25-500m) space bounced back from its lowest showing of the year in Q4 with a robust set of numbers in Q1: a total of 265 mid-cap deals were recorded in the most recent three months, equating to a rise of more than 14% on the 232 deals seen in Q4 and a 12% rise on the quarterly average for the whole of 2023. The value of deals in this space also grew, but by a much more modest 3.5% to €23.7bn.

Breaking Q1 down by midmarket bracket shows that the most significant jump in dealflow was seen in the lower midmarket space (€25-50m), which rose 20% to 119 deals – a five-quarter high – worth €4bn (up 16%). The core midmarket segment (€50-250m) also saw healthy growth, with a 10.6% rise to 125 deals (just above the quarterly average for FY23), but a marginal decrease in overall value to €12.7bn. The upper mid-cap bracket (€250-500m) grew too, but by a much more modest 5% by volume and 6% by value (to 21 deals worth €6.9bn).

The large-cap space (deals worth over €500m) witnessed its quietest quarter since Q1 2023, with just 16 deals worth €23.4bn announced, falling well short of the 24 deals worth almost €30bn seen in the final three months of last year. Of the large-cap deals to take place, nine worth €6.6bn were seen in the €500m-1bn bracket, down 25% in volume and 15% in value, while just seven €1bn+ deals worth €16.8bn were announced, which equates to a fall of 42% in volume and 23% in value.

Dealflow by European region

While most regions saw a decline in dealflow in the first quarter, the UK enjoyed something of a bounceback after a year that saw it fall from 146 deals in Q1 2023 to just 120 in the final three months of the year. In total, the region recorded a 30% growth in deal numbers to 156 – a five-quarter high – and a near 40% jump in value to €27.6bn, boosted by the multibillion-pound secondary buyout of Argus Media by General Atlantic and the €1bn+ SBO of Jagex by CVC and Haveli Investments.

The only other region to witness growth in the quarter was DACH, which saw deal number rise from 77 in Q4 to 84, though this remains some way below the 2023 high of 101 deals recorded in a busy third quarter. In value terms, the absence of deals in the larger brackets meant that aggregate value for the region dropped sharply from €11.3bn to €4.3bn, with the largest deal coming in the shape of the €800m buyout of Sunday Natural Products by CVC. Meanwhile, Europe’s main volume market of France/Benelux recorded a small fall in deal numbers (down from 180 to 173) and value (€15.3bn to €13.9bn). Of the deals in the region, only one – the buyout of EMG & Gravity Media by Towerbrook – was estimated to be worth more than €500m. 

Elsewhere, after an especially strong end to 2023, the Italy/Iberia combination fell back to more typical levels with the quarterly deal tally at 73, compared with 100 in Q4 and a 2023 quarterly average of about 83. Aggregate value, however, rose in the region to €7.3bn, versus €4.4bn in the previous three-month period. The buyouts of Forno d'Asolo and Fassi Gru S.p.A. (both by InvestIndustrial) were both reported to be worth €1bn or more, which made a significant impact on the region’s quarterly total. The largest Iberian deal of the period was the SBO of Monbake by Ardian, which reportedly valued the producer of frozen bakery goods at about €900m. 

Europe’s main volume market of France/Benelux recorded a small fall in deal numbers (down from 180 to 173) and value (€15.3bn to €13.9bn). Of the deals in the region, only one – the buyout of EMG & Gravity Media by Towerbrook – was estimated to be worth more than €500m

The Nordic market saw deal numbers drop to their second lowest point since the beginning of 2023 at 73 deals, with the aggregate value also falling nearly 40% to €6.1bn. The CEE region recorded just 16 deals worth less than €600m.

Dealflow by sector

Interestingly, given the slightly downward trend in Europe-wide deal numbers, six of the seven industry groups actually saw a rise in the number of transactions recorded. This statistical anomaly was caused by a near 30% drop in deals in the industrials space, which fell from a market-leading 159 in Q4 to just 113 in Q1. Aggregate value in this space also fell sharply from €11.5bn to €7.1bn, with only two Italian €500m+ deals to prop up the values (the buyouts of Fassi Gru S.p.A. for a reported €1bn and Officine Maccaferri for a sum estimated to be in excess of €500m). 

The blip in activity in the industrials space means that the business services sector dominated the quarter, with deal numbers rising modestly from 155 in Q4 to 161. Here, too, aggregate value declined significantly, though at over €10bn it was the second most valuable industry group. Although the largest deal with a known or reported value was the buyout of UK business WGSN Limited for about £700m, the merger/buyout of Assemblin Caverion Group by Triton Partners in Finland is estimated to have created a company worth well over €1bn.

Of the other volume sectors, the standout performance came from deals in the consumer goods and services space. Here, while deal numbers rose by a relatively modest 17% to 95, their aggregate value almost doubled to €12.6bn, thanks largely to the €4bn+ Argus Media deal and three other large-cap deals in the food space: the buyouts of Forno d'Asolo, Monbake and La Piadineria Group are estimated to have added more than €2.5bn to the quarterly total.

Activity in the TMT space was relatively flat in the first quarter, with a marginal rise in deal numbers to 93, but a near 60% drop in value to €4.2bn despite the completion of the £900m+ Jagex secondary buyout. Meanwhile, the number of healthcare and pharma deals rose by almost 18%, albeit with a drop in value of nearly 30%.  

Of the remaining sector groups, the growth in deal numbers was most evident in the energy/environment space (up 40% to 21), while the value of deals in the financials sector almost doubled to €6.9bn, driven by the €4.9bn secondary buyout of Alter Domus by Permira.

The number of healthcare and pharma deals rose by almost 18%, albeit with a drop in value of nearly 30%

Dealflow by UK region

After an especially quiet fourth quarter in 2023, when few UK regions saw any growth in activity, the stronger start to 2024 was represented almost across the board, with only two regions not improving on their Q4 totals. One of those not matching its Q4 total was the Southeast, though it remains the second most active region and only missed its Q4 total (23 deals) by one. The dominant London region remained by far the most active region in the UK/ROI, recording 44 deals worth €9.8bn, representing increases of 10% and 30% respectively. The acquisitions involving Argus Media, WGSN Limited and Johnson Matthey Plc all added significantly to the capital’s total in value terms. 

In terms of growth rates between the two periods, the two standout regions were Yorkshire/Humberside and Scotland, which saw deal numbers jump. In the case of the former, only three deals had been recorded in Q4, but this more than trebled to 11 in Q1, which Scotland saw deal numbers more than double to 13 in the same period, making it the third most active UK region.

In value terms, two notable areas in Q1 were the Eastern region and the Northwest, which both saw aggregate value totals well above the €1bn mark. In the case of the former, the Jagex deal as well as the buyout of Acteon Group Limited propelled the regional total to over €2.5bn. In the Northwest, deals involving Morson Group Ltd and Vital Energi Utilities Ltd added an estimated €1bn of the region’s €1.4bn. The number of deals in these regions were relatively flat, with the Northwest matching the previous quarter’s total and the Eastern region recording two more than Q4.

Other regions to record deal numbers into double figures were West Midlands with 12 (up by five) and Wales/Ireland with 11 (up by one). Although neither saw any headline-grabbing deals, the aggregate total value of deals in Wales/Ireland almost quadrupled thanks largely to the reported €300m buyout of Chanelle Pharma by Exponent.

The Southwest, Northeast and East Midlands all saw single-figure deal hauls, though between them they doubled the combined Q4 tally of 10 deals.

European exit activity

In overall terms, 2023 was a relatively strong year for exit activity, despite a somewhat lacklustre final quarter. A total of 603 disposals valued at approximately €147bn were recorded – a rise of 10.6% in volume and a fall of nearly 2% in value. 

Unsurprisingly, given the problems GPs have been experiencing finding and transacting new primary dealflow, exits via sales to peers enjoyed an especially strong year, with numbers rising by 17% to 318 (more than 50% of all disposals). Again though, the slowdown in deal activity involving the largest companies means that the estimated value of secondary disposals (€81.2bn) is down 16% on FY 22. Notable SBOs during the year included the sales of IMA Group, Neuraxpharm Group, Scan Global and InfoPro. 

The number of trade sales recorded in 2023 also rose, albeit by a more modest 5%, to reach 257, versus 244 in FY22. Interestingly, the combined value of these actually grew by 11% to €55bn, suggesting that trade buyers are willing to play in the larger deal space when strategic factors give them the edge. Easily the largest trade sale of the year came in the form of CVC’s sale of Messer industries to its joint venture partner Messer SE in a deal reported to be worth some €8bn. Other notable trade sales involved the disposals of Polyplus, Diaverum and EA Elektro-Automatik GMBH & Co KG – estimated to be worth more than €6bn combined.

As has been reported in previous quarterly analyses, the exit market in 2023 was notable for one main reason – the return of IPOs and share sales. Although the numbers were low – just 10 during the course of the year – it is double the activity seen in FY22. While it is unlikely to grow significantly in the current year, the trend is at least in the right direction. The IPO of Arm Limited and share sales involving Software AG and InPost stole the headlines during the year.

After a relatively consistent year in 2023, which saw three of the four quarters registering more than 100 deals, the small-cap segment fell back to the lowest level seen since before 2023. In total, just 91 sub-€25m deals were announced between January and March – a near-20% drop from the 112 seen in Q4. The aggregate value of these deals also fell by 24% from €1.56bn in Q4 to €1.18bn in Q1. 

In complete contrast, the midmarket (€25-500m) space bounced back from its lowest showing of the year in Q4 with a robust set of numbers in Q1: a total of 265 mid-cap deals were recorded in the most recent three months, equating to a rise of more than 14% on the 232 deals seen in Q4 and a 12% rise on the quarterly average for the whole of 2023. The value of deals in this space also grew, but by a much more modest 3.5% to €23.7bn.

Breaking Q1 down by midmarket bracket shows that the most significant jump in dealflow was seen in the lower midmarket space (€25-50m), which rose 20% to 119 deals – a five-quarter high – worth €4bn (up 16%). The core midmarket segment (€50-250m) also saw healthy growth, with a 10.6% rise to 125 deals (just above the quarterly average for FY23), but a marginal decrease in overall value to €12.7bn. The upper mid-cap bracket (€250-500m) grew too, but by a much more modest 5% by volume and 6% by value (to 21 deals worth €6.9bn).

The large-cap space (deals worth over €500m) witnessed its quietest quarter since Q1 2023, with just 16 deals worth €23.4bn announced, falling well short of the 24 deals worth almost €30bn seen in the final three months of last year. Of the large-cap deals to take place, nine worth €6.6bn were seen in the €500m-1bn bracket, down 25% in volume and 15% in value, while just seven €1bn+ deals worth €16.8bn were announced, which equates to a fall of 42% in volume and 23% in value.

Read the full Q1 2024 Market Tracker here.

Thoma Bravo has acquired Cambridge-based cybersecurity firm Darktrace for £4.3bn.

The purchase price of 620 pence per share represents a premium of 148% on Darktrace’s IPO price of 250 pence on 30 April 2021.

The Darktrace board had previously reviewed and rejected unsolicited offers from Thoma Bravo, citing unfair representation of the value of the business.

Thoma Bravo, which is headquartered in Chicago, exclusively invests in software companies.

The acquisition of Darktrace is an “attractive” opportunity to increase its exposure to the large and growing cybersecurity market, it said in filings shared with the London Stock Exchange.

Darktrace was founded in 2013.

ADVISERS

Thoma Bravo
Goldman Sachs (financial adviser)
Kirkland & Ellis (legal)

Darktrace
Latham & Watkins (legal)
Qatalyst Partners (corporate finance)
Jefferies (corporate broker)

3i Group has exited Nexeye to KKR, which is acquiring the business primarily through its $8bn European Fund VI.

Headquartered in Gorinchem, the Netherlands, Nexeye is an eye- and hearing-care provider operating under the Hans Anders, Eyes + More and Direkt Optik chains.

In total, Nexeye and its brands have 719 stores across the Netherlands, Belgium, Germany, Austria and Sweden, employing more than 3,500 people.

3i first backed the business in 2017. Under the GP's ownership, Nexeye has expanded into new markets, most notably with the acquisition of Eyes + More in 2019.

The seller said it also modernised the organisation, opened stores and "realised" a step change in omnichannel and digital innovation.

As a result, sales and Ebitda doubled during 3i’s holding period.

KKR will use its investment and previous expierence in the optical sector to expand Nexeye's optical and hearing care services within both existing and new markets, particularly focusing on customer service, product quality and innovation. 

ADVISERS

KKR
Jefferies (corporate finance)
UBS (corporate finance)
Kirkland & Ellis (legal)

3i
Harris Williams (corporate finance)
ING (corporate finance)
Clifford Chance (legal)

Goodwin Procter has hired Ian Keefe and George Weavil, joining the firm’s private equity practice as partners in its London office. The pair join from Travers Smith.

Keefe's advisory expertise ranges from leveraged buyouts, consortium deals and bolt-on acquisitions, to carve-outs, co-investments, minority deals, recapitalisations, divestments, distressed M&A, public-to-privates, reorganisations and restructurings. Weavil has extensive experience advising businesses and investors in identifying and assessing ESG-related risks and opportunities in the course of a transaction. 

The two join Goodwin Procter's expansive 80-lawyer UK private equity practice, covering M&A, private investment funds and debt finance. During the past 18 months, the London team has welcomed partners Jacqueline Eaves, Arvin Abraham and John Anderson to the group.

Growth-focused GP Synova has invested in Synectics Solutions, partnering with the founding Shanahan family.

Established in 1992 and headquartered in Stoke-on-Trent, UK, Synectics is a software and data services provider helping clients mitigate organised financial crime and money laundering.

Synova typically invests £15-150m into companies valued between £20m and £250m in the UK, Ireland and continental Europe, engaging in both majority and minority transactions.

The PE firm is currently investing Synova V, a £875m fund raised in 2022.

Synova said it will work with Synectics' CEO, Richard Wood, and the wider team to support the portfolio company's next phase of expansion and invest further in its technology solutions.

IK Partners has raised €505m for its inaugural continuation fund, IK Strategic Opportunities I.

The vehicle will fund the purchase of Yellow Hive, a Dutch insurance distribution platform that is currently part of the €550m IK Small Cap II Fund.

TPG GP Solutions, AlpInvest and Pantheon acted as co-lead investors for the transaction, alongside existing IK SC II Fund investors who will also invest in the new continuation fund. 

Founded in 2011, Yellow Hive (formerly You Sure) is a financial services intermediary for property and casualty insurances, employee benefits, risk assessment and mortgages, serving both small and medium-sized enterprises and employing a staff of 500.

For IK, which first invested in the business in November 2020, the sale represents the ninth exit from its IK SC II Fund.

The fresh cash will be used for international expansion, the private equity firm said in a statement.

BC Partners has exited German pharma contract development and manufacturing organisation (CDMO) Aenova Group in a trade sale to Kühne Holding. As part of the transaction, the sponsor will reinvest as a minority-stake shareholder. 

Financial terms were not disclosed.

BC Partners acquired the company from Bridgepoint in 2012 for €480m. The firm said it sourced the opportunity outside of an auction process. 

Headquartered in Starnberg, near Munich, Aenova Group has approximately 4,000 employees across 14 manufacturing sites worldwide.

Under the ownership of BC Partners, Aenova Group has developed into one of the 10 largest CDMOs in the world, the firm said in a statement. 

In 2023, the company earned pro forma revenue of €832m, representing an increase of 17% annually. 

Kühne Holding, based in Switzerland, holds a majority stake in Kühne+Nagel International and is the largest single shareholder of Hapag-Lloyd, Deutsche Lufthansa and Brenntag. It's owned by the German billionaire businessman Klaus-Michael Kühne.

According to Kühne Holding, it's enlarging its investment portfolio to include healthcare and pharmaceutical assets with this investment.

BC Partners has signed or completed nine liquidity events in the last 12 months, which have realised €8bn of value.

ADVISERS

BC Partners and Aenova
Jefferies (corporate finance)
Kirkland & Ellis (legal)

Kühne Holding
Allen & Overy (legal)

UK and Ireland PE firm BGF has invested £3.25m in Boxphish, a Leeds-based human risk management platform.

Founded in 2020, the portfolio company provides cybersecurity training courses, customisable phishing simulations and data analytics to mitigate the risk of falling victim to cyberattacks.

Commenting on the deal, Boxphish CEO Nick Deacon-Elliott said: “We’ve known BGF for a number of years and are now at a stage where partnering with an experienced, long-term minority investor with a strong track record of working with other regional tech companies is the right thing to do.”

BGF will use its funding and wider network to accelerate Boxphish’s product and commercial strategy.

As part of the investment, Andy Dancer has joined the board as non-executive chair following an introduction from BGF’s talent network. BGF Yorkshire and Northeast investor Rob Johnson, who led on the deal, will also join the Boxphish board.

BGF was set up in 2011 and has invested £3.9bn in more than 560 companies.

ADVISERS

BGF
Squire Patton Boggs (legal)
Tax Advisory Partnership (tax)

Management 
Walker Morris (legal)
KPMG

Spanish GP Nexxus Iberia has acquired a majority stake in Creaciones Marsanz.

The deal marks the first investment from Nexxus Iberia Private Equity Fund II, which held its final close on €241m earlier this year.

Founded in 1965 and based in Madrid, Creaciones Marsanz is a family-owned retail equipment manufacturer, including shopping carts, handling and logistics equipment, commercial shelving, entrance and exit devices, and checkout counters for national and international retailers.

The business had 179 employees by the end of 2023 and a turnover of €33m last year.

Established in 2016, Nexxus Iberia is the result of a partnership with Mexican alternative asset manager Nexxus Capital. It invests in Spanish and Portuguese small to midsized companies, and has fully invested its first fund.

The PE firm will look to grow the portfolio company through internationalisation, reinforcing its team and launching new products. 

Creaciones Marsanz joins Nexxus Iberia's current portfolio of companies, which includes Mirplay, OFG, Solutex and La Margarita.

ADVISERS

Nexxus Iberia 
Pinsent Masons (legal)
EY (commercial, financial and ESG due diligence, and tax)
Aon (insurance due diligence)

Creaciones Marsanz
Alanza DTE (corporate finance)
Garrido (legal) 

Mutares has acquired a majority stake in Sofinter Group.

Headquartered in Italy, Sofinter operates through four main brands: Macchi, which provides industrial and heat recovery boilers for the oil and gas sector; AC Boilers, a manufacturer of utility boilers and waste-to-energy/biomass boilers; Europower, an EPC and O&M contractor focused mainly on the waste-to-energy sector; and Itea, which is dedicated to the development and sale of plants.

With about 680 employees, the portfolio company generated revenues of more than €200m in 2023.

The investor will help to develop Sofinter’s service and aftermarket business, citing the portco’s “considerable” installed base of equipment worldwide.

Mutares added that it expects significant synergies between Sofinter and its other engineering and technology portfolio companies, including NEM Energy Group.

Swedish GP Neqst has exited DigitalRoute to Northern European b2b software investor GRO.

Founded in 2000 and headquartered in Stockholm, DigitalRoute provides usage data management software, with its main areas of application being billing and revenue management. 

The company has more than 200 employees across its nine offices around the world.

Neqst first backed DigitalRoute in 2008, and most recently had a 94% ownership stake in the portco, according to the seller’s website.

GRO, which has approximately €1bn in AUM, said it sees potential for the portfolio company to capture the opportunities in the “fast-growing market” for subscription and usage-based business models, which it believes are transforming “many industries”.

DigitalRoute added that GRO is the “ideal partner” to help it expand its offerings to new and existing customer segments, citing the investor’s track record of supporting B2B software companies at strategic and operational levels.

The partners behind GRO have been investors in more than 25 technology and software-related companies.

British Patient Capital has committed $50.8m to the third fund by Evolution Equity Partners, a cybersecurity-focused venture capital firm.

Evolution Equity Partners has raised $1.1bn for its latest vehicle. 

The UK is a “leading” cybersecurity hub in Europe, and Evolution’s investment strategy will capitalise on the strong investment opportunity that growing British companies within the sector offer, British Patient Capital said in a statement, citing the rationale for its investment. 

Recent investments by the firm include Quantexa, a global data and analytics software company that achieved unicorn status in 2023.

British Patient Capital’s investment follows a $35m commitment to Evolution’s second fund in 2020.

Managing directors Nick Keegan and Yusuf Hoballah have been inducted to Mayfair Equity's partnership.

Hoballah has been a member of the investment team since 2017. Prior to joining Mayfair, he was a member of Morgan Stanley’s private equity team, focusing on majority buyout investments in North America and Western Europe. 

Keegan joined Mayfair in 2018 as a specialist focused on value creation through marketing effectiveness, and joined having spent more than a decade advising brands at PE-backed communications consultancy Blue Rubicon. 

In addition, the firm has also appointed Maria Carradice to a new role to lead the delivery of Mayfair’s evolving data strategy.

Carradice currently serves as the managing director of ESG for the firm.

Following the launch of ListAlpha, a dealflow platform for investors that has been developed with support from Mayfair, the firm is increasing its focus on data. 

Mayfair Equity Partners invests in technology and consumer sectors and has AUM of more than £2bn.

Apiary Capital has closed its sophomore private equity vehicle on £240m, surpassing its original target. 

The announcement comes hot on the heels of Apiary’s divestment of entertainment business TAG, which marked its maiden exit. 

Speaking to Real Deals off the back of the fundraise, managing partner Mark Salter says: “Apiary had a benign experience on the road since we have a loyal investor base, a very high re-up rate of 83% from existing LPs, and commitments from new investors. Additionally, the strong appetite and positive sentiment among LPs towards the lower midmarket is another key reason why we were able to surpass our target.

"However, fundraising continues to be tough overall in the market, especially for emerging managers. These days, LPs are not necessarily looking to cultivate new relationships, but rather focus on managing existing relationships as liquidity remains tight. But a lot of data, especially in the US, points towards superior returns generated in the lower midmarket, which explains why some investors are continuously seeking new relationships in this segment.”

These days, LPs are not necessarily looking to cultivate new relationships, but rather focus on managing existing relationships as liquidity remains tight
Mark Salter, Apiary Capital

Apiary Capital Partners II, which set out to raise £200m, has already completed an investment in Carbon Underwriting, a tech-enabled managing general underwriter servicing the global insurance industry.

Some 60% of the fund’s LP base is American. The vehicle received commitments from endowments and foundations (25%), public and private pension funds (29%), consultants (3%), fund-of-funds (22%) and family offices (21%).

Overall, the fund has welcomed nine new LPs and tentatively aims at completing 10 deals.

Set up for success 

Apiary’s oversubscribed vehicle comes against the backdrop of a sluggish fundraising environment. 

According to Salter, a couple of things ensured their success, namely Apiary’s "clear and focused" investment strategy, the quality of its team they have built since establishing the business in 2017 and most importantly, its discipline in staying in the lower midmarket.

Nikola Sutherland, chief operating officer at Apiary, elaborates: “Our second fund is 20% bigger than our inaugural vehicle, which was raised in 2018. We have deliberately kept the fund size in that range to demonstrate our commitment to the lower midmarket.”

Our second fund is 20% bigger than our inaugural vehicle, which was raised in 2018. We have deliberately kept the fund size in that range to demonstrate our commitment to the lower midmarket
Nikola Sutherland, Apiary Capital

Salter, who previously served as a senior partner at Bowmark Capital, also stresses the importance of diversity and ESG in the fundraising process. 

“LPs are seeking limited but strong relationships and are not in a rush to commit. In our experience, the presence of an established ESG strategy and a diverse team can improve a GP’s chances of winning a commitment,” he explains. 

The managing partner adds: “To anyone in the industry who is looking to raise capital at the moment, I’d advise having a clearly defined investment strategy and being prepared for the fundraising to take a bit longer.”

Apiary Capital invests in business services, financial and technology services, healthcare and education.

ADVISERS

Rede Partners (placement agent)
Proskauer Rose (legal)

Raymond James has expanded its private capital advisory investment banking practice with the hires of four senior bankers. The appointments were made between February and April. 

Callie Kourniotis, Guy Hume and Michael Henningsen have joined the team as managing directors, in addition to Ash Rajah who joins as a director. 

Kourniotis is based in New York while Hume, Henningsen and Rajah are all London-based.

Kourniotis joins Raymond James from Credit Suisse where she worked as a senior distribution banker in the firm’s private fund group. She has more than 18 years of experience in private equity. 

Hume joins the financial services firm from Nomura where he led the EMEA financial sponsors group. His previous stints also include Deutsche Bank and UBS.

Michael Henningsen comes to Raymond James from Pophouse Entertainment where he was the head of client relations, having started his career at UBS.

Rajah joins Raymond James from Fairview Capital Group, prior to which he was at Pantheon Ventures and The Abraaj Group. 

The private capital advisory group was established at Raymond James in 2021 through the acquisition of Cebile Capital.

Triton has exited its stake in EQOS, a specialty installation and service company of critical infrastructure.

The sale – to Eiffage Énergie Systèmes – comes after a 10-year holding period.

While Triton decline to comment on returns, a source familiar with the deal said the exit has generated an almost 4.8x return on Triton’s investment.

Headquartered in Luxembourg, EQOS (formerly known as Alpine Energie) clocked up sales of close to €459m last year and employs a staff of 1,700. The company provides turnkey solutions to maintenance in the areas of power grid, energy, mobile communication and railway.

Triton’s rationale for the investment in 2014 was to provide capital to support restructuring of the company and recapitalise the balance sheet.

According to Triton, the private equity firm made a “series” of improvements to the company’s strategy, leadership and culture, finances and operations. Non-core entities were disposed and strategic M&A was used to complement the company’s service portfolio, the firm said in a statement. 

Additional value creation levers also saw EQOS publish its first compact report with International GRI alignment under Triton's ownership.

EQOS will enable Eiffage Énergie Systèmes to enter the energy infrastructure market, particularly in Germany and Austria, said Ludovic Duplan, chairman of Eiffage Énergie Systèmes.

In May 2023, Triton Fund IV, which initially invested in the company, divested EQOS, along with three other companies, to its €1.63bn Triton IV Continuation Fund.

ADVISERS

Morgan Stanley (corporate finance)

Linklaters (legal)

Trill Impact has invested in TT medic, a medtech development and manufacturing business.

Headquartered in Austria, the portfolio company was established through the gradual combination of three family-owned businesses in the DACH region (GOLLER Systems, Renggli and J. Söllner).

It is now active in precision medical injection molding, specialising as a contract development and manufacturing organisation (CDMO) in clean-room processing of polymer components.

TT medic caters its products to several indications and therapeutic areas, including minimally invasive surgery, wound care, surgical sealants, drug delivery and ophthalmology. 

Stockholm-based impact house Trill, which has about €1.2bn in assets under management, said it was impressed by TT medic’s position as a fully integrated partner for its medtech global OEM customers, as the portfolio company covers almost the entire value chain.

UK midmarket GP Palatine has exited NRG Riverside to infrastructure investor Astatine Investment Partners.

Headquartered in Skelmersdale, NRG Riverside leases and maintains specialist vehicles, such as waste collection trucks, to local authorities and private companies in the UK.

Palatine originally acquired a majority stake in NRG Group in October 2020.

The PE firm then separated NRG Riverside from its former sister company Direct Tyre Management, which remains part of the Palatine portfolio.

The GP appointed new management teams, allowing both businesses to focus on delivering independent sales strategies, digital roadmaps and operational efficiencies.

Palatine said NRG Riverside has made "significant" strides in workforce training, development and retention following a period of significant investment in its people and operations.

As a standalone company, NRG Riverside has seen revenue grow more than 50% since Palatine’s investment, according to the PE firm, while employee numbers have increased to more than 220.

Looking ahead, Palatine noted that NRG is now "well positioned" to capitalise on "compelling" market dynamics, including zero-emission fleets.

ADVISERS

Palatine
Deloitte Corporate Finance (corporate finance)
Gateley (legal)
PwC (financial due diligence)

CapMan has sold Havator Group to the joint venture BMS Stangeland, which is owned by the Danish–Norwegian crane operator BMS Group and Stangeland Gruppen.

As part of the deal, the joint venture has acquired the portfolio company's entire capital stock from CapMan's Buyout IX Fund and Havator’s other current owners. 

Established in Finland in 1956 and backed by CapMan since 2010, Havator Group provides lifting, special transport and heavy haulage services. It has a turnover of about €100m and employs approximately 500 people.

Havator CEO Hannu Leinonen said: "A Nordic consolidation is something our industry has been expecting. The new setup will allow Havator to leverage an even stronger and broader service offering to its clients and also offer more uniform services to clients operating on a Nordic scale.

"Joining a pan-Nordic company will also offer our personnel an even more international outlook towards the future, combined with growing opportunities to develop competencies and careers. I am also pleased that our new owner is a true industrial player."

For Munich-based private equity firm EMH Partners, Asia will be one of the focus areas for expansion of its portfolio company Stonebranch, partner Jens Zuber tells Reals Deals. 

EMH Partners made an undisclosed investment for a “significant” minority stake in Stonebranch, a provider of service orchestration and automation solutions earlier this month.

According to the German private equity firm, the investment will be used to support organic growth, platform enhancements and geographic expansion.

Based in Frankfurt and Georgia, Stonebranch assists enterprise customers with transitioning their IT environments. The Stonebranch Universal Automation Center (UAC) empowers enterprises to centrally automate and orchestrate workloads across on-premises, cloud and hybrid IT environments. IT operations, developers, data teams and cloud operations groups leverage UAC to collaborate and innovate within a single future-proof platform.

Founded in 1999, Stonebranch serves a global customer base of 350 blue-chip enterprise clients.

For EMH Partners, the fact that the company is “well positioned" in the highly attractive service orchestration and automation market, with double-digit annual growth rates and "a history of record bookings", served as motivation for pursuing the deal.

Deal origination 

According to Zuber, EMH Partners has been tracking the software company for “several” years. He explains:  “As a result of our thematic sub-sector sourcing approach, we were able to originate a bilateral deal situation. Our engagement [with the company] intensified towards the beginning of 2023."

Zuber, who was previously the deputy head of TMT at EQT, emphasises that deal sourcing and realisation did not happen “overnight” but instead followed intensified engagement and bilateral discussion over several months.

He stresses that the EMH team was able to position itself as a value-adding partner to Elvaston and the management team for a couple of reasons. These include the firm’s ownership track record with transatlantic technology companies (Brainlab, Native Instruments, Acrolinx, Cleverbridge), deep industry expertise (with several senior industry execs advising EMH during the transaction) and ongoing dialogues and meetings with co-shareholders, managing partners and the CEO to build trust and mutual understanding on value creation.

As a result of our thematic sub-sector sourcing approach, we were able to originate a bilateral deal situation
Jens Zuber, Stonebranch

On the value creation front, Zuber adds that the firm’s 100-day plan will include initiatives around driving organic growth via platform enhancements and geographic expansion.

Stonebranch operates in the enterprise market space with an expectation of growing market share via discrete use cases across archetypes and orchestration functionalities. Going forward, the German GP says its growth will be driven by structural trends such as back-office automation, AI, expanding workload automation (WLA), and cloud migration.

“Substantial” market growth is expected in the non-mainframe WLA submarket, according to Zuber, a trend the firm is looking to capitalise on by way of its latest investment. 

The sub-market grew by more than $1.9bn in 2023 and is expected to grow at 15% annually until 2028, states EMH Partners.

As part of the transaction, Berlin-based Elvaston Capital – which acquired the company in 2017 – will retain its majority stake. 

The deal was funded by EMH Growth Fund II, which closed in 2020 on €650m (excluding co-investments).

ADVISERS

Milbank (legal)
Code & Co (tech and product due diligence)

INVL Asset Management's second fund could become the largest in the Baltics, with a particular focus on the region, but with fundraising and investment ambitions that extend more broadly, managing partner Deimante Korsakaite tells Real Deals.

Targeting €250m with a hard-cap of €400m, INVL Private Equity Fund II expects a first closing at around €125m by the end of the year.

INVL Private Equity Fund II expects continued support from institutional Baltic-based LPs, including pension funds and high-net-worth individuals from Lithuania, Latvia and Estonia. But from further afield too.

The fund aims to attract European investors, following other funds in the GP portfolio like the forestry-focused INVL Baltic Forest Fund I, backed by investors from Greece, Slovenia and the Baltics, Korsakaite explains.

“We expect INVL Private Equity Fund II to be supported not only by regional investors but also by a range of LPs from other European Union countries,” Korsakaite points out.

“We believe that INVL Private Equity Fund II will be the top choice for local and foreign investors who understand our region, the opportunities it presents and are willing to invest in companies operating in the market with sound plans for rapid growth,” the investment professional adds.

The fund’s predecessor INVL Baltic Sea Growth Fund enjoyed the support of a large European LP – the European Investment fund (EIF), which has historically supported the development of the Baltic market, investing in a range of GPs and funds within the region. 

We believe that INVL Private Equity Fund II will be the top choice for local and foreign investors who understand our region, the opportunities it presents
Deimante Korsakaite, INVL Asset Management

Launched this month, Private Equity Fund II began operations after receiving approval by the Bank of Lithuania.

INVL Private Equity Fund II seeks minimum LP investments of €10m.

Exploring new sectors 

INVL Private Equity Fund II eyes opportunities in the Baltic States, but as with its hunt for LPs, they’re also on the lookout for investment opportunities in the wider region.

“The mandate covers the whole European Union so technically, an investment can be made anywhere within a EU country,” Korsakaite points out. 

Succeeding the  €165m INVL Baltic Sea Growth Fund, INVL Private Equity Fund II will be managed by the same team and will target sectors such as waste management, combating climate change, healthcare and food processing.

“These sectors are more resilient to economic downturns. Particularly, the recycling sector is thriving due to an increase in waste generation, making it crucial from an ESG perspective,” she adds.

A variation to the old fund will include a new additional focus towards investments in the technology and the defence fields, Korsakaite reveals, as they continue to grow in importance among PE investors. With ticket sizes between €15m and €35m, the fund seeks to build a diversified portfolio of 10-12 investments and is currently evaluating opportunities. 

“We have been very active and expect to complete a number of deals right after the first closing. In the meantime, we are continuing the deployment of our growth fund,” the investment professional explains.

The net internal rate of return of the INVL Baltic Sea Growth Fund at the end of 2023 was 26%, with a money multiple of 1.9x. Current companies in its portfolio include Eco Baltia, InMedica, Eglės sanatorija or Galinta.

Spreading ESG knowledge

As a light-green Article 8 fund, INVL prioritises ESG in due diligence. “As part of a 100-day plan, we agree with companies on a set of certain ESG KPIs that we want to achieve,” Korsakaite highlights. 

KPIs can be straightforward, aiming to reduce water and energy losses. “These steps improve cost-efficiency and governance, laying a strong foundation for sustainable growth. It's a risk management tool, not just regulatory compliance,” she notes.

As part of a 100-day plan we agree with companies on a set of certain ESG KPIs that we want to achieve
Deimante Korsakaite, INVL Asset Management

When asked about the sluggish exit and fundraising European environment, Korsakaite remains cautiously optimistic:  “I call it the wheel of life, as everything is related. Last year, exits were stalled until capital came back to LPs at a slower pace; as a consequence, the PE landscape is currently facing a lack of capital but I believe that the market will evolve during the year,” she concludes.

Established in 1991, INVL Asset Management is part of the Invalda INVL group.

The group manages more than €1bn of assets across multiple asset classes including private equity, forests and agricultural land, renewable energy and real estate, as well as private debt. 

Its scope of activities also includes family office services in Lithuania and Latvia, management of pension funds in Latvia and investments in global third-party funds. 

After a six-year hold, Main Capital Partners has sold Dutch-based healthtech company Enovation to Legrand, a French specialist in electrical, digital building infrastructures and digital care solutions.

While financials of the transaction were not disclosed, a spokesperson told Real Deals that the return is more than the firm's average of 4x.

The sale reportedly values the company at more than €500m, according to Bloomberg. 

According to the sponsor, the exit is the largest in the firm's 20-year history in terms of enterprise value. 

Established in 1983, Enovation is an international IT company that connects people, systems and healthcare organisations working at the intersection of technology and healthcare. 

Main invested in the company in 2018. During its holding period, Enovation transformed from a secure communication and information-exchange vendor in the Dutch healthcare market to a European connected-care and e-health platform provider serving almost 20 countries employing a staff of 300. 

The GP also supported the company in making eight add-on acquisitions and increasing its international footprint across Northwestern Europe. This, along with other value-creation levers, saw the company’s revenues grow nearly three times. 

Benoît Coquart, Legrand’s chief executive, said the deal represents another investment that’s at the “heart of buoyant trends”.

This article was updated to reflect financial figures.

Ardian has exited its majority stake in Audiotonix to PAI Partners

The deal will see the latter acquire a majority stake and become the largest shareholder in Audiotonix, with Ardian retaining a minority stake alongside management.

Headquartered in the UK, Audiotonix specialises in designing, engineering and manufacturing products that enable sound quality for a variety of formats, from live tours and concerts, theatre shows and major international live events, to TV, film, music recording, sporting occasions and places of worship. 

Audiotonix’s products have been used on global tours by artists including Coldplay and U2, at major sporting events including the Super Bowl and FIFA World Cup, and in venues such as the Las Vegas Sphere.

Audiotonix distributes its products through an international network of more than 400 distributors and partners in more than 90 countries worldwide, with a sizeable footprint in North America.

Audiotonix was acquired by Ardian in March 2020 and has since completed five strategic acquisitions.

PAI’s investment will support Audiotonix’s R&D capabilities, drive organic growth and pursue strategic M&A opportunities across the audio ecosystem, the firm said in a statement. 

ADVISERS

Ardian
Goldman Sachs (corporate finance)
Allen & Overy (legal)

PAI
Weil Gotshal & Manges (legal)
McKinsey (commercial due diligence)
Alvarez & Marsal (financial due diligence)

Audiotonix
Liberty Corporate Finance (corporate finance)
Macfarlanes (legal)

IK Partners has picked up a minority stake in A-Safe through its IK Partnership II Fund, which closed on €335m in 2022.

The deal represents the final transaction for the minority stakes fund, which is now fully deployed. 

Founded in 1984 and headquartered in Yorkshire, A-Safe produces a range of polymer-based products that are deployed in factories and warehouses across the world to safeguard people and assets from collisions with vehicles such as forklifts. The company has a staff of 700.

The founder-owned business serves more than 6,000 customers in 50 countries, with clients including Coca-Cola, UPS and Amazon. 

HSBC served as the sole financial adviser to A-Safe.

This story was updated on 26 April to reflect advisory information.

Spacetech investor Seraphim Space has held the first close of its new venture fund, Seraphim Space Ventures II (SSV II).

Investing at seed and Series-A stages, the new fund will look to invest in the application of artificial intelligence to satellite data, the merging of terrestrial and space-based communications networks, and space-based networks for on-orbit edge compute, communications and data relay.

James Bruegger, chief investment officer and general partner at Seraphim Space, said: “Investors are increasingly recognising spacetech’s outlier potential, with record numbers of VC investments being closed every quarter. This stands in stark contrast to the recent contraction in investment activity in the wider VC market."

He continued: “With a 10-fold increase in the number of satellites in orbit anticipated over the coming decade and the cost for both launching to and returning from orbit continuing to fall, we believe that the impact of spacetech will reshape much of the world as we know it.”

Following the same strategy of its original spacetech-focused venture fund, SSV II is aiming to build a portfolio of approximately 30 companies.

SSV II has already made nine investments, including Hubble (internet-of-things satellite constellation for connecting directly to Bluetooth-enabled devices), Delos (space data-powered wildfire home insurance provider), ATMOS (space cargo return service for life sciences), and Auriga (electro-magnetic launch system).

Seraphim Space launched its first venture fund focused on spacetech in 2016.

The investor has backed more than 120 spacetech companies in 27 countries worldwide, which collectively have raised more than $3bn in funding. 

Notable investments include ICEYE, HawkEye 360, LeoLabs, D-Orbit, Spire Global (NYSE:SPIR), Voyager, AST SpaceMobile (NASDAQ:ASTS) and Tomorrow.io.

Global investment firm KKR has invested in Impilo-backed Immedica Pharma through its $4bn KKR Health Care Strategic Growth Fund II.

Nordic healthcare investor and existing owner Impilo will reinvest to become an equal owner alongside KKR.

Established in 2018 by Impilo and the management team, Stockholm-based Immedica Pharma is a pharmaceutical company focused on the commercialisation of medicines for rare diseases and specialty care products. 

The business has built up a portfolio of drugs primarily within haematology and oncology, as well as genetic and metabolic diseases for rare conditions. It has revenues of €100m and annual growth of more than 50%.

Growth catalysts have included a series of in-licensings and acquisitions of drugs for orphan and niche conditions, as well as the organic development of a pan-European and Middle Eastern launch and commercialisation organisation with approximately 100 employees, supported by the corporate headquarters in Stockholm.

KKR and Impilo will work on Immedica’s launch of the recently approved ultra-orphan drug Loargys, additional pipeline assets, and continued in-licensing and M&A. 

The company is also evaluating an expansion into the US ahead of the regulatory filing and potential approval of Loargys by the US Food and Drug Administration.

KKR has invested approximately $20bn in the healthcare sector since 2004.

ADVISERS

KKR
BofA Securities (corporate finance)
Gibson Dunn (legal)
Setterwalls (legal)
Cooley (legal)
Alvarez & Marsal (financial due diligence and tax)
PwC (financial due diligence and tax)
Clearview Healthcare Partners (commercial due diligence)

Impilo
Morgan Stanley & Co. International (corporate finance)
Latham & Watkins (legal)
Mannheimer Swartling (legal)
PwC (financial due diligence and tax)
BCG (commercial due diligence)

The flow of capital into European private credit during the last 10 years has been extraordinary. Focusing on the direct-lending segment of private credit, covering both senior and unitranche strategies, assets under management (AUM) were a cumulative €3.0bn in 2010. 

To illustrate the relative size of this source of capital for European SMEs, in 2010 it represented just c.0.7% of the outstanding SME loans across the UK, France and Ireland (by way of a reference sample). 

By 2020, this relative measure had increased to c.23% or c.€135bn in AUM. By June 2023, AUMs had expanded by a further 45% to c.€197bn. That represents a compound annual growth rate of c.38% or a 65x multiple of AUMs since 2010. 

While these growth numbers are extraordinary and represent a very real form of new supply of debt capital to European businesses, the headline numbers mask an asymmetry of distribution of this capital among the various parts of the market. 

We would broadly define four distinct parts of the direct lending market in Europe with the following transaction size characteristics:

Lower midmarket (LMM)
Ebitda: €2-10m
Typical leverage: 3.0-4.0x Typical deal size: €10-25m 

Midmarket
Ebitda: €10-25m
Typical leverage: 4.0-5.0x
Typical deal size: €50-100m

Upper midmarket
Ebitda: €25-75m
Typical leverage: 4.0-5.5x
Typical deal size: €150-250m

Large-cap
Ebitda: >€75m
Typical leverage: 4.0-6.0x
Typical deal size: >€250m

Defining these market segments is important as it allows for some consideration of where the majority of the €197bn of direct lending AUM has been or will be deployed. It is worth noting that dry powder balances stood at c. €46bn in June 2023. Some interesting facts to frame the discussion:

Average fund size for European direct lending has increased from €450m (across seven funds raised) in 2013 to €1.5bn (16 funds) in 2023. 

Of the 16 direct lending funds closed in Europe in 2023, eight or 50% (42% in 2022) were under $500m in size with cumulative AUM of c.$2.3bn, representing just 9.4% of total AUM closed in 2023 ($2.5bn or 7.7% in 2022).

Kroll recently noted that 45% of all deals completed in the 2nd half of 2022 were greater than €100m in size. Given the ever-increasing size of direct lending funds, it is not surprising that average transaction sizes are increasing as managers seek to deploy ever larger amounts of capital within defined investment periods.

In a recent survey, law firm Proskauer engaged with c.50 private credit firms in the UK / EU and 178 firms globally. Some 13% of respondents indicated that their maximum deal size was under $50m and 17% of respondents indicated that the average Ebitda level of portfolio companies was less than $15m, suggesting that a large proportion of market participants are focused on segments other than the LMM.

Deloitte, in its spring 2024 issue of the Private Deal Tracker, noted that less than 20% of deals in Europe were in support of sponsorless deals. That number is considerably lower in the UK at c.10%. While PE activity is robust in the LMM, it touches only a fraction of the c.237,000 medium-sized enterprises across the UK / EU.

Given the ever-increasing size of direct lending funds, it is not surprising that average transaction sizes are increasing as managers seek to deploy ever larger amounts of capital within defined investment periods

What is evident from the above is that most of the direct lending capital raised in recent times is not focused on the LMM. This implies limited relative supply as compared to the other segments of the direct lending market. Demand for capital remains robust, as evidenced by record dry powder in private equity funds and the ongoing demand for debt capital from LMM borrowers across the UK/EU who are no longer adequately served by traditional banks in their domestic markets. 

Common misconceptions about the LMM include:

More competition: To the contrary, as outlined above, there is less competition for transactions given the notably smaller number of managers focused on the LMM. The white space in the LMM has only grown during the last five years as larger private credit managers continue to get larger with only a limited few remaining steadfast in their focus on the LMM. Market bifurcation is clearly very evident in European direct lending. Further, given the nature of the European market, being a collection of individual legal jurisdictions, competition by geography in the LMM can also vary substantially with very attractive, underserved markets, throughout the region. European banks, which provide c.70% of funding to the LMM, continue to pull back because of changes in regulation including the impact of the Capital Requirements Regulation and Capital Requirements Directive.

Higher risk: Smaller means riskier. Size of the borrower is often cited as the key risk associated with LMM lending, given the conflation of default risk with size, but there is limited data to support the assertion that size alone is a key indicator of the likelihood of default. The accepted drivers of default risk are business risk and financial risk. Business risk includes internal factors such as management quality, corporate governance, operating efficiency, profitability, cashflow conversion and external factors such as country- and industry-specific risks. Financial risk is the quantitative and qualitative assessment of a borrower’s ability to service and repay loans. Financial risk can be assessed by a company’s cashflows, liquidity, earnings and asset quality. So, while size alone is not the key driver, there is little doubt that default risk is positively correlated with leverage, particularly in a high(er) interest- and inflation-rate environment.

What differentiates LMM lending from other segments of the direct lending market?

The LMM product offering is not treated by borrowers, be they financial sponsors or owner managers, like a commodity to be defined only by its cost. Rather, its value is seen initially as delivering certainty of execution with a trusted partner and subsequently as an enabler of enterprise-value growth.

Relationships matter – close relationships between borrowers and lenders with alignment of interests engrained not only in underlying loan documentation but also longevity of relationships between market participants are crucial.

Diligence underpinning a transaction is extensive with material input from lenders as to the scope of such diligence. Access to management teams is facilitated from the outset, allowing LMM lenders to get much closer to the inner workings of their potential borrowers. This is a critical success factor in underwriting as it allows a more forensic approach in determining what might go wrong in an underlying business.

Lender protections in loan documentation are extensive and materially stronger than those found in the larger parts of the direct-lending market. Financial covenants are more extensive, are set with less headroom against a robust financing case (with growing Ebitda) and with less scope for manipulation via adjustments to Ebitda. Additional debt incurrence is very limited, as is scope for asset leakage/stripping that might undermine recovery values in a workout scenario. It is interesting to note that 42% of respondents to the Proskauer 2024 survey indicated they would consider covenant-‘lite’ transactions. These were global respondents and when focusing on UK / EU direct lenders that number falls to 29%.

As discussed above – the underlying borrower is characterised as having Ebitda and turnover of less than €10m and €50m respectively. A positive factor worth considering in the context of size is the relative complexity of workout scenarios with such borrowers. While no workout is very straightforward and requires the adept application of skills gained only via experience, high recoveries and thus low loss given defaults are greatly aided by a lender’s ability to quickly assert control over all aspects of a borrower’s business. In this context, smaller businesses with less structural and operational complexity lend themselves to relatively more successful workouts.

Less leverage and higher pricing leading to compelling relative risk-adjusted returns with margins per turn of leverage typically in excess of 200bps. This is of course before considering reference rates (SONIA or EURIBOR), which would result in a coupon (margin plus base rate) per turn of leverage in many cases of above 300bps. These levels are above those available in other segments of the direct lending market and indeed the public high yield and leveraged loan markets.

Unique opportunity

There is a very clear structural supply/demand imbalance that exists in favour of direct lenders, particularly those active and experienced in deploying capital in the European LMM. This presents a unique opportunity for private credit investors who are prepared to look past some of the common misconceptions associated with LMM lending. 

Size alone is not a driver of default risk and while there is certainly data to support that borrowers in certain industries and with particular financial profiles are more prone to default, these are factors that an experienced LMM manager can identify early and use to frame their selection process. 

True alpha and compelling risk-adjusted returns can be generated by an experienced LMM manager with the skillset to originate and underwrite high quality credits from the vast opportunity set that exists in the LMM. A manager’s track record and, in particular, success in achieving high margins per turn of leverage together with low default and, in the event of something going wrong, high recovery rates, will demonstrate their ability to deliver on these often overlooked and underappreciated aspects of LMM direct lending. l

Ross Morrow is a co-founder and executive director of DunPort Capital Management, a specialist LMM lender operating across Ireland, the UK and the Benelux markets

The title of the recent Irish Funds publication, Why Ireland?, posed more than just a rhetorical question for the global alternatives industry.

The numbers quoted by the report are impressive: $6.1trn in total assets under administration; more than 1,000 fund promoters; 13,677 total funds, with 8,870 Ireland-domiciled funds and 21% of those funds focused on alternatives. Ireland was the first regulated jurisdiction to provide a regulatory framework for the alternatives industry, and Irish funds are sold in 90 countries across Europe, the Middle East and Africa, the Americas, and Asia-Pacific.

Beyond the numbers, however, Ireland’s role in the alternatives industry is expanding in critical ways, as fund managers, trusted service partners and fintech companies seize opportunities and address the rapid transformation of asset servicing and fund administration.

With a strong educational system, highly skilled workforce and 17,000 funds professionals already working, Ireland is increasingly the location of choice for global firms establishing management companies and operational centres to oversee existing funds or launch new ones, whether they are domiciled in Ireland, Luxembourg, or other European Union countries.

Fintech hubs

We’re seeing a significant increase in fintech hubs developing products to address new risk, regulatory, reporting and compliance demands across global jurisdictions. Ireland’s Fintech Steering Group, launched in 2020, has promoted innovation, spurred cross-border discussions and collaboration and helped shape policy regarding the development and broader use of fintech.

There are significant opportunities and support for smaller, nimble fintech firms delivering products, including blockchain and digital asset services, digital banking and payments, and cross-border payments. With further support from Enterprise Ireland, it’s likely these firms will continue to get the support they need to deliver change.

Exploring the potential for AI remains a priority for the EU and Ireland-based firms. As part of the European Commission’s Digital Europe Programme to shape digital transformation, four European Digital Innovation Hubs are operating in Ireland. The hubs are supporting digital transformation by encouraging the adoption of cybersecurity technology, AI and high-performance computing, as well as providing access to technical expertise, innovation services, training and skills development. 

Ireland’s Fintech Steering Group, launched in 2020, has promoted innovation, spurred cross-border discussions and collaboration and helped shape policy regarding the development and broader use of fintech

The European AI Act has flagged concerns about AI applications that carry risks for safety, livelihoods and rights of EU citizens. It’s not yet clear if the EU will drive global standards similar to the US and UK, which have put growth and innovation at the centre of their AI strategies. It’s clear that fund managers and their partners – including MUFG Investor Services – already are well down the road to identifying ways to use AI to improve operational efficiency, reduce risk and cost, drive greater value and improve results. 

Staffing challenges

Ireland’s rapidly growing reputation as an operations centre also presents significant challenges, primarily in recruiting, training and retaining staff. With more than 200 management companies in Ireland, competition for experienced employees is intense considering the country’s low unemployment rate and competition from larger firms or fintech startups.

And as the industry becomes more automated and data-driven, few objectives are more important than hiring colleagues who can manage those systems, identify potential failure points and create solutions. Increased training is vital to retain those colleagues and remain competitive. 

What next?

Given the increased role of funds and growth of the financial services industry in Ireland, the natural question becomes: What happens next?

Along with the Why Ireland? report, industry stakeholders have been closely reviewing the Update to Ireland for Finance, released in March by the Irish government. The report identifies six themes to improve the environment for financial services and improve competitiveness: sustainable finance, fintech and digital finance, diversity and talent, regionalisation and promotion, and operating environment.

While the report provides a solid long-term view, there are short-term steps that can be taken to bolster Ireland’s presence in alternatives. Ireland was at the forefront of providing a regulated framework for alternatives and leads the way in ETFs, but it has struggled to attract flows in alternatives compared to Luxembourg, its biggest competitor in Europe, where GPs are launching more alternative structures than any other jurisdiction. In fact, Luxembourg benefits from flexible structures on offer – either regulated or unregulated products to meet the needs of GPs and LPs – and Ireland lags in providing similar solutions.

The Investment Limited Partnership (ILP) was launched several years ago and although it was a move in the right direction, uptake has not been as forthcoming as with Luxembourg fund products. ELTIF 2.0 may give Ireland a better chance to compete, although the majority of ELTIFs launched to date have been domiciled in Luxembourg.

Looking to the future, one of the keys to expanding the number of Ireland-domiciled funds – in particular, an increased share of the alternatives market – will be increased collaboration between industry firms and Irish regulators to find a regulatory balance that protects investors while also giving the industry greater flexibility to introduce and support new products.

David Rochford is co-location head for Ireland and global head of public markets at MUFG Investor Services

Eurazeo has acquired Eres Group following an exit from IK Partners for an undisclosed amount. 

According to the firms, “definitive financial information will be disclosed once the transaction has been completed”.

Established in 2005, Eres is a French player in the advisory and structuring, asset management and distribution of employee profit-sharing plans, retirement schemes and employee shareholding plans. 

Headquartered in Paris, Eres distributes its products through a network of more than 6,600 distributors, including wealth management advisers, insurance brokers and accountants.

The investment from Eurazeo is expected to enable Eres to further consolidate its position, the firm said in a statement.

The private equity firm has invested nearly €3bn in financial services to date.  

IK Partners, which is selling its stake through this deal, invested in the company in 2019 through its €1.85bn IK VIII fund.

Between 2018 and 2023, the group’s assets under management increased from €2.4bn to €6.7bn.

Under IK’s leadership, the company improved its operational efficiency through strategic headcount growth, strengthened its commercial team, achieved inorganic growth with a “series” of successful acquisitions and digitalised its product offering, the firm said. 

Rémi Buttiaux, managing partner at IK Partners, said Eres almost tripled in size during their five-year partnership.

ADVISERS

Wil Consulting and FIG Partners (corporate finance)

McDermott Will & Emery (legal)

Fund managers expect alternative asset classes to see the biggest increase in fundraising this year, according to new research from Carne Group, a provider of fund regulation and governance solutions for the asset management industry.

Research commissioned by Carne Group tapped 200 senior executives working for fund managers in the UK, US, Germany, Switzerland, Italy, France, the Netherlands, Norway, Finland and Denmark, with a total $1.6trn of assets under management. The fund management sectors covered included hedge funds, private equity, real estate, infrastructure, private debt, equity and fixed income.

When asked to select the top five asset classes they expect to see the biggest increase in fundraising in 2024, private equity came top, followed by renewable energy, hedge funds, private debt and real estate.

In a separate study that looked at wealth managers and institutional investors including pension funds, insurers and family offices, 71% said they expected their organisation to increase their allocation to private equity by 10% or more in 2024. Some 70% said the same about their allocation to private debt.

However, a big challenge for alternative fund managers is an expected increase in consolidation in their markets, driven by fundraising challenges and increasing regulatory costs. During the next five years, 69% of fund managers surveyed expect the level of consolidation in the private equity sector to increase.

Epiris has appointed Mike Ebeling as a partner in its investment team.

Ebeling will join the firm’s executive and investment committees, and work with Epiris’s established investment team to deploy Epiris Fund III, which held its final close in February on £1.044bn. 

He joins Epiris having spent 15 years at Goldman Sachs Private Equity, latterly as a managing director leading the firm’s investment teams in the DACH and Benelux regions. He previously worked at Clayton, Dubilier & Rice, and started his career at J.P. Morgan. 

Epiris targets positions in UK and international businesses with an enterprise value of £75-500m, deploying between £40m and £150m of equity in each investment.

The effects of inflation have taken their toll on portfolio companies’ margins, much to the frustration of GPs, which are having to extend holding periods to avoid selling assets at a suboptimal price.

This comes at a time when many portcos are due to repay debts used in the initial leveraged deal, prompting refinancing discussions between PE firms and lenders.

In steadier markets, refinancings were easier to come by for GPs, as they could get more leverage at a profit multiple similar to the one secured in the initial term without it costing the investor materially more.

However, a desire by central banks to manage inflation has, naturally, seen interest rates increase several times.

Consequently, investors struggled to find leverage in last year’s choppy financing markets, with banks less confident in growth compared to preceding years. And any full refinancings structured by those prepared to lend would see businesses tied down to far more expensive debt and incur transaction costs, watering down a GP’s return. But that was last year.

Dumb luck

Bill Sacher is partner and global head of private credit at Adams Street Partners, which, among other strategies, provides debt in PE-backed midmarket transactions. He says that while underlying base rates haven’t changed that much, spreads have tightened.

“Conditions have improved and financing rates have come down. That is spurring, frankly, a bit of a refinancing wave in Europe. Not only are we seeing refinancings of upcoming maturities, but we’re actually seeing opportunistic financings,” says Sacher.

“PE sponsors have more options than they had just six or 12 months ago, as the financing markets have become very robust and are more comfortable to lend now, both on the broadly syndicated loan side where the banks participate, as well as on the private-credit side.”

The global head of private credit attributes the improvement in conditions to market psychology, or, more specifically, investor optimism: “There is an expectation that inflation will continue to moderate – and objectively it has – and that interest rates will eventually start to come back down. That is a forward-looking view that remains to be seen, but the market is operating as if that is the scenario that’s going to play out.”

Of course, the number of options PE sponsors have to deal with the refinancing conundrum varies, depending on, for instance, when debt was first issued and how much leverage was involved, as well as the nature of the underlying business.

“If an excellent company with a healthy balance sheet wants to refinance its senior debt, now it can do so at a lower cost of capital compared to last year,” says Martino Ghezzi, partner at European private debt firm Park Square Capital.

Stable businesses with high levels of recurring revenue and low churn rates in sectors that are not particularly cycle-prone – healthcare, defence, non-discretionary consumer – are thought to fare better with refinancing opportunities. Bonus points are awarded if they have been around for some time and offer something differentiated.

If an excellent company with a healthy balance sheet wants to refinance its senior debt, now it can do so at a lower cost of capital compared to last year
Martino Ghezzi, Park Square Capital

The Park Square partner also highlights “excellent” companies that are over-levered, whose capital structure was put in place in a zero rate environment. “Over the past 15-18 months, we have seen a lot of demand for de-leveraging transactions,” says Ghezzi.

“This is something Park Square knows very well because we do preferred equity and PIK-loan financings that have this exact purpose: to de-lever the balance sheet, reducing the debt that has a cash pay coupon, so the operating cashflows of the business are more than enough to serve the interest expense.

“The equity sponsor is happy because it sees it as a solution for the fact that it’s a bit over-levered, and the preferred equity provider is happy because it assumes that it is investing in a great business with a sustainable senior debt. But these types of transactions can be very expensive for the PE firm undergoing it.”

Then, there are over-levered ‘bad’ companies, likely to be one-off sales-focused, in deeply cyclical industries, and that possess an inherent existential risk. “Those are in trouble. Those businesses can only get away with something when the market is super bullish – but not today,” says Ghezzi.

Alternative levers

Given expected drops in base rates during the course of 2024, PE houses are looking to kick the maturities can down the road for as long as possible. One way of doing so is through amend-and-extends.

These agreements see businesses hold on to a less-punishing level of leverage with one or two years added to the end of it, providing the PE house with extra time to get the business in order before exiting. 

Even though GPs pay a fee to the bank, which also takes some increase in its rates, it won’t take as much as it would have taken from a complete refinancing, which could be perceived as a bad loan on their books.

“There is tolerance from lenders for amend-and-extends,” says Ghezzi. “As a lender, you’re happy to stay outstanding for longer if the company is good and your capital is not at risk. You make a bit more money if you stay outstanding for longer. And if your investment as a lender is doing less well, you will have negotiating power to do the extension on your terms, such as a higher increase in the margin or more fees to allow the extension.”

While the option may suit lenders, their tolerance is based on a confidence that the portco’s ‘problem’ is temporary; extensions for the sake of avoiding the inevitable are unlikely to convince them.

For a GP keen to avoid refinancing or selling an asset for less than it believes it’s worth, it can also sell it from the fund that owns it to its new fund at a sensible mid valuation, subject to the approval of both funds’ LPs.

Sponsors are a little reluctant to sell one asset from an old fund into a new fund, but that is occurring to some degree as well
Bill Sacher, Adams Street Partners

The extent to which a PE firm’s existing fund sells an asset for cheaper is the extent to which its new fund benefits from the ‘fresh’ deal. Similarly, GPs can raise a separate ‘continuation fund’ to buy the individual asset from its existing fund, seeing the portfolio company retained until the GP decides that it is a good time to sell.

“As long as it’s a good operating business, it’s a bit of a win-win, where the private equity sponsor can hold on to a strong-performing asset and give investors who have been in the fund for a long time an opportunity to exit if they want to,” Sacher notes. “And I would venture to guess that the overwhelming majority of those GP-led secondaries are in that category.”

Further to these refinancing alternatives is a fairly new development: NAV lending, whereby GPs incur debt at the fund level, which is done either to make a distribution to LPs or to inject capital into an underperforming portfolio company.

Sponsors are a little reluctant to sell one asset from an old fund into a new fund, but that is occurring to some degree as well

A ways to go

By and large, markets have recovered in a way that gives PE sponsors multiple options to deal with a refinancing headache. 

“When I joined the business close to 30 years ago, my very first lesson was that companies don’t default because of performance; they default because they lose access to the capital market. Right now, there’s plenty of access to the capital markets in various forms: broadly, syndicated loans, private credit, NAV lending, continuation vehicles, etc,” Adams Street’s Sacher observes.

That said, he notes a couple of risks remain: “The optimism may be a little premature, as there are still some unresolved significant uncertainties. Inflation is moderate but it’s still not down to target. Squeezing that last little bit out tends to be the most challenging part. Even in the optimistic case, you’re still probably looking at 3-4% underlying base rates. And I personally think it is unlikely the market will go back to the zero-interest-rate environment that we had for the last 10 years.

“Europe is not one universal economy. There are geopolitical issues going on. I think the economic outlook is a little bit more shaky at the moment.”

Meanwhile, Park Square’s Ghezzi says his firm is not “particularly gloomy” on the economy but highlights that it always assumes a potentially difficult market environment when it looks at and underwrites new investment opportunities. “Being generally pessimistic is part of our job; we are in credit.” 

Genesis Capital's HP TRONIC Group has acquired all of the shares held by the PE firm's Genesis Private Equity Fund III, seeing 100% of the shares now within the portco's corporate structure as a result.

A club of banks – ČSOB and Česká spořitelna – arranged financing for Genesis's exit.

The HP TRONIC Group is a retailer of consumer electronics and home appliances in the Czech Republic and Slovakia. Its portfolio includes the electronics retailer DATART and the brand ETA.

Genesis Capital, which invests in small and medium-sized companies in Central Europe, first backed HP TRONIC in 2017.

The GP's support, along with financing from ČSOB and Česká spořitelna, helped the portco to acquire DATART. 

During the seven-year holding period, HP TRONIC Group opened a new logistics hall with 30,000 m² of warehouse space in Jirny near Prague, which replaced the original warehouses of both HP TRONIC and DATART.

The Covid-19 pandemic brought about DATART store closures in 2020 and 2021, but the seller said the business "completely" compensated for the drop in sales from stores with increased performance of online sales.

Since its inception in 1999, Genesis Capital has raised six private equity funds with a total volume exceeding €350m.

Mutares has acquired Greenview Group Holdings from Belfast-based PE firm Cordovan Capital Management and Michael Burke, the portfolio company's current CEO.

Founded in 2017, Greenview Group is a provider of mechanical and electrical installation, heating installation and servicing, property maintenance and improvements, and sustainable energy services.

With about 190 employees across its four offices in Belfast, Northern Ireland, and London, UK, the company generated revenues of approximately €36m in 2023.

Cordovan Capital typically takes majority or significant minority stakes in UK and Ireland businesses with enterprise values of up to £10m and positive Ebitda of between £250k and £1.5m.

The seller first backed Greenview Group in April 2022 through its Cordovan Capital Partners II fund.

Marking its fourth acquisition of 2024, Mutares expects the portfolio company to deliver revenues of approximately €45m in the current financial year to March 2025.

Priority check

This Old Bird has sat in plenty of meetings throughout his lifetime. Many of them could have been emails. But he recently heard of one that was unpleasant for an entirely different reason. 

On the agenda was signing off the firm’s ESG report. A managing partner was chomping at the bit, as another colleague was first five, then 10 minutes late.

Finally, said individual hurried into the meeting room, slightly out of breath, apologising for the delay. His child had fallen ill and he was waiting for the mother to return before running off. His apology fell on deaf ears as the managing partner remarked he should “get his priorities straight”.

Isn’t the facilitation of fatherly care roles an important element of successful DEI strategies? This Old Bird cannot help but wonder how much signing off the report truly needed after this debacle. l

An internal affair

Speaking of emails, this Old Bird recently received one where we couldn’t quite figure out why it was addressed to us. But we instantly recognised all other addressees as being from a firm that regularly appears in the pages of Real Deals. 

Our confusion was swiftly cleared up as we found ourselves in an internal email chain containing lively discussion about the firm’s recent press coverage. Only, it wasn’t coverage our magazine had provided. It was an article from another trade publication.

Quotes were discussed, other firms mentioned and evaluated, and ideas for future storytelling born. This Old Bird couldn’t help but snicker at the glimpse of the impact a news piece or analytic article can have. After a few minutes however, our conscience got the better of us. We reached out to the initiator of said email separately, informing them discreetly of their accident and then deleted the thread. 

RSM UK has appointed Stuart Clowser as head of private equity. 

Clowser was previously a fund audit partner at RSM and has extensive experience advising private equity funds on their portfolios and on the private equity regulatory environment. 

A member of the BVCA’s accounting committee, Clowser succeeds Charlie Jolly who has been head of private equity for nine years at the firm and now joins the consulting leadership team.

He started his stint at RSM 20 years ago.

CVC has invested in World of Talents, following an exit by Belgian investment firm Baltisse. 

Active in Belgium and the Netherlands, World of Talents is an international platform for HR companies, specialising in bottleneck professions and talent management. 

The company operates in outsourcing, interim (management), and recruitment and selection, generating a turnover of €360m and Ebitda of €50m, with a staff of 4,500.

In 2023, World of Talents expanded to Germany through the acquisition of easyCare, a HR company specialising in the medical sector.

The fresh funds will be used to diversify the company’s offering and expand its geographic footprint nationally and internationally, CVC said in a statement. 

Baltisse is selling its majority stake but reinvesting a “significant” portion. 

Earlier this week, the private equity firm announced its intention to list on Euronext Amsterdam.

ADVISERS

CVC
Freshfields Bruckhaus Deringer (legal)
Lincoln (corporate finance)

World of Talents
Allen & Overy (legal)
Clifford Chance (legal)

After holding the company for only two years, Deutsche Beteiligungs AG (DB AG) has exited its stake in In-tech, a technology company focused on software development, testing and validation. 

The sale has been made to Infosys, a global IT services giant headquartered in Bengaluru, India.

According to DB AG, the sale has reaped a more than 3x return on investment.

The exit represents the first divestment from DB AG Fund VIII, a €1.1bn vehicle that has built up a portfolio of seven companies since 2020. 

Based in Garching near Munich, In-tech is a service provider for software development, testing and validation that shapes digitalisation in the automotive, rail transport and smart-industry sectors. 

In-tech develops solutions in e-mobility, connected and autonomous driving, electric vehicles, off-road vehicles and railroads. 

The IT services and software segment now represents 25% of DB AG’s total portfolio value.

Greenpeak Partners has raised €350m for its inaugural continuation fund, to extend the hold of two German companies operating in the speciality laboratories and testing, inspection and certification (TIC) space.

The vehicle was led by HarbourVest Partners.

The Greenpeak Continuation Fund I will invest in Academia and Certania – portfolio companies currently being managed by Greenpeak Fund II, which closed in 2022. 

The deal has been structured in a way that will provide customised exposure across one or both companies for different investors. 

HarbourVest Partners is acting as the principal lead investor for the vehicle across both companies, while Kline Hill Partners is acting as the co-lead Investor in Academia, alongside a consortium of international syndicate investors.

Greenpeak Partners is a lower midmarket-focused buy-and-build private equity firm in the DACH region. Under the firm's leadership, Academia and Certania have built up their combined Ebitda to nearly €70m while completing more than 30 acquisitions, the GP said in a statement. 

Continuation funds have risen in popularity in the past year, as exits continue to dwindle and LPs crave liquidity.

ADVISERS

Greenpeak
PJT Park Hill (corporate finance)
ISP Healthcare (commercial due diligence)
Roedl & Partner (financial and tax)
Stephenson Harwood (legal)
FMDH Rechtsanwälte (legal)
McDermott Will & Emery (legal)

HarbourVest Partners
Kirkland & Ellis (legal)

Real Deals is thrilled to unveil the much anticipated list of winners from its 23rd annual Private Equity Awards – a ceremony recognising Europe's very best private equity transactions and the most successful firms and advisers. Our winners and shortlisted firms have displayed dedication, hard work and excellence – and are stronger than ever despite the difficult market conditions. Congratulations to all!

The winners were announced during our awards ceremony held on 18 April 2024 at the JW Marriott Grosvenor House, London.

ADVISORY AWARDS

• Asset-Based Lender of the Year: ABN AMRO Commercial Finance
• Fund Administrator of the Year: Aztec Group
• Regional Legal Adviser of the Year: Foot Anstey
• Pan-European Legal Adviser of the Year: Eversheds Sutherland
• Specialist Adviser of the Year: Capstone
• Specialist Fund Adviser of the Year: Asante Capital Group
• UK Corporate Finance House of the Year: Clearwater International
• European Corporate Finance House of the Year: Houlihan Lokey
• Commercial Due Diligence Provider of the Year: Armstrong
• Technology Due Diligence Provider of the Year: Crosslake
• Financial Due Diligence Provider of the Year: Alvarez & Marsal
• Lender of the Year – Bank: HSBC UK
• Lender of the Year – Specialist: Ares Management

SPECIALIST AWARDS

• Diversity and Inclusion Leader of the Year: Hg
• ESG Champion of the Year – Mid-Cap: Abris Capital Partners
• ESG Champion of the Year – Upper Mid-Cap: Investindustrial
• ESG Champion of the Year – Large-Cap: Nordic Capital
• Mid-Cap Private Equity Investment Leader: Robert Knorr, MidEuropa

DEAL AWARDS

• Central and Eastern European Deal of the Year: Enterprise Investors for Unilink
• DACH Deal of the Year: Oakley Capital for IU Group
• France and Benelux Deal of the Year: Archimed for Polyplus
• Mediterranean Deal of the Year: Wise Equity for Cantiere del Pardo
• Nordic Deal of the Year: Norvestor for Kabal
• UK Small-Cap Deal of the Year (EV on entry less than €25m): AURELIUS for Distrelec
• UK Lower Mid-Cap Deal of the Year (EV on entry of €25-100m): Palatine for Anthesis
• UK Upper Mid-Cap Deal of the Year (EV on entry of €100m+): Equistone Partners Europe for Acuity Knowledge Partners

HOUSE AWARDS

• Special Situations House of the Year: AURELIUS
• PE House of the Year-Small-Cap (EV on entry of less than €25m): Kester Capital
• PE House of the Year – Mid-Cap (EV on entry of €25-100m): ECI Partners
• PE House of the Year – Upper Mid-Cap (EV on entry of €100-500m): Oakley Capital
• PE House of the Year – Large-Cap (EV on entry of more than €500m+): Bridgepoint Group
• European Fund of the Year: ECI Partners
• Hall of Fame: Helen Steers, Pantheon

The IT sector continues to present potential rich pickings for investment, but not all that glitters is gold. That’s the message from partners at Progressio, speaking to Real Deals following their purchase of a majority stake in Italian digital services provider Archiva Group.

“Overall, the IT sector has clear growth opportunities and resilience, it has performed well and has not experienced any shocks during the pandemic, and these characteristics make it currently very attractive for private equity firms,” according to Progressio partner Beatrice Capretti.

Companies specialising in digital technologies, such as cybersecurity and AI, show high revenue and ROI potential, making them more credible investments, she says.

But she adds: “One should not make the mistake of investing in platforms that are too fragmented. LPs are prudent and GPs should cautiously select the type of businesses they are looking at within this sector.”

Following this logic, the GP acquired a majority stake in Archiva Group, an Italian digital provider serving more than 1,500 companies, from medium-sized to multinational.

The company says its value proposition is based on three pillars: data, processes and people, with a focus on digital transition, AI and cybersecurity. 

One should not make the mistake of investing in platforms that are too fragmented. LPs are prudent and GPs should cautiously select the type of businesses they are looking at within this sector
Beatrice Capretti, Progressio

The area of data offers a range of services for modern document and digital data management – including digital archiving, national and international electronic invoicing, and automation of document generation. 

"Italy leads in these areas; for instance, electronic B2B invoicing, which is mandatory in Italy, is still optional in many EU countries," explains fellow partner at the private equity firm, Massimo Dan.

Progressio aims to enhance Archiva's solutions, strengthen client partnerships and focus on cybersecurity and information security, enhancing Archiva’s technological expertise including digital workflow platforms, AI applications and robot process automation.

The strategic plan envisages an ambitious M&A strategy, both in Italy and abroad, with a particular focus on the acquisition of functional B2B softwares, Dan explains. 

"We plan to bring concrete use cases from Italy to large international customers, extending that experience in customs bill management and international cross-country invoicing abroad," he adds.

Expertise counts

The GP's first meeting with Archiva was in July 2023. "It wasn't an auction but a 'beauty contest' with few players, organised by the seller's M&A adviser, Clearwater International," explains Dan.

"We were selected within two months and began the business plan immediately together with the management team and the entrepreneur," he adds.

The conversation was "smooth" and "agile", with full cooperation from the management team, according to the GP. 

"We believe that our team's expertise in this technical, relatively new sector stood out. Part of our team have previously worked in an M&A boutique that focuses exclusively on digital services, developing skills that you would struggle to find outside the industry,” Capretti highlights.

"We also have an operating partner, providing specialised support valued by our investee businesses," she adds.

Off the beaten track

The GP reviews between 200 and 250 deals annually, involving conversations with advisors, accountants, and entrepreneurs across Italy.

"We often travel to visit them, building one-to-one relationships. Managers particularly are a key origination source for us," Capretti emphasises. "Over the years we've built a network of sector-focused managers that involve around 80 managers that support us during the entire investment cycle."

Over the years we've built a network of sector-focused managers that involve around 80 managers that support us during the entire investment cycle
Beatrice Capretti, Progressio

Progressio’s origination strategy also includes identifying niche targets through ad hoc analysis to better understand the sector.

“This way we find targets that are completely out of the mainstream,”  the investment professional says. 

Maiden investment

Archiva’s acquisition was completed via the Progressio Investimenti IV fund and represents the first acquisition signed by the vehicle. 

The fund completed the first closing at the end of January with commitments for €182m and has a target of €300m, with a second closing expected by the end of summer. 

It is currently boosting its pipeline, with the GP revealing a few deals on the horizon. “We are imminently completing a new deal in the mechanics sector, and we are in the due diligence phase for an investment within the energy-transition sector that could potentially be completed before summer,” Capretti reveals.

Progressio is an independent private equity firm focused on the Italian midmarket. It has so far managed funds worth more than €730m and completed 23 investments, with 16 add-ons and 17 exits.

ADVISERS

Progressio
Bonelli Erede (legal)
Deloitte (financial due diligence)
Roland Berger (business due diligence)
EY (ESG) 
Russo De Rosa Associati (tax due diligence)

Archiva Group 
Clearwater International (corporate finance)
PwC (vendor financial assistance)
Studio Legale Mancini (legal)
Studio Legale e Tributario Pasquini (legal)

Proemion Holding, a provider of advanced data and analytics technology for mobile industrial assets, has acquired TrendMiner, an industrial analytics company.

Battery Ventures invested €33.5m in the German company in 2022. The bolt-on acquisition has been made for €47m. 

The acquisition of Belgium-based TrendMiner will “significantly” expand Proemion’s existing analytics capabilities for critical industrial equipment, which help equipment manufacturers and operators gather machine data remotely.

TrendMiner produces a complementary, web-based, self-service analytics platform for monitoring critical equipment inside complex industrial environments. Its technology is used across industries including chemicals, oil and gas, pharmaceuticals, power generation, food and beverage, and high-tech manufacturing.

Proemion was founded in 1987. The company’s technology allows customers – who operate in industries including construction, agriculture, logistics and natural resources – to better manage equipment, plan maintenance, save fuel costs and generate CO2 emission reports.

It serves global industrial OEMs and operators from its offices in Fulda, Germany; Dayton, Ohio; and Seoul, South Korea.

bValue, a Polish growth investment fund, has closed its third vehicle on €90m. 

The bValue Growth (BVG) fund represents bValue’s largest ever vehicle having surpassed its target by €10m. 

The announcement comes a year after bValue’s first close, which was held in February last year on €60m. 

Approximately half of the commitments came from financial institutions, including the European Investment Fund and the Polish Development Fund, with the remaining coming from private investors, including Polish and foreign family offices.

EIF invested in the fund through the European Scale-up Action for Risk Capital (ESCALAR) programme, which supports investments in scale-ups, chief executive Marjut Falkstedt said in a statement. 

bValue’s growth equity strategy seeks to fill the financing gap between venture capital funds, which invest at an early stage, and private equity funds, which target buyouts. 

BVG will invest tickets of €5-15m for equity stakes of 20-40%. 

Since its inception in 2016, the firm has invested in 40 companies and made 14 exits. The vehicle has completed its first investment in Hostersi, a provider of cloud migration and cloud infrastructure support services. "We have already deployed 18% of the fund. By the end of this year we intend to deploy up to 45%," Maciej Balsewicz told Real Deals. 

Van Campen / Liem served as the legal adviser. 

This article was amended on 22 April 2024.

Wellington Management has closed its inaugural Climate Innovation Fund (CIF) on $385m.

The vehicle will invest in private companies developing solutions to help mitigate and adapt to climate change. 

Wellington Management will target late-venture and early-growth companies developing tech-enabled solutions such as software, software-enabled hardware, AI, data and analytics in energy transition, sustainable buildings and cities, transportation and mobility, industrial automation, enterprise digitalisation, sustainable consumer, and food and agriculture innovation.

Headquartered in Boston, Wellington Management is a private investment manager.

The vehicle’s investor base includes sovereign wealth funds, pensions, insurance companies, banks, family offices and high-net-worth individuals, it said in a statement. 

Managed by Greg Wasserman and the CIF investment team, the vehicle is a part of Wellington’s expanding $8.5bn private investing platform. 

The vehicle follows Wellington’s three venture funds – Wellington Venture Investments I, Wellington Hadley Harbor IV and Wellington Biomedical Innovation II.

Unigestion has appointed Jordan Dimmock as a senior investment professional in its global secondaries team.

Dimmock joins from abrdn, where he was an investment director monitoring more than $1.5bn of transactions, and has 10 years of experience in private equity. 

In his new role, he will be focusing on sourcing and underwriting transactions for the sixth vintage of Unigestion’s secondaries strategy, the asset manager said in a statement. The vehicle is currently is open. 

Unigestion has more than 20 years of experience in secondaries with a global team of 70.

Its sixth vintage has a target portfolio of 40-60 transactions – split between North America and Europe (40% each), and the remainder in Asia. 

During the past 24 months, Unigestion’s secondaries team, headed by Ralph Büchel, has closed almost 30 transactions globally.

Ardian has partially exited its stake in Planisware following the launch of an initial public offer (IPO) of its portfolio company Planisware on Euronext Paris. 

As part of the IPO, the French software company’s co-founders will retain a majority stake.

Since 1996, Planisware has enabled companies to improve their project portfolio management (PPM) processes. The company has 12 offices and employs a staff of 700 supporting customers in 38 countries.

Ardian, via its growth strategy, first acquired a stake in Planisware in 2003 followed by a reinvestment in 2018. During its hold, the private investment firm has helped accelerate the group's international expansion, particularly in the US, and supported its M&A strategy, with the acquisition of NQI in 2018 and the integration of Japanese subsidiary IFT in 2023.

In 2023, the company achieved sales of €156m, with annual growth of 20% and an adjusted Ebitda margin of 33%.

Planisware’s IPO on Euronext Paris sees the company’s market cap top €1bn. Ardian will continue to retain its c.5% stake in the company.

The software company postponed its intention to float in October last year.

ADVISERS

Hogan Lovells (legal)
White & Case (legal)
Rothschild (corporate finance)
BNP Paribas (bookunner) 

Herbert Smith Freehills has promoted 27 new partners globally, with the promotions taking effect on 1 May 2024.

Many of the new partners focus on areas aligned to the firm's vision and which the firm has prioritised, such as private capital, energy transition and ESG.

In all, 14 of the 27 promotions are aligned with private capital, with promotions based across the firm’s global network of offices in Asia, Australia, EMEA, the UK and the US.

These include former senior associates Laura Ackroyd, Vassilena Karadakova, Philip Lis and Carolyn Milligan.

The appointments reflect the firm's ongoing commitment to invest in its international network, its practices and its sector expertise, the law firm said in a statement. 

CEO Justin D’Agostino added: "We are incredibly pleased to recognise the breadth of talent we have in our leading practices across the network. Our new partners have the skills, expertise and outlook to ensure we continue to drive our strategy and our growth areas of private capital, energy transition and ESG. They are integral to the future leadership and success of the firm."

Herbert Smith Freehills is an international law firm with headquarters in London, UK and Sydney, Australia. 

Interest rates in Europe appear to have peaked, but buyout deal financing and portfolio company working capital remains expensive. With traditional lenders still cautious, midmarket alternative credit providers are finding ways to step up, work together and provide private equity-backed companies with capital in a still tricky environment.

In this roundtable discussion, Real Deals talks to lenders and advisers about how the former have kept deploying capital and supporting private equity firms in the face of stiffening market headwinds

At the table:

• Graham Barber, PNC Business Credit
• Don Brown, Stephenson Harwood
• Nicholas Buxton, Investec
• Steven Chait, IGF
• Michael Holmes, ABN Commercial Finance
• Jake Hyman, Blazehill Capital
• Ross Morrow, DunPort Capital Management
• Cem Yaslak, BZ

 Moderated by Nicholas Neveling on behalf of Real Deals

Real Deals (RD): How have the lenders around the table responded to the rising rate cycle? Have higher rates led to any changes in deployment appetite or approach to underwriting?

Cem Yaslak: Our appetite at BZ has certainly grown in the last couple of years. We have expanded our product range to include cashflow products, to complement our full-suite ABL offering. And we recently partnered up with UBS to meet increasing demand for these hybrid structures. BZ has a strong track record of working with sponsor-backed corporates. However, the recent softening in the M&A market has led to lower sponsor-led activity. This has been, to some extent, replaced by refinancing activity as existing facilities mature, and corporates find it more difficult to access liquidity via the mainstream bank market. This creates an exciting opportunity for alternative lenders like BZ to support these corporates going forward.

Michael Holmes: We have also seen an uptick in refinancings come to the table. We are an ABL lender and there is a growing interest from corporates to turn to their balance sheet in order to raise debt, whereas previously they might have used other financing solutions. We also see an opportunity to grow our business at the larger end of the market. Previously we had a lot of focus on the midmarket, but now we are working more regularly with bigger credits, which has been positive and has enabled us to sustain steady deployment. In terms of underwriting, our approach to assessing credit risk hasn’t changed. Obviously, you've got to buy into the forecasts you are looking at, and sense-check those forecasts. This is something that we would always look at, but in the current environment we take a bit more time to assess and make sure that forecasts stack up.

Ross Morrow: From an underwriting perspective, our priorities are unchanged. We still focus on the same things and want to see the same good-quality business fundamentals evident in the credits we finance. One area that we are focusing on more in an inflationary environment is the ability of a company to pass on prices. Businesses that have not been able to push through price increases have been challenged. If you aren't able to pass on price increase in an inflationary environment, margins will be squeezed and free cashflow will suffer as a result. With respect to demand, it has been marginally up year on year, and we considered approximately the same amount of opportunities in 2023 as we did in 2022, but I would say that the quality of what we saw in 2023 was definitely different. The quality was fine through the first half of 2023, but in the second half of the year a lot of what we saw just didn’t meet our underwriting criteria or risk appetite. As a result, we took a step back from the market in Q4 2023 and ultimately underwrote about 60% of our 2022 volumes in 2023. That hasn’t been a problem for us really, as our model is not a volume game, it’s about picking good credits and working with good borrowers.

One area that we are focusing on more in an inflationary environment is the ability of a company to pass on prices. Businesses that have not been able to push through price increases have been challenged. Ross Morrow, DunPort Capital Management

Nicholas Buxton: Lower M&A volume has meant lower demand, but as other speakers have highlighted, we have also seen rising refinancing volume. With a refinancing, however, you always have to ask yourself and get comfortable with what is driving the refinance. Does the refinancing solve a problem for a sponsor (for example, revised exit horizon, additional funding for growth, recapitalisation, etc) or for the incumbent lender (for example, the borrower is over-levered or facing structural headwinds)? Clearly the former is more palatable from an incoming lender perspective, with problem-solving for our sponsor clients something we pride ourselves on at Investec. In terms of appetite, we remain eager to do deals and maintain deployment. To that end, it helps to have an active and acquisitive portfolio when M&A activity cools. Private equity firms still have the ambition to grow their portfolio companies and we have been kept very busy financing buy-and-build
strategies across our portfolio. Yes, the M&A market has been a bit subdued, but our clients are still acquisitive, and we like to back those strategies. Our bold mandate on the term lending side means that we are well equipped to support these strategies and that represents a major differentiator for us.

Graham Barber: The last 12 months have been a period of unsettled activity for lenders, which is not surprising given that interest rates have gone up by 500 basis points since December 2021 and inflation has been high. Against this backdrop, we have spent our time understanding the ability of borrowers to service and repay debt. You simply have to do that because we are in a different market now. Debt costs are up and therefore liquidity has come out of the market because of that. There is, however, capital available to deploy. From a new business perspective, there was less activity through the course of 2023 but good-quality assets still came to market. With fewer assets seeking finance and lenders aiming to deploy the same level of debt, it becomes more
competitive and you have to pick and choose what credits you want to pursue. You've just got to be choosy. You also have to make sure that you have a product offering that is relevant and can help clients across a number of scenarios. For PNC, that has meant evolving from being an ABL lender offering additional ‘stretch financing’ into a more sophisticated senior secured lender both in the US and here in the UK. That evolution has enabled us to do deals in the ABL arena, the technology finance arena with software-as-a-service recurring-revenue lending and the super-senior/’first out’ arena of revolvers and term-loan-As in front of private credit funds. Our ability to do more, and add more value, is probably greater than its ever been and we have to continue aligning ourselves with the needs and wants of sponsors, and being a relevant player for them.

Steven Chait: The slowdown in the M&A market has meant that activity has ebbed and flowed. One month it will be really busy and then the market will go quiet. We have a strong appetite for new business but it is a choppy market. That said, we have seen opportunities to help companies that have CBILs and (recovery loan scheme) RLS loans to repay. Another interesting area has been carve-outs. When businesses are carrying leverage, we've been able to carve-out some of that leverage against some of the assets in the business and repay some money to a sponsor by taking security over the receivables, for example. In the current high-rate environment, another unique selling point for us has been speed to market. If we say we're going to do something, we do it, and we can do it very quickly. We've just done our largest deal of all time within a month. Sponsors and portfolio companies really value that certainty of execution in an uncertain market.

Jake Hyman: Rising interest rates and widespread uncertainty have created opportunity for Blazehill, being a fund that operates in the midmarket private credit space. The ABL heritage of the platform coupled with our flexible mandate and ability to stretch meaningfully beyond the value of the assets and into the cashflows has meant we’ve been uniquely positioned to support a range of sponsor and non-sponsor backed business during a time where we’re seeing the more traditional cashflow market be a little bit more selective. As mentioned by Graham earlier, when it comes to underwriting, one of the key areas of focus in the current higher interest rate environment is sensitising a borrower’s ability to service debt. Yes, Blazehill has the ability to push beyond conventional lending parameters and provide enhanced flexibility and quantum, but we still need to ensure the facility doesn't put too much pressure on a company's longer-term liquidity position – it's about picking the right opportunities. As an example, we’re seeing a number of transactions that are growth-like in nature, where during the quieter M&A market sponsors have turned their focus to existing portfolio companies, identified accretive investment opportunities and are now looking to raise transformative capital to accelerate growth and provide a bridge to an exit for what are fundamentally strong businesses.

Another interesting area has been carve-outs. When businesses are carrying leverage, we've been able to carve-out some of that leverage against some of the assets in the business and repay some money to a sponsor by taking security over the receivables, for example. Steven Chait, IGF

Don Brown: Everything that has been said chimes with what we have seen across the deals we have advised on. Credit committees are definitely tougher. Due diligence has been enhanced and transactions that don't fit the box have been struggling to get approval. There is undoubtedly a much more selective approach to risk. On the borrower side, sponsors are cautious when it comes to putting extra money into portfolio companies and this is one of the main reasons we've seen deals fail. There is not an unwillingness from lenders to put debt in, but deals can end up stuck because the borrower can't raise the equity injection on which the debt is contingent. These scenarios, however, can open up opportunities for alternative lenders to step in and plug funding gaps between debt and equity; and also help sponsors who are under pressure to take money off the table and make distributions to investors.

RD: An uptick in refinancing is something that has been mentioned by everyone. During the next two to three years, there is a big maturity wall approaching. How does that play out, given that cost of capital is much higher than it was when this vintage of loans was first issued?

Morrow: The so-called ‘maturity cliff edge’ is a topic that comes up time and again, and I remember having this exact same conversation back in 2011-12. It's all about supply and demand, and if you step back for a moment and look at the private credit landscape specifically, the vast majority of private credit funds are focused on the mid and upper midmarket. There are large pools of capital to service companies at this end of the market, and lenders in this space can get creative and use holdco financings, preferred equity, PIK toggle and similar instruments to manage refinancings. In addition, the liquid high yield and levered loan markets will deliver capital solutions to a proportion of affected borrowers, and for the rest I’m sure ‘amend, extend and pretend’ will be prevalent for a while. When you look at businesses with Ebitda below the £7-8m threshold, however, the supply of capital is much tighter. That presents an interesting dynamic. If lower midmarket sponsors want to refinance in order to extend investment periods and wait for multiples to normalise, they may require larger financing packages to cover the longer hold periods. It is going to be interesting to see how lower midmarket lenders respond to that. Most private credit lenders in the lower midmarket can't hold more than £30m, and most top out at about £20m. When refinancing, companies
will either have to grow into a new, larger lender who has the capacity, or try and introduce a new lender into the club of existing lenders. While not common in the lower midmarket, there is precedent for club transactions among participants and an increasing willingness to facilitate some. I do think demand will outstrip supply in the lower midmarket, so there will be some tension.

Hyman: There is a cohort of legacy acquisition finance facilities that have approached or will be approaching maturity. We find ourselves in a very different credit environment today compared to when these loans were initially issued, so there will be instances where it may be suboptimal for sponsors to simply amend and extend existing facilities, as there may be a more economically efficient source of third-party capital available. Sponsors should use the opportunity to reappraise their options and consider alternatives to bank syndicate term loans when it’s time to refinance. For example, a conventional ABL revolver that can flex in line with a company’s working capital profile may be more fit for purpose for certain businesses, particularly if partnered with a more creative slice of credit fund debt to ensure day one and ongoing availability is maximised.

Chait: We've seen refinancings where debt funds are at the limit of their ticket sizes and have approached us to consider a carve-out of the receivables, which we've done. In these deals there is additional liquidity coming into the business as a result of a more flexible working capital facility secured against the receivables. We can get comfortable with these structures because of the secured nature of invoice financing.

Brown: The maturity wall is creating more space for creative structures, where other lenders can come in to help secure refinancing and lower financing costs. We have seen transactions, for example, where borrowers can refinance with an existing lender, but only at a much higher cost, and will look to bring in other lenders to lower the all-in cost of capital. Sometimes, a second lien structure can help firms avoid the need to sell the business at a discounted valuation multiple. So, there can be opportunities for ABLs here.

We find ourselves in a very different credit environment today compared to when these loans were initially issued, so there will be instances where it may be suboptimal for sponsors to simply amend and extend existing facilities, as there may be a more economically efficient source of third-party capital available.  Jake Hyman, Blazehill Capital

RD: How comfortable are different types of lenders when it comes to working with each other?

Buxton: That is a good question. At Investec, we have the ability to lead-underwrite or participate in larger deals and have developed a list of partners that we can share deals with and who are comfortable with having ABL and term loans in the same structure. We have completed a number of deals alongside a varied cohort of lenders, from traditional ABL lenders and private debt funds to high-street lenders, with lenders participating in the ABL, term loans or both tranches. Trusting your partners and understanding what their requirements are is essential for these partnerships to work and deliver. The key is getting that first deal over the line. Once the first deal is done and you have first-hand insight into a partner’s credit committee process and legal requirements, the process becomes smoother. That makes the intercreditor documentation much easier and it makes sharing deals much easier. With the recent re-emergence of club deals, we believe it is vital to have this capability in the current market.

Chait: Intercreditor agreements are much more advanced now and precedent has been set, which makes working with other lenders and the debt funds much more palatable. We've got so much more experience in the industry when it comes to building clubs of different lender groups, and most borrowers and advisers will know what we can and can't deliver. Good relationships have been built between lenders and with the sponsors. It has taken a long time but I think we're definitely in a good place.

Yaslak: We have worked with several lenders in the past, including Leumi and Secure Trust, and remain open to partnering with others where together we can offer the most optimal solution for our clients. As these types of partnerships have become more commonplace, it has allowed intercreditor precedents to be set, providing a smoother path for future transactions. In addition, it has demonstrated to sponsors and corporates that mainstream-alternative ABL club structures can offer the best structure in certain situations. BZ can lend from £20m to £150m, and at the higher range of ticket sizes there is an opportunity to partner with other lenders.

Chait: Relationships and reputation are critical. We all want to do bigger deals, control the collateral and control the transaction ourselves, but there is a maturity and recognition in the industry that sometimes deals do have to be split between a first lien and second lien lender, or put together by a club. Partnering with other lenders is a real focus for us at IGF and something we definitely want to do more of.

Morrow: Lending partnerships between term debt and working capital/ABL lenders are certainly possible and have many advantages in the right circumstances, but they are no panacea for an over-levered balance sheet. Just because it is possible to combine term debt with ABL financing, doesn’t mean that it’s necessarily the right thing to do. The quantum of debt won’t change and a borrower will still have to match interest costs to cashflows.

Barber: Ross makes a good point. Revolving ABL facilities are there to help generate liquidity as well as lower the overall cost of debt for borrowers and sponsors. By nature, working capital ABL revolvers are self-liquidating. Where challenges arise, it is normally because of a one off or ongoing cash-burn event and even the ABL revolver has become core borrowing. Problems don’t come out of nowhere, and lending clubs/syndicates and sponsors have to have honest discussions upfront about what the purpose of a financing deal is. Is the ABL adding liquidity because the business needs more working capital headroom, repaying some existing debt with a lower cost of capital to save on interest costs? Does this saving on interest costs actually stop cash burn? Is the ABL solution allowing for a turnaround/improvement plan to be implemented and actioned? Is it part of a new debt structure to effect a sale?

ABLs accept not every deal works out but we all want to make sure that borrowers have a runway to success as opposed to just adding liquidity to prolong the inevitable. It is crucial to have the conversations and join the dots because when you do, different lenders can work very well together. A private debt fund will want to be close to full-drawn and see its money at work and the ABL can do the revolving facility piece that the private credit fund can’t. While bringing an ABL into a structure can often generate extra liquidity on its own, sometimes the answer to getting the extra liquidity is to do it in conjunction with a balance sheet restructuring, with debt being taken off the table to provide companies with a chance to survive. ABLs have always had a role in all sorts of financing events over the years, especially in times of economic challenge or change. There is no reason why that won’t continue in the higher debt cost environment of today, even when there is more lender choice than ever.

ABLs accept not every deal works out but we all want to make sure that borrowers have a runway to success as opposed to just adding liquidity to prolong the inevitable. It is crucial to have the conversations and join the dots because when you do, different lenders can work very well together. Graham Barber, PNC Business Credit

RD: Given the dynamics involved in pulling clubs together, how easy (or not) is it to negotiate and agree on intercreditor documentation?

Barber: The intercreditor is always the elephant in the room that you have to address. When you are working through an intercreditor, it is important to take a few steps back and interrogate what is driving the need for a new financing facility. M&A is relatively easy to understand because you are all going in together and everybody has bought into the story. But if you are refinancing an existing deal and existing lenders, then something has changed. ABL is all about financing change but the question is what has changed and what that means the intercreditor should look like. What are you solving for? What does the sponsor really want? People like single-lender solutions because they're easier to understand and you are in control of what goes on. In the current environment, however, everyone has to accept that you can’t do every deal as a single lender. There have to be some trade-offs on the intercreditor to unlock more opportunities for everyone. That's just how it works. It requires all the parts of the puzzle to come together. The good news is that there is appetite to do it.

Holmes: For the last 18 months, we've been trying to establish relationships with alternative lenders, and the intercreditor agreement is always tricky. It is very difficult to agree a vanilla intercreditor when each transaction is different. Our approach has been to get as far as we can with standard intercreditor terms and then negotiate further details when a specific need or transaction arises.
We've made it a long way down the line with a number of lenders, but these transactions have unfortunately not always happened. You still see situations where one lender can come in and do the whole deal. Borrowers prefer that. That said, we will get there. I'm convinced that it's a matter of time because there are obvious benefits for borrowers in working with us and other lenders.

Hyman: This is an area that we've come to know really well over the last few years at Blazehill. We’re continuing to build on what is already a pretty comprehensive playbook and believe we have developed a strong reputation in the market for deliverability and commerciality, which are both critical, particularly on sponsor-led transactions. Over 75% of our existing deals are either structured with an ABL in a senior position ahead of a junior Blazehill hybrid term loan, or are structured on a bifurcated basis where each lender carves up separate security for themselves. The facilities are always bespoke to the situation and specific transaction dynamics, and the intercreditor agreements look very different across each of the deals. In the past, it has been notoriously difficult to partner a senior ABL with junior term debt, particularly when the junior term debt is stretching into the cashflows, due to competing interests between the two lenders. The cashflow lender wants to preserve enterprise value for as long as possible, while the ABL lender will always need to reserve the right to reduce advance rates, build in reserves and manage their position
carefully. That can be difficult for more traditional cashflow lenders to accept.

The rise of midmarket private credit funds, however, specifically private credit funds with an ABL heritage, has meant we’re starting to see these facilities executed on a more regular basis. Having sat the other side of the table in previous roles, we at Blazehill appreciate the core ABL principles are centred around having a certain level of borrowing base control, but we also understand that ABL as a product has come a long way since the ‘lender of last resort’ days, and that mainstream ABLs will invariably look to preserve enterprise value and avoid a liquidation at all costs, working collaboratively with all parties. Awareness of the ABL’s key priorities and approach to lending has made partnership between senior ABLs and junior credit funds possible – and that is very good news for sponsors and borrowers going forward.

Buxton: Whether a multi-lender or bilateral deal, the vast majority of deals that we do are on an integrated ABL and cashflow basis, with term lending typically between 1-3x of leverage on top of the ABL. The sizeable term lending element gives other parties – sponsors and other lenders – confidence because there is a natural alignment of interests between the debt tranches. In bilateral deals, an intercreditor would simply not be required. Because we are in both tranches of the debt structure, enterprise value preservation is always a key consideration in our credit decision-making and it would be self-harming to unduly alter ABL funding metrics to the detriment of our term loan position.

Holmes: To add to that point, in the discussions around intercreditors we have had during the last 18 months, many concerns come from preconceived ideas of ABL. We've all spoken about how much the ABL industry has grown but I think many of the concerns around the intercreditor emanate from how ABLs might have been viewed 10 years ago. But that is not what ABL is today. ABL has matured and evolved, prioritising a relationship-driven approach to meet the needs of our clients. I have been in situations where we are one of many parties involved and there is no need to turn to the intercreditor because there is a partnership and a determination to find the best outcome for all parties involved.

RD: Don, as the lawyer at the table, what have you observed with respect to intercreditors? Is it becoming easier?

Brown: As lawyers, there is nothing we like more than an intercreditor… especially a complicated one that needs a lot of legal focus! There is a whole area of the market where there are ABL club deals, which are just like any other syndicated transaction. Everyone is sharing the same security, has exposure to the same assets and is more or less aligned on enforcement strategy. Partnering ABLs with cashflow lenders, however, can be difficult and there are sometimes challenges at the intercreditor stage. It can be hard to get everybody on the same page, especially where the parties haven't worked together before, and even more so if the cashflow lender is working with an ABL for the first time. Each intercreditor discussion is different, because every deal is different, so agreeing a standard creditor agreement is hard.

But despite these challenges, we are seeing more and more examples in the market of ABLs and cashflow lenders working together successfully. There is more willingness to be flexible than previously. ABLs are getting more comfortable with tiered events of default, for example, where the ABL will accept different standstill periods, unless there's been something fundamental like a fraud requiring the ABL to act quickly. The emergence of hybrid lenders, who have one eye on the borrowing base analysis and another on the cashflow, has really helped to move the market on. We are also seeing examples of split lien structures – where one ABL lender will take a second lien position behind a senior ABL. These deals can sometimes be quite easy to negotiate because of both parties' familiarity with asset-based lending.

There is still a way to go but the market is coming closer together. Private equity sponsors are now much more comfortable with ABL as a potential solution than they were 10 years ago. As a result, we are seeing more and more deals succeed with cashflow and ABL, or split lien ABL, in the capital structure.