Deal in Focus: Quadriga Capital sells M&R to PIA

Quadriga Capital this month sold its stake in Graz-based industrial automation company M&R Automation to PIA Automation, a subsidiary of Chinese corporate Joyson Group.

The transaction was initiated and led by M&A adviser Alantra. Frank Merkel, a partner at the advisory firm, was responsible for the transaction. Alantra acted for Quadriga in the negotiations but Merkel says the impetus for the deal came from the buyer: "The timing of the exit was triggered by strategic interest in the asset on the buy-side."

The combined group will employ 1,100 people and generate a turnover of €220m, according to a statement. The acquisition is intended to strengthen PIA's portfolio in the powertrain and e-mobility production spaces.

The transaction was completed in a very timely manner, around three months from start to finish. There is a market perception that Chinese buyers can take a long time but that was not the case in this instance" – Frank Merkel, Alantra

Michael Roesnick, managing director of PIA, stated that expansion into China was high on the list of strategic priorities. The company hopes to make use of the support of its new Chinese investors, specifically Joyson chairman Jeff Wang.

In preparation for the acquisition, PIA was spun out from its parent, Preh Group, which is also a subsidiary of Joyson. A PIA statement said the business plans to acquire another operational branch of Preh in the near future.

Cultural alignment
Preh was originally a German company that was bought from Aditron by private equity investor Deutsche Beteiligungs AG (DBAG) in 2003. It was purchased for an enterprise value of €120m comprising €40m equity and an €80m debt package arranged by Baden-Würtembergische Bank.

DBAG then sold Preh to Joyson in April 2011, initially retaining a 25% stake, but later divesting this by November 2012. The sale price was not disclosed but the company's revenues more than doubled under DBAG's stewardship to €345m.

Merkel explained this background was a factor in Quadriga and M&R managements' decision to sell to PIA: "Management felt it was a good strategic fit but also a good cultural fit. PIA has Chinese investors but has remained a German company."

Quadriga was initially attracted to the company due to the management team, who also invested in the MBO in January 2015. Quadriga took a majority stake with plans to expand internationally using the investment. Prior to this, Capexit had invested €4m in the company in a funding round closed in June 2003.

Production line efficiency
The Chinese government is providing substantial support to companies in the automation sector. This means Chinese corporates have the capital to look for good technology and a lot of this technology has been developed in the DACH region. Chinese money paired with German automation technology and efficiency is likely to continue to drive this consolidation trend.

However, many market participants have prejudices against foreign investors, particularly from the Far East. One common complaint is that the bureaucracy involved on their end means a frustrating and slow process. However, according to Merkel this was not the case this time. "The transaction was completed in a very timely manner, around three months from start to finish. There is a market perception that Chinese buyers can take a long time but that was not the case in this instance."

M&R was founded in 1989 in Graz, Austria, and now has five locations in Austria, Germany, Canada and China. It develops industrial automation products for the automotive, electronics, consumer goods and medical technology industries. The company employs more than 400 staff and generated sales of €70m in 2016.

People
Quadriga Capital – Jörg Mugrauer (partner).
PIA Automation – Michael Roesnick (managing director).
Joyson Group  – Jeff Wang (founder).
M&R Automation – Bernd Stütz (CEO).

Advisers
Equity  –  Alantra, Frank Merkel (M&A).

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