Arx exits KVK in trade sale to Sika

Nicole Tovstiga
06 October 2017

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Arx Equity Partners has sold its stake in Czech construction materials manufacturer KVK Holding to Swiss speciality chemicals company Sika.

The deal generated a 3.7x cash-on-cash return multiple and an IRR of 20%, Arx said.

The Warsaw-based private equity house acquired KVK and its subsidiary, Parabit Technologies, in August 2010.

Initially the private equity house held a 75% stake in KVK, and held 70% at the time of selling to Sika, managing partner Brian Wardrop told unquote". In the firm's succession process, the younger owner and CEO rolled over his equity stake and increased his shares. Sika wholly acquired KVK in the deal.

Arx did not engage with a sell-side adviser but was in discussions with three strategic buyers six months before inking the deal with Sika.

Wardrop noted that Arx held KVK for somewhat longer than anticipated, primarily to integrate add-on acquisitions. The construction business is cyclical and the macro-dynamics in the Czech and Slovak markets are currently strong, making it a good time to exit, he said.

Under its ownership, the business grew its management team and enhanced its internal processes. It inked a first add-on acquisition deal in 2011 with Czech industrial firm KRPA Dehtochema. The firm also bought Penopol the same year, expanding its product range.

In the original deal, the GP deployed capital from its third CEE-focused fund for an undisclosed amount, buying out the retiring owners in a proprietary succession deal.

The Arx CEE III fund closed on €102m in September 2009 and is currently exiting portfolio companies. It is expected to be fully realised by 2020, according to Wardrop.

Company
Founded in 1963 and headquartered in Prague, KVK produces mortars, wall renderings, construction adhesives and fillings for mortar joints. It also operates two quarries, which produce stone products for various applications.

The company's subsidiary, Parabit, produces oxidised and modified bitumen hydro insulation sheets for waterproofing flat roofs, foundations and basements.

KVK reported a turnover of €40m in 2016.

People
Arx Equity Partners – Brian Wardrop (managing partner).