Deal in Focus: Equistone exits Hornschuch

Equistone scored a 3.5x multiple in October with the sale of Hornschuch to Benecke-Kaliko, a subsidiary of automotive supplier Continental, unquote" understands. The high return and a sale price of around €400m were also made possible due to the GP's push for innovation.

"We have a strong focus on innovation, both in terms of products and processes," says Michael Bork, Equistone managing director, who expects portfolio companies to present him with new ideas at board meetings. During the GP's tenure, the business brought to market new products such as foils with infrared and UV filters, dirt-repellent nano-surfaces and breathable artificial leather.

This strategy also helped Hornschuch through the financial crisis, Bork claims. As the global economy struggled, the budget cuts the company went through did not affect its research and development department. Equistone also seized the moment to pursue its buy-and-build strategy for the business, at a time when assets were more likely to go at a discount. The foil and artificial leather producer bolted on German competitor Kek in 2009 and US-based foil producer O'Sullivan Films in Q1 2010. "Our strategy usually includes an expansion to new markets, such as Asia or America," Bork explains.

Founded in 1898 and based in Weissbach, Hornschuch produces functional films for end consumers in the home decoration unit, as well as films and coated substrate materials for the automotive, furniture, marine and construction industries. It has three additional production sites: apart from Kek and O'Sullivan, Hornschuch acquired German coating business Stolzenau in 2013. Hornschuch has 1,800 employees.

We also examined the possibility of an IPO in Asia, but the overall conditions did not encourage us to pursue the idea" – Michael Bork, Equistone

Equistone, then known as Barclays Private Equity, acquired Hornschuch in a tertiary buyout from DZ Equity Partner and L-EA – the mid-cap funds of state-owned L-Bank – and Hornschuch's management in 2008. The debt was supplied by LBBW and Investkredit, with an equity stake of around 40% for a transaction understood to value the company in excess of €100m. The deal saw the management reinvesting for a 20% stake, which rose to 25% during the course of the investment.

DZ and L-EA acquired a joint minority stake in Hornschuch from Halder in 2006 for an estimated €65-80m, while Halder wholly exited its stake. Halder had supported the management buyout of Hornschuch from Decora Industries in 2001.

Despite being the third private equity company at the helm of the business, Equistone put its financial clout to good use to help the company deliver on its three-fold turnover increase.

With its €6bn in assets under management, the GP is considerably larger than the previous owners and almost doubled its initial equity investment of €48m in 2008 during the course of the holding.

The sale of Hornschuch followed a limited auction process organised by Macquarie, in which the seller approached a few potential buyers, including previous interested parties and new suitors. For a while, Equistone entertained the idea of taking the business public: "We also examined the possibility of an IPO in Asia, but the overall conditions did not encourage us to pursue the idea."

People
Equistone – Michael Bork (managing director).
Konrad Hornschuch – Hans-Hinrich Kruse (CEO).

Advisers
Equity – Macquarie (M&A); EY (corporate finance); Skadden Arps Slate Meagher & Flom (legal); PwC (corporate finance).

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