Quiet start to 2017 for DACH buyouts following Q4 flurry

GPs in the German-speaking region had a particularly hectic final quarter in 2016 compared to their European neighbours. According to the latest Private Equity Barometer, recently published by unquote" in association with SL Capital Partners, 36 buyouts were recorded in Q4 – almost double the figure seen in any one quarter since before 2014. Adding to that were a handful of buyouts completed in Austria and Switzerland, sending the quarterly total for the DACH region to 40 transactions worth an overall €11.4bn.

By comparison, the traditionally more active French market saw GPs announcing a total of 36 buyout transactions, down from 43 registered in Q3 last year. The UK, not surprisingly, edged the DACH region in volume terms, but only just: the region was home to 41 deals in Q4, again a slight drop compared to the 43 buyouts recorded in Q3. But even the UK could not match the value jump seen in the DACH region, despite settling at €9bn for the quarter (more than double the Q3 aggregate value). France, meanwhile, saw just half of the total value of deals recorded in the DACH region.

Looking specifically at Germany gives an inkling as to why: the country was home to five of the largest 10 transactions with a disclosed value in Q4, sending the aggregate value of the market to just below €10bn, or around two-and-a-half times the average for the previous eight quarters. The acquisitions of Atotech by Carlyle, Xella International by Lonestar and Acetow by Blackstone all fell into the €1bn+ bracket in Q4 and contributed more than €6bn to the total between them.

The Nordic region, driven by a busy final quarter for Sweden, was the only other European market to see an increase in buyout dealflow in Q4 last year, even though this was much less pronounced than in Germany: deal volume increased by five deals to settle on 24 in Q4, with the aggregate value of €3.2bn being nearly identical to the Q3 figure.

Foot on the brake
While Germany and its immediate neighbours finished 2016 in a buoyant fashion, the first few weeks of the new year have proven much more subdued on the buyout front. The region was home to 10 recorded transactions between January and February, equating to around 11% of the European buyout market in volume terms – against nearly a quarter in Q4. The picture was very similar in terms of aggregate value; so far in 2017, the DACH region has seen buyout transactions amounting to a combined enterprise value of around €1.3bn, far behind the €2.6bn and €2.3bn of aggregate value seen in France and the UK respectively.

This is not to say that the first few weeks of 2017 have been devoid of highlights. The most notable transaction to take place was Advent International and Bain Capital Private Equity's acquisition of German payment service provider Concardis in January. The GPs acquired the business in a deal valuing the company's equity at €700m, with Morgan Stanley, Goldman Sachs and HSBC providing an undisclosed credit facility estimated at 5.5x the company's EBITDA, unquote" understands. The deal was notable for marking a further step in the GPs' joint investments in the European payment services sector, following on from RBS Worldpay, Nets and ICBPI.

Meanwhile, on the exit side, the sale of Mauser showed how private equity houses can reap the rewards of the region's strong industrial sector. Clayton Dubilier & Rice (CD&R) sold its stake in industrial packaging producer Mauser Group to Stone Canyon Industries in early February, reaping $2.3bn in proceeds via an all-cash transaction managed by Goldman Sachs; CD&R had bought a controlling stake in the business from DIC for approximately €1.2bn in May 2014.

But this slow start when it comes to new investments further highlights the fact that local GPs may have to work particularly hard to put money to work following a good 2016 vintage on the fundraising front. According to recent figures from unquote" data, DACH-based private equity funds raised commitments of €9.5bn during 2016. Fund managers enjoyed 15 final closes, raising an aggregate €6.8bn, and seven first closings held for a total of €2.7bn. Add to that the significant appetite from international GPs, and auction processes for the rare assets making it to market could prove hotly contested for months to come.

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