GP Profile: PAI to step up DACH deal-making

Ralph Heuwing joined PAI in September 2020 from DAX-listed commercial and rail vehicle supplier Knorr-Bremse. He has a background in the industrials and business services sectors, where he has held both executive and consulting roles and now plans to leverage his expertise and network in these areas to drive the GP’s large-cap strategy.

The DACH market is a key part of PAI’s pan-European vision, Heuwing tells Unquote. “Our strategy is based on having a local presence in our respective markets, with seven offices across Europe and one in New York,” he says.

“We are in the process of setting up our mid-market fund, which will have a German presence. Philip Meyer, who is based in our Munich office and was previously a member of our large-cap team, will be in charge of the firm’s mid-market efforts in the region, while I focus on our large-cap activity,” says Heuwing. “The team’s size and presence across the two funds will increase the visibility of PAI in DACH.”

PAI Middle-Market Buyout Fund held a first close on €500m in October 2020, as reported by Unquote. The fund is targeting €700m and will focus on businesses with enterprise values of €100-300m, deploying equity tickets of €50-150m.

“There is a vibrant mid-market environment in the DACH region, with a large number of opportunities, including primaries and secondaries from smaller financial sponsors,” says Heuwing. “The mid-market fund will apply the same sector focus as our larger fund, leveraging the firm’s wider expertise, international platform and LP network.”

Georg Bundy joined the DACH team as investment director in 2020 from Hg Capital. The DACH team also comprises principal Andreas Kumeth, who joined PAI in 2014, with prior experience at Apax Partners and Waterland private Equity. PAI intends to expand the team further in the next six months, says Heuwing.

Dual strategy
PAI announced its first deal since Heuwing’s appointment in December 2020, acquiring real estate and facilities services provider Apleona in an SBO from EQT that valued the company at €1.6bn, as reported by Unquote. PAI invested via PAI Europe VII, its latest large-cap flagship fund, which held a final close in March 2018 on €5bn. The vehicle deploys equity tickets of €150-400m, targeting businesses with enterprise values of €300m-1.5bn.

“The Apleona acquisition is exactly the sort of company that we like to invest in,” says Heuwing. “It has scale, it is international and, from a business services perspective, it is very well positioned to respond to evolving client needs, such as increased demand for digital and integrated solutions. The company is also able to offer new and important services, such as helping clients reduce their buildings’ energy consumption and CO2 emissions.”

Heuwing says that PAI sees a range of opportunities in the business services sector. “In addition to facility management and professional services, we also look at businesses providing IT services, for example – not so much the pure software businesses or those with core software activities, but perhaps hardware or consulting with a content focus on IT.”

Besides newly acquired Apleona, the GP has two DACH-focused portfolio companies: dental clinic chain Zahneins; and insulation foam business Armacell, for which DACH is the largest market, although the company has its corporate headquarters in Luxembourg.

PAI acquired Zahneins in November 2019, buying a majority stake in a deal that saw Summit Partners exit its investment. The GP has provided capital for Zahneins to pursue a consolidation strategy in the dental clinic market, with the aim of strengthening the individual practices by incorporating them as part of a broader network.

In addition to benefiting from organic growth from trends towards energy efficiency and the substitution of legacy insulation materials, Armacell is also reviewing strategic acquisitions. The company aims to increase its geographic footprint and to expand its product portfolio in terms of the insulation materials that it offers. PAI invested in Armacell via PAI Europe VII in December 2019 in a buyout valued at €1.4bn from family office Kirkbi.

Building on expertise
PAI sees opportunities for both its large-cap and mid-market funds in the DACH region. “We will continue to invest in resilient businesses with exciting growth opportunities, both organically and through acquisitions, seeking to ensure they are not impacted by disruptions such as Covid-19, the macroeconomic environment or technological change,” says Heuwing. “Our current strategy has served us well and our LPs appreciate this.”

PAI intends to continue its focus on its core sectors of business services, food and consumer, industrials, healthcare, retail and distribution in its DACH region strategy. However, Heuwing identifies opportunities in business services and industrials in particular, where he has particular expertise and experience. “There are certain themes emerging in these sectors, such as automation, digitisation or energy efficiency,” he says. “Some of these themes are very apparent in our acquisition of Apleona and will continue to be important over the next years, favouring businesses and companies that bring solutions to these challenges. Take climate goals and the pressure to adapt: these trends provide tailwind to energy efficiency solutions. Or industrial automation: there is still a lot of potential to increase efficiency and quality and integrate digital workflows.”

PAI expects to see an increase in dealflow in the DACH region in the coming years. “In the next five years, we should see a visible acceleration of investments in the DACH region compared with the past five years,” says Heuwing. “We have now made three acquisitions in the past year and the pipeline is stronger than ever, so we expect to look at a few transactions per year across both our large-cap and mid-cap funds.”

• Tweet  
• Facebook  
• LinkedIn  
• Google plus  
• Send to  

• Topics
• GPs
• DACH
• France
• In Profile
• PAI Partners
• Germany
• Switzerland
• Austria