Deal in Focus: Ardian buys ADA Cosmetics from Carlyle

Harriet Bailey
30 July 2014

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In a rare occurrence, “Mittelstand champion” ADA Cosmetics has selected a third private equity owner, preferring the asset class’s style of ownership. Harriet Bailey reports

Last week, Ardian purchased Carlyle's 88% stake in ADA Cosmetics, marking the Germany-based company's third round in private equity ownership.

According to Carlyle director Thorsten Dippel, ADA's management company prefers the private equity model. And thanks to the team's preference for the asset class, the deal, from first contact to signing, was completed in less than three months.

Carlyle made a reported 3x return on its original investment, taken from its Europe Technology Partners II vehicle. According to Ardian managing director Dirk Wittneben, the deal was definitely not worth more than €100m, despite reports to the contrary.

Capital for the latest transaction came from the Ardian Expansion Fund III, which closed in March this year on €450m with €50m in co-investments.

Wittneben says Ardian was attracted to the 300-strong company, which expects to see €53m in sales in 2014, because it occupies a niche market within the travel retail sector and has a high level of recurring sales. Both Ardian and the company's management team, who increased their previous 12% shareholding as part of the deal, plan to grow ADA organically and pursue a bolt-on acquisition strategy.

Kehl-based ADA recently set up a sales structure in the UK and last year secured a contract with a Chinese hotel chain. It now generates 7% of its sales in the Asian hotel market and is considering establishing local production facilities in the region. The cosmetics supplier has also earmarked a portion of the fresh capital for expansion of its product range and associated designs.

The 35-year old company manufactures and sells personal care products including shampoo, body lotion and soap for the hotel industry. It supplies almost 15,000 customers in 50 countries, with the majority of sales generated in France and in the DACH region, where it has a 35% market share. Its customer base is three to five star hotels and hotel chains such as Mövenpick and Relais & Chateau, as well as airlines and cruise ships.

From Mittelstand to Middle East
Germany-based Halder, a Mittelstand-focused private equity firm acquired ADA in a management buyout in November 2006. The GP used its Halder-Gimv fund to make the transaction, with a senior debt package provided by Investkreditbank, according to unquote" data. According to Dippel, Halder's main aim was to consolidate ADA's independence from the founding family Dahlmeyer and remove some of the complex structures in place. Five years later and with the process completed, Halder decided to sell and opened up an auction process.

"We invested in 2011 and our thesis was to help this German Mittelstand champion grow internationally," says Dippel. "Back then, we saw that ADA had a very stable business model, which would benefit from a network of contacts in other countries. Management favoured us because of the network we have in the hotel industry and in Asia."

Even Dippel admits the sale of ADA three and a helf years later, after growing revenue by 20% and profitability by 70%, was somewhat quicker than anticipated: "Typically, our holding period is more around five years but our investment thesis was to help the company strengthen its position in its core markets and expand its international presence and this went better than expected. ADA has delivered outstanding growth during the time we have worked with them." Carlyle was apparently approached by various private equity firms that asked if it would be willing to sell.

Here, Ardian's long-standing relationship with ADA played to its advantage, enabling the GP to win out over the competition. "We've been following the company for several years and we have had a good personal relationship with the CEO since 2006," says Wittneben.

Commerzbank and DZ Bank provided a full senior financing debt package for the deal, continuing their involvement with ADA. Similar terms were offered for both SBOs.

Advisers
Equity – Roland Berger Strategy Consultants, Wolfram Schmitt, Sven Kleindienst (Commercial due diligence); Wilkie Farr & Gallagher, Mario Schmidt, Jan Wilms, Maximilian Schwab (Legal); Deloitte & Touche, Egon Sachsalber, Tanja Fehr (Financial due diligence); Taxess Steuerberater, Richard Schäfer, Gerald Thomas (Tax, corporate finance); Aon Risk Solutions, Hansjörg Pezzei, Christoph von Lehmann (Insurance due diligence); ERM, Christopher Kiermayr, Frauke Kadasch (Environmental due diligence); Lincoln International, Dominik Spanier, Christine Weis (Debt advisory); Blue Corporate Finance, Lars Veit (M&A).
Vendor – Altium Capital (M&A); Clifford Chance (Legal).