DACH region ends Q2 on high with flurry of deals

Last month, unquote" highlighted how quiet the German buyout market had been in the first half of the second quarter, and questioned whether the levels of activity witnessed in the first three months of this year could be sustained. A late surge in the final weeks of June had a welcome, if moderate, impact on the volume total.

But it was the amount of equity deployed in the country through a quartet of significant transactions that put the DACH region firmly back on the map. With an estimated aggregate value figure of €7.15bn, Q2 saw a performance almost on par with the busy corresponding period last year, although dealflow was nearly halved.

The first heavy hitter in the final days of Q2 2015 came courtesy of Cinven. The GP acquired a majority stake in Synlab Group, a German provider of laboratory analysis for human and veterinary medicine, from BC Partners. The transaction gave Synlab an enterprise value of €1.8bn, providing BC Partners with an estimated 2.7x return following a six-year holding period. This hefty secondary buyout is part of a platform play for Cinven: the firm will look to merge the business with French medical diagnostics laboratory Labco, which it acquired from 3i in a €1.2bn deal in May. At the time of the Labco deal, the GP stated it was looking to consolidate the "highly fragmented" European laboratory diagnostics market.

Slightly lower down the value scale, Nordic Capital followed up with the buyout of German wheelchair and mobility products company Sunrise Medical from Equistone – enterprise value was understood to stand around the €450m mark. Rumours of Equistone's exit began to surface in May with IK Investment Partners, Nordic Capital and two family offices reportedly bidding for the company.

Equistone had bought the business from Vestar Capital Partners just three years prior. Lindsay Goldberg Vogel also sold German packaging company Weener Plastic Packaging Group to 3i after a similarly short holding period last month: the deal saw the company change hands after three years for an enterprise value of €250m.

Finally, the end of June saw CVC Capital Partners step up to the plate to sign the largest buyout of the year so far in Germany as the GP acquired beauty product retailer Douglas from Advent International for an estimated enterprise value of €2.8bn. The deal put an end to the company's IPO plans: the transaction was announced one week after Douglas stated its intention to float. Advent had taken Douglas private in 2013 for around €1.5bn. At the time, the German retail group operated five divisions, including the Douglas perfumeries. The business has since realigned its focus towards its core beauty products, selling off jewellery retailer Christ and acquiring French perfume brand Nocibé from Charterhouse.

Stick to what you know
The sheer amount of capital deployed across this handful of deals vindicates our earlier analysis of the German market: opportunities are definitely there for the taking, especially at the larger end of the spectrum. The short holding periods preceding three of the aforementioned transactions also highlights the that fact fund managers have been skilful in taking advantage of a clear window of opportunity to return capital to their LPs.

However, this surge of activity in June also showed that sourcing primary transactions in the mid-market and up remains a challenge: all of the aforementioned assets changed hands between GPs. By the midpoint of the second quarter, unquote" had highlighted that around two-thirds of the German buyouts recorded between April and mid-May had been primary investments, split fairly evenly between corporate spin-offs and more traditional deals sourced from private vendors. The past few weeks have seen this proportion come down to less than 50%, mirroring sourcing trends witnessed in the other main European markets.

Thankfully, other divestments show that GPs on the sell-side have also been successful in securing significant trade sales. Boston-based Abry Partners agreed to sell its 49% stake in German data centre operator E-shelter to NTT Communications for a reported enterprise value of €742m, for instance. HgCapital also sold SimonsVoss, a German producer of electronic locking and access systems, to Irish trade buyer Allegion for €210m.

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• Topics
• DACH
• Buyouts
• Germany
• Cinven
• Nordic Capital
• CVC Capital Partners
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• Unq2015July