KKR sees GfK sale stutter as buyers balk at valuation

Amy-Jo Crowley and Ryan Gould
04 March 2022

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KKR has halted its effort to sell German consumer research group GfK after failing to drum up sufficient interest from buyers due to a gap in price expectations and a lack of interest in the whole business, three sources familiar with the matter said.

Trade suitors including Kantar, NielsenIQ and NPD Group are no longer pursuing the asset, nor are private equity firms, the sources said.

KKR is now likely to shift its focus towards an initial public offering of GfK, which would likely to take place in the next 12 to 18 months, depending on market conditions, two of the sources and another source familiar with the matter said.

The US buyout firm, which took GfK private in 2017, had appointed Goldman Sachs for a possible sale of its 46% stake in the group, as reported last November. It was unclear whether majority shareholder and non-profit organisation Nuremberg Institute for Market Decisions (formerly GfK Verein) would be able to roll over its 54% stake at the time.

Valuation was a key consideration in the sale process, with KKR holding out for an EV/EBITDA multiple in line with the sale of Chicago-based Numerator and price expectations on the buyside closer to Bain Capital's acquisition of Kantar, according to one of the sources.

Kantar's EUR 1.4bn acquisition of Numerator was struck at 19.4x EBITDA, while Kantar was valued 8.3x 2018 EBITDA by Bain, according to Mergermarket data.

Part of the problem for buyers was that only part of GfK's business – the AI-driven analytics tool gfknewron - was comparable to Numerator, one of the sources said, adding that Numerator is considered a higher-quality asset overall. gfknewron was launched in September and now has more than 150 companies and brands globally signed up to the platform.

Further complicating the process, trade players that considered exploring a bid were more interested in parts rather than the whole of GFK, which comprises of media measurement, point of sale and reputational intelligence tools among others, the sources said.

Kantar and NielsenIQ were mainly interested in GfK's Panel business, while NPD also liked GfK's point of sale business, two of the sources said.

With full appetite for the process said to be "dead", conversations are now pointing towards an IPO.

A potential GfK listing could take place in the US, where there is growth potential and where information services peers are quoted, though majority shareholder NIMD will likely veer towards the Frankfurt Stock Exchange, as reported by Mergermarket.

European advertising players such as Publicis, WPP and Ipsos would be among GFK's publicly traded peers, one of the sources said.

KKR has turned around GfK through non-core divestments and by exiting low-margin ad-hoc research projects, as reported by Debtwire. At the same time, it has focused on standardisation of central functions and reduced headcount by 5,000 full-time employees to 8,000.

In May, S&P forecast adjusted leverage for 2021 of 7.2x EBITDA, which is expected to decline to about 5.5x by year-end 2022 due to increasing EBITDA and diminishing restructuring costs. The ratings agency assigned the company a B+ rating at the time.

Representatives for GfK, KKR and NielsenIQ declined to comment. NIMD, Kantar and NPD did not respond to requests for comment.