Deal in Focus: Colony Capital et al. exit French chain But

The transaction represents a 6x EBITDA multiple and comprises a senior debt package provided jointly by a consortium of six international banks. The latest deal is practically identical in value to the one through which the three GPs had entered the business eight years ago (€550m including €400m of debt at the time).

The 2008 deal saw Goldman Sachs and Colony Capital each acquire 48% of the capital from Darty (formerly Kesa Electricals), with the remaining 4% going to OpCapita (then Merchant Equity Partners). The three GPs bought the business via the Decomeubles Partners holding company.

A source close to the deal speaks of a challenging beginning at the time of the investment. "A lot of people asked the investors what the reason was for the business to exist," the source says. "They probably wouldn't ask this question today. Over the holding period, But was able to gain market share from its two key competitors and to reaffirm its position in the French furniture sector, with currently more stores than Conforama in the country."

But currently holds a 13% market share in the French furniture sector, compared to 9% prior to the GPs' intervention, the source argues. The group's presence has also significantly increased in the country, with 303 stores at present - including 12 opened last year - instead of 180 prior to 2008, coupled with a 6,500 headcount and a €90m EBITDA. Revenues are understood to be somewhere in the region of €2bn.

The GPs outsourced a large portion of the group's furniture production to Asia to cut down manufacturing costs

As the three investors entered the group in 2008, their first major goal was to cut down product prices starkly, as those had "gone too high relative to competition," the same source explains.

"They wanted to deliver a better product at a much better quality, but for a good price," the source adds. "They exited lower margin products like computers, and focused instead on higher margin products like furniture and decorative accessories."

In addition to this, the GPs outsourced a large portion of the group's furniture production to Asia to cut down manufacturing costs.

Work was also done on the promotional side, with fliers and brochures distributed twice as often but with half as many pages to keep costs down. This was complemented by a much more aggressive marketing campaign, both in brochures and in-store.

Amendments were also made to the stores' layouts and design. "The group invested in and renovated every single store," the source says. "More attention was paid to how products were placed in the stores - the company tried to arrange them in a more logical and sensible way in order to drive cross-purchasing by customers."

The Lutz card
Once the decision was made to exit the group, Goldman Sachs and Rothshchild were mandated for the sale process.

"There were both strategic and financial interests in the bidding," the source says, "but CD&R were by far the most appealing candidate, as they did a huge amount of preparatory work, developed a proper business plan, and skilfully brought in a strategic commercial partner in the business - Austrian furniture giant XXXL Lutz, currently generating €3.9bn of revenues - to add value to it."

In 2012, the Austrian group, via its investment vehicle WM Holding, had already attempted to acquire But for an estimated €400-450m - an offer that was rejected at the time.

Its partnership with the CD&R investment fund in the present deal, however, gave it the necessary credibility and enabled it to reach an agreement with the exiting shareholders, the source argues.

People
OpCapita - Joshua Spoerri; John von Spreckelsen.
Colony Capital - Sébastien Bazin; Jean-Romain L'Homme.
Goldman Sachs - Tom Bauwens.

Advisers
Equity - Lazard, Nicolas Constant, Jean-Philippe Bescond, Bertrand Moulet (M&A); Clifford Chance, Fabrice Cohen, Marianne Pezant (legal).
Vendor - Goldman Sachs, Céline Méchain, Edouard Panié (M&A); Rothschild & Cie, Frank Cygler (M&A); Bredin Prat (legal).

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• Topics
• Exits
• France
• Consumer
• Buyouts
• Deal in focus
• France
• Goldman Sachs
• OpCapita