Deal in Focus: Cobalt makes 3.5x on TCS sale to Meeschaert

Alice Tchernookova
06 February 2017

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Cobalt Capital's sale of TCS follows a seven-year holding period in which the vendor oversaw a nationwide acquisitive growth strategy. Alice Tchernookova delves into the details

Cobalt Capital made 3.5x money in January on the sale of its majority stake in French mail service TCS to a consortium led by Meeschaert Capital Partners. Acquired through a primary leveraged buyout just over seven years ago, the business made steady progress with the Cobalt's backing.

Established in Bordeaux some 30 years ago, TCS is an express delivery company specialising in fixed-schedule and daily small parcel and document shipping for the banking, insurance, health, administration and pharmaceutical industries. As the GP entered the group in 2009, it was a privately held business that had steadily grown under the stewardship of founder and owner Jean Clavel.

"The owner had already started building a national network before we entered the group," says Christophe Fercocq, managing partner at Cobalt. "He was the first one in his field of activity to be willing to cover the entire country, which distinguished him from his competitors."

As we saw we could easily keep enhancing returns for our investors, and got along very well with the owner, we decided to extend the holding period" – Christophe Fercocq, Cobalt

Cobalt purchased a 75% stake in TCS, while Clavel retained a 25% share alongside management. The deal, in which TCS was valued at around €30m, was supported by a debt package featuring a senior A and B tranche co-arranged by Societe Generale and Crédit Lyonnais, and syndicated by CIC and BCME. The transaction was financed with equal amounts of debt and equity, according to unquote" data.

Today, the business has 550 employees, a network of 30 branches in France, and around 35,000 delivery points. It services around 2,000 clients, including French national electricity provider EDF and national railway company SNCF.

Cobalt invested through the Cobalt Investment FCPR, which closed on €150m in 2004. According to the GP, only one divestment is yet to be made from the vehicle. Other investments from the fund have included containers and packaging group Barat in 2010, and industrial supplier group Mertz.

During the holding period, TCS's revenues almost doubled, and now stand at €93m with a 9-10% EBITDA margin. Four add-on acquisitions, altogether representing an added value of around €30m, notably helped the group expand. An important addition was GLS, a Royal Mail subsidiary acquired in 2011 that helped the group develop its activities in eastern France. Activities were previously largely concentrated in the south-west, gravitating around the group's Bordeaux headquarters.

In 2013, TCS also closed what marked its third Cobalt-backed bolt-on by acquiring Bip Bip Courses (BBC), a sector competitor reporting €10m revenues at the time.

Building up, branching out
With the addition of BBC, TCS's revenues grew from €56m to around €90m. Overall, the group registered 2-4% year-on-year growth over the seven-year holding, according to Fercocq. With Cobalt, the group also opened up to new types of clients within sectors including healthcare, pharmaceuticals and administration. It also recruited 20-30 executives and appointed a CFO to manage acquisitions.

The sale came "a little later than originally planned", says Fercocq, but generated a 3.5x money multiple and an IRR in the region of 18-20%. "It was a very pleasant deal for which we received excellent feedback. As we saw we could easily keep enhancing returns for our investors, and got along very well with the owner, we decided to extend the holding period." The vendor says there was a moderately competitive auction process involving both funds and trade buyers, in which Meeschaert ultimately prevailed.

The original debt package – largely used to finance acquisitions – has now been fully reimbursed, with the new transaction supported by a senior debt package made up of three tranches. The A and B tranches were arranged by Crédit Agricole and LCL, while Muzinich arranged the C tranche. According to another source close to the deal, the debt represents a 3-4x EBITDA multiple, and includes a significant acquisition line.

The same source added that the enterprise value for the current deal is in the region of €50-100m. Meeschaert led the round and was accompanied by a consortium of minority investors, including Idia Capital Investissement, Swen Capital Partners and two Crédit Agricole-managed entities. Founder Clavel also retains a minority share in the group. Once bolt-on opportunities have been fully exploited in France, the new GP will look to expand the group in the Netherlands and then Belgium and Luxembourg, a source at Meeschaert tells unquote".

Meeschaert used its Private Equity Fund for the acquisition – a buyout vehicle that closed on €150m in 2016 and focuses on French lower-mid-cap businesses with turnovers in the region of €20-200m. TCS marks the second investment completed with the fund after the acquisition of sterile packaging maker Sterimed last year.

Advisers
Equity – EY, Pierre Jouanne (financial due diligence); Neovian Partners (commercial due diligence); Marsh, Humbert d'Autichamp (insurance due diligence); Hoche Société d'Avocats, Jean-Luc Blein, Jennifer Pernet (legal); LL Berg, Grine Lahreche, Nathalie Jacquart (legal).
Vendor – Transaction R, Pierpaolo Carpinelli, Philippe de Montreynaud (corporate finance); DLA Piper, Jeremy Scemama, Elise Aubert (legal); Eight Advisory, Stéphane Vanbergue, Joris Toulet (financial due diligence); Roland Berger Strategy Consultants (commercial due diligence).
Debt – Jones Day (legal).