SBOs, mega-deals fuel strong Q1 for French buyouts

Greg Gille
15 April 2021

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While the sharp quarter-on-quarter rebound of late 2020 was not replicated, the French market remained buoyant in Q1 this year as GPs upped their divestment pace, and large-cap deals hit a three-year high. Greg Gille reports

France was home to 65 PE buyouts valued at an aggregated EV of €15.6bn in the first three months of 2021, according to Unquote Data. The volume figure could not quite match the 75 deals recorded in Q4 last year, but it marked an 18% increase on the Q1 2020 figure and was comfortably in excess of the 55 deals inked per quarter on average over the past five years.

Fuelled by pent-up investment appetite and processes unlocking as the Covid-19 situation improved in the country in the late summer and autumn, the Q4 2020 volume figure was itself a sharp uptick on the 50 deals recorded in Q3, and more than double the volume seen in Q2 as the coronavirus outbreak hit. It was France's busiest quarter for buyouts since Q3 2019 and well in excess of most quarters in the past five years.

The Q1 2021 aggregate value of €15.6bn, on the other hand, is 45% higher than Q4's and the highest ever recorded by Unquote for the French market in a single quarter. Even though dealflow in the €500m-1bn EV bracket was back to normal historical levels (two transactions) following a high-water mark in Q4 (six deals), the four transactions seen in the €1bn+ segment boosted aggregate value significantly.

These included EQT entering exclusive negotiations to acquire medical diagnostics business Cerba HealthCare from Partners Group for around €4.5bn, as well as CVC clinching a majority stake in Cooper Consumer Health, a provider of generalist over-the-counter self-care pharmaceuticals, from Charterhouse in a deal valuing the business at €2.2bn.

Another trend that fuelled the strong Q1 performance was a sharp 75% uptick in secondary buyout (SBO) dealflow compared with Q4. With deals sourced from private sellers back to more normal levels, this meant that SBOs accounted for 53.8% of buyout dealflow in Q1 – significantly in excess of the 29% seen over the whole of 2020. GPs were clearly back in sell-mode after a trying 2020, with Unquote recording 71 exits from French investments in Q1, a figure last seen in Q3 2019 and significantly higher than most quarters in the past five years.

While Q1 was busy for French buyouts, the UK continued to be the most active buyout market in Europe. Activity continued to build on the Q4 rebound and set a new quarterly record of 98 deals for UK-based businesses, as reported – this was mostly fuelled by strong dealflow at the lower end of the market, with France's status as a mega-buyout hot spot resulting in a comparatively lower aggregate EV for the UK despite the significant volume differential.

With France still wrestling with a third wave of the pandemic, it remains to be seen if high volumes of dealflow can continue unabated. Notable processes underway include for food retailer Prosol; sponsors looking at the company include Advent, Bain, BC Partners and Hellman & Friedman, with a first round of bids expected in early April, Unquote sister publication Mergermarket reported. The business is being marketed based on an EBITDA figure of €230m and could fetch a 12-14x valuation.

Meanwhile, PAI Partners, Core Equity and Montefiore were said to be the three contenders competing in the second auction round to acquire a stake in testing, inspection and certification specialist Apave Group, Capital Finance reported in early April. Mergermarket reported that the Paris-headquartered group is being marketed based on EBITDA of more than €60m, and €900m in sales.

Processes that should come to market later in the year include high-end glass bottle manufacturer Saverglass, currently owned by Carlyle. The US private equity house mandated Rothschild to guide the sale, with the process set to begin in early Q2, according to Unquote sister publication Mergermarket. The business is expected to be sold based on EBITDA of around €130m, with the transaction likely to fetch an 8-10x multiple.

Private equity firms Eurazeo PME and Andera Partners are also said to be preparing their exit from In'tech Medical, a manufacturer of orthopaedic implants, Capital Finance reported. The business could be valued at more than €500m, with a sale contemplated for late 2021 or early 2022.