Deal in Focus: FSN's DKK 1.2bn EET Europarts buyout

FSN Capital succeeded in acquiring EET in a deal worth DKK 1.2bn after winning out over competition from EQT and Segulah. FSN now follows CVC Capital Partners, Capidea, and Alipes as the company's fourth private equity owner.

Local media reported Alipes had set EET on a dual-track process last year with the aim of a public listing in Copenhagen. However, following Altor-backed OW Bunker's bankruptcy, the uncertainty of how the public would view a private equity-backed IPO saw Alipes switch its focus to exiting through a private transaction.

FSN won the ensuing auction process, which reportedly saw the GP outbid interest from Axcel and Nordic Capital as well.

"We understood the company quite well, and spent a lot of time on the company, but of course in an auction process it is fair to say that nine times out of 10 it is the price that gives you the prize," says FSN partner Thomas Broe-Andersen.

According to unquote" sources, the deal was leveraged between 2x–5x with financing provided by one of the major Swedish banks.

Although it came down to price in the end, FSN knew EET and its management team from having been involved in the process that eventually saw the company sold to Alipes in 2009. The GP continued to track the business and was keen to bid for it again when IPO plans were scrapped.

"It is a unique company that is just performing much better than any of its competitors," Broe-Andersen says when asked what attracted FSN to the business. "Given the size of the company compared to its competitors, its scale gives it a very clear advantage. They are professional, very large and a clear European leader – so it is an obvious consolidator in the industry," he adds.

Secondary buyouts have become increasingly common in the Nordic market in recent years. With suggestions private equity is finding it more difficult to sniff out value and whispers of an asset bubble forming, questions about how to generate value from an investment increase with every SBO iteration.

The key criticism of secondary buyouts is how much further can a company grow after already having been in private equity ownership. Having been first acquired by CVC in 1997, for EET this question is paramount. "We have done secondaries before with success," says Broe-Andersen. "Companies go through various phases. This company has been performing well over the past five years, but the consolidating aspect is far from finished. We believe that it will be a very good investment for us as well"

Consolidation and expansion
EET Europarts currently has a 1–2% share of the European market, and FSN plans to help the company consolidate its position even further, in a market Broe-Andersen considers highly fragmented.

Having followed a strategy of growing organically as well as through acquisitions, EET's new owner will look to continue in the same vein. FSN plans to expand the company's operations geographically in Europe, as well as looking to move into new product segments.

The GP has secured room to finance acquisitive growth as part of the deal, but expects there will still be room for other private equity firms to add value when FSN eventually exits EET.

"I think it can be an obvious PE case or potential IPO when we sell it in the future, because we will not have been able to roll up the whole industry in Europe nor on a global scale, so it is just a matter of the next owner continuing to consolidate," says Broe-Andersen.

"You have seen that a number of times – where you have a number of PE owners owning the company for four to five years and the company can still continue – it is the same with EET."

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