KKR buys majority stake in ERM from Omers, AIMCo

The deal is expected to close in Q3 2021. It is valued at $2.85bn, equating to a 19.6x EBITDA, a source familiar with the situation told Unquote.

Unquote sister publication Mergermarket reported in January 2021 that ERM's owners had hired advisers to begin a sale process for ERM. Earlier this May, Mergermarket reported that final round bids were due for ERM in a process that saw the company marketed based on EBITDA of £130m. The company was expected to generate a valuation in the £2.5-2.6bn range, corresponding to a 20x entry multiple, sources told Mergermarket.

Sponsors participating in the earlier stages of the process included Silver Lake, CVC Capital Partners, Carlyle Group, Partners Group, GIC and CPPIB, Mergermarket reported. Bidders in the later rounds of the process included KKR and Blackstone, as well as Belgium-based investment holding company D'Ieteren Group, Mergermarket later reported.

KKR is investing via its Core Investments Strategy, which targets long-term investments that are not limited by a fund lifecycle, with anticipated holding periods of up to 15 years. The strategy was established in 2017 and has $12.4bn in assets under management. The GP previously deployed the strategy to invest in Benelux-based software platform Exact.

KKR is a long-standing client of ERM's consulting services, the GP said in a statement.

ERM's management team and partners will retain a position as minority shareholders in the business.

Jonathan Mussellwhite, senior managing director and head of Europe at Omers, told Unquote that Omers' original investment was structured as a bilateral off-market transaction, and that Omers was convinced of the company's strong brand and reputation, as well as the outlook for ESG.

Omers held a stake of 40% in the business, Mussellwhite said, with AIMCo owning a stake of almost 20% and the management holding the remaining balance.

Asked about the rationale behind the timing of the exit, Mussellwhite told Unquote: "We don't have the same pressures as traditional funds, so we can really look at the opportunities our portfolio companies have, investing for the longer term and helping them through difficult periods. It is always about what is right for the business and the management team."

The company has gone through a succession of series of cycles of around five to six years in which it has brought in a change in investor, Mussellwhite added, and its partner-owned structure meant that a further sponsor-backed deal made sense for the next stage of its growth.

Omers is continuing to pursue an active investment strategy in Europe, Mussellwhite told Unquote. "Omers is fully committed to Europe and the diversification of its investment portfolio globally," he said. "We want to continue to grow and develop our European private equity business, and we are actively recruiting to build our team."

"We are looking to do one to two deals per year in Europe, focusing on multinational and international businesses in the UK, France, Benelux and DACH," he said. "I am optimistic that you will see more announcements soon." Asked whether the firm is likely to undertake primary buyouts or secondary or sponsor-backed deals, Mussellwhite said that the GP will look at all opportunities where there is value creation potential.

Previous funding
3i backed ERM's first MBO in a £200m deal in 2001, with ICG providing mezzanine debt. The company employed 2,500 staff at the time.

Bridgepoint acquired ERM in a €446m deal in 2005, taking over 3i's 52% stake and the 48% stake owned by 400 ERM employees, according to Unquote Data.

Charterhouse Partners acquired a 55% stake in ERM from Bridgepoint in 2011 in a deal that valued the company at $950m.

Omers acquired ERM from Charterhouse in a $1.7bn SBO in June 2015. At the time, the company posted revenues of $940m, compared with $483m when Charterhouse first invested in 2011. The deal was backed by rollover debt from Deutsche Bank and HSBC.

Company
Founded in 1971 and headquartered in London, ERM is a sustainability consultancy providing services in areas including health and safety, risk and social consulting. It provides sector-specific services, covering areas including finance, pharmaceuticals and technology. Its clients include businesses operating in these sectors, in addition to energy, mining and minerals businesses.

The company had 4,800 staff in 2015 and now has 5,500 staff across 150 offices in 40 countries. ERM posted revenues of £799m for the financial year ending in March 2020, compared with £717m in the previous year.

People
KKR – Mattia Caprioli, Tim Frank, Ken Mehlman, (partners); Franziska Kayser (managing director); Rami Bibi (director).
ERM – Keryn James (CEO).
Omers Private Equity – Jonathan Mussellwhite (senior managing director, head of Europe); James Frankish (director).

Adviser
Equity – JP Morgan (corporate finance); Lazard (corporate finance); Allen & Overy (legal); Ropes & Gray (legal); EY (financial due diligence).

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