Lower mid-market buyouts hit €2bn record in January

Greg Gille
27 February 2013

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France and the UK led Europe in January in the lower mid-market, which saw 18 such transactions across Europe worth a combined €1.9bn - the largest monthly value witnessed for a year. Greg Gille reports

Deals valued in the €50-250m range do not necessarily attract headlines, and were indeed upstaged by larger deals announced at the start of 2013, such as the €1.13bn secondary buyout of Italy-based Cerved by CVC. But the lower mid-market proved a fertile ground for deal-making in January: unquote" recorded 18 buyouts in that space, amounting to a combined enterprise value of nearly €1.9bn. This marks a healthy uptick from December, when only 13 transactions worth an overall €1.6bn were announced in the segment. More importantly, these are the highest monthly figures recorded in more than a year for the lower mid-market, although July 2012 came close (17 deals worth €1.8bn).

In a more surprising development, France was at the forefront of this lower mid-cap offensive – a welcome rebound after a very sedate 2012, which saw the country's buyout market left in the dust of its largest European neighbours.

France was home to no less than five lower mid-cap buyouts worth a combined €430m. Equistone Partners notably entered negotiations to acquire food machinery business Groupe Brétèche, while Alpha was granted exclusivity to buy clothing brands Vertbaudet and Cyrillus from PPR subsidiary Redcats for a total enterprise value of €119m.

Much was made of the protracted political and fiscal uncertainty hampering business in France last year. But it would seem that the end of the budget proceedings in the last few weeks of 2012 allowed GPs to start signing letters of intent again: after a very lacklustre October and a dry spell in November, France was home to three lower mid-cap buyouts worth an overall €360m in December.

The UK was on par value-wise with France in January, but this came on the back of only two transactions. US private equity firm Cerberus Capital Management acquired tenanted pub group Admiral Taverns from Lloyds Banking Group for £200m. Sun European Partners meanwhile bought a majority stake in label maker Paragon Print and Packaging from Equistone, LDC and the management team – the deal valued Paragon at £150m.

Germany was also in the leading pack with three lower mid-cap deals transacted in January, for a combined enterprise value of around €260m. Capiton AG acquired manufacturer Kautex Maschinenbau in an SBO from Steadfast Capital valued at €50-100m. Steadfast generated a 3.6x money multiple and an IRR of approximately 25% on the sale.

All eyes might now be set on the large-cap space, with many in the industry wondering whether 2013 will see a return of the mega-buyout. But smaller players, and perhaps more importantly the many European SMEs in need of financing, would no doubt welcome the prospect of activity picking up further down the value chain.