Q3 2019 EMEA PE-backed M&A Roundup

By Margarida Veloso

Global M&A deal value decreased 37% vs Q2 2019 and 24% YOY

Global M&A deal value amounted to USD905bn during Q3 2019. This figure represents a 37% decrease in comparison to the previous quarter and a 24% decline YOY. The YTD value of M&A activity worldwide reached USD3,742bn, a 13% drop relative to YTD Q3 2018.

Although not sponsor-backed, for measure, the largest announced transaction this quarter was the London Stock Exchange’s acquisition of Refinitiv for USD27bn.

Global PE-backed M&A experienced a slip in both value and volume of deals

Global PE deal value followed the same trend as global M&A. During Q3 2019, PE deals reached USD179bn, which represents a 34% decrease in comparison to Q2 of the same year and a 10% decrease in comparison to Q3 2018. The YTD value of PE decreased 8% in comparison to the previous year.

We can verify that there was also a slight decrease in the volume of PE deals announced this quarter to 6,239, versus the same quarter of the previous year with 6,472 transactions.

Undoubtedly, the most valuable PE transaction over the course of this quarter was the institutional buyout of Genesee & Wyoming Inc. by Brookfield Infrastructure Partners. The total consideration of the transaction is USD8.4bn and still pending. The runner-up in terms of value was the acquisition of Cobham plc by AI Convoy Bidco Ltd for USD5bn.

Deal value in the EMEA region decreased 19% YOY

The EMEA region in its entirety exhibited a YTD PE deal value decrease of 19% compared to 2018.

  YTD Q3 2019 value (USD,m) YTD Q3 2018 value (USD,m) % change YTD Q3 2019 volume
Europe 177,306 221,742 (20%) 2,799
Middle East 7,400 2,835 261% 40
Africa 200 2,500 (92%) 47
EMEA 184,906 227,077 (19%) 2,886

 Middle East displays a rising trend in deal value

In the Middle East, YTD PE value reached USD7.4bn which represents a YOY increase of 261%. The momentum in the Middle East is signaling a recovery from the slowdown suffered after the collapse of the The Abraaj Group in 2018.

The total YTD PE deal value in Africa was of USD200m which represents a 92% decrease compared to YTD Q3 2018.

The EMEA region shows some discrepancies in the trends of its several sub-regions – Europe, Middle East and Africa. Considering that Europe is evidently the most significant market of the region (both in terms of deal value and volume) the analysis of the trends in the EMEA region is predominantly led by events which took place in Europe.

19Q3 PE.png

PE activity in Europe reached the lowest volume of deals in the last two years

In Europe, PE activity in Q3 totaled USD54.2bn. This value represents a decrease of 26% compared to Q2 and a decrease of 17% YOY. The YTD value of deals amounts to USD177.3bn at the end of Q3 2019, suffering a 20% reduction in comparison to YTD Q3 2018. Once again, this trend is also applicable to the volume of deals. In Q3, there were 777 PE-backed M&A deals in Europe – one of the lowest levels observed in recent years. However, this effect is not fully reflected with respect to size as there were several high-value deals announced in this quarter.

UK dominates both in volume and value of PE-backed deals despite uncertainty related to Brexit

The UK outperformed both in terms of volume (317) and value of deals (USD17.1bn). Germany ranked second with USD15.9bn in deal value and France third (USD6.1bn). Concerning deal volume, the UK is followed by France (67) and Germany (65).

Germany rallies after slow start

With 8 of the most valuable PE deals in the EMEA region, Germany recovered its position as one of the countries with the highest level of deals just behind the UK. The total of Germany for Q3 2019 is USD15.9bn which represents a YOY increase of 95%. Because 2018 was the strongest year in terms of PE activity for Germany since the financial crisis, the decrease in values at the beginning of the year could be interpreted as a return to more sustainable levels. However, the spike in Q3 sparks debate about the future level of PE deal-flow in Germany – will it continue increasing at the current rate or will it regress to more sustainable levels?

Notable transactions announced in Q3 2019 – EMEA

Eleven USD1bn+ deals in the EMEA region

During this quarter, there were several high-profile transactions which contributed to the increase in the level of value of deals. During the quarter under review, 11 deals exceeded the USD1bn threshold.

Some investors, such as Macquarie Infrastructure and Real Assets, Advent, Bain, Blackstone and Ardian, were involved in more than one of these jumbo deals in the EMEA region.

Increased strategic cooperation

Taking into account the deals announced in Q3, namely the ones hereafter detailed, there is an observable trend that PE-firms are increasingly investing in creating cooperative relationships with strategic partners to ensure the success of the business – this is highlighted in the case of Currenta:

  • Cobham plc -Aerospace communication systems and aircraft components manufacturer

Date announced: 25/07/2019

Value: USD5bn

Status: Pending

Deal type: Institutional buy-out – 100%

Acquirer: AI Convoy Bidco Ltd

Acquirer Advisors: Advent International Corporation, GSO Capital Partners LP, Blackstone Tactical Opportunities Advisors, LLCBlackstone Group Inc.

Target Country: Great Britain

Overview: Advent International Corp., a US PE group is acquiring Cobham ­– a UK-based defense company – through its subsidiary AI Convoy Bidco Limited. Cobham creates products for the aerospace and defense industry. Concerning the financials of Cobham, approx. 64% of its annual revenues are derived from defense.

  • Osram Licht AG – Lamp and lighting equipment manufacturer

Date announced: 03/07/2019

Value: USD4.5bn

Status: Pending

Deal type: Institutional buy-out – 100%

Acquirer: Luz (C-BC) Bidco GmbH

Acquirer Advisors: Carlyle Group LP, Bain Capital LP

Target Country: Germany

Overview: Bain Capital Private Equity and The Carlyle Group jointly own Lux (C-BC) Bidco GmbH, the holding company acquiring Osram. Bain and Carlyle will buy-back the publicly traded shares of Osram, privatizing the company. At the time of announcement, the offer included a 27.7% premium over the average stock price. Since Osram management supports the move, this deal is considered a friendly takeover.

  • Currenta Geschaftsfuhrungs-GmbH – Analytical laboratory services holding company

Date announced: 06/08/2019

Value: USD4.0bn

Status: Pending

Deal type: Institutional buy-out – 100%

Acquirer: Macquarie Infrastructure and Real Assets (Europe) Ltd

Acquirer Advisors: Macquarie Infrastructure and Real Assets (Europe) Ltd

Target Country: Germany

Overview: Currenta manages and operates infrastructure, energy supply and other services across chemical parks in Germany. Bayer and LANXESS will sell their stakes to MIRA. Bayer and MIRA have reached an agreement on long-term service and supply contracts, reinforcing the desire to continue to work closely in future. LANXESS will provide operational support for the transition period of the deal. Bayer, which owns 60% of Currenta, expects to sell its stake before the financial year end while LANXESS, which owns 40%, will complete the sale by April 2020.

  • Advanced Computer Software Group Ltd – IT managed services provider, online enterprise cloud software developer

Date announced: 12/08/2019

Value: USD2.4bn

Status: Announced

Deal type: Institutional buy-out – 50%

Acquirer: BC Partners LLP

Acquirer Advisors: BC Partners LLP

Target Country: Great Britain

Overview: Advanced is the third largest software group in the UK. It is held by Vista Equity Partners which is selling 50% of its stake to BC Partners. Vista Equity will retain 50% of the target and resume an active role in the management of the company.

Increased buyout interest for software companies

The multiple for the Advanced Computer Software transaction is about 20 times earnings before interest, tax, depreciation and amortization, and aligned with comparable transactions in the market such as KKR’s acquisition of Exact Software. It is important to notice the growing interest of buyout funds for software companies. This may be an indicator that the SaaS sector will continue its growth trajectory into 2020.

Data used in this assessment is based on the analysis of announced deal volumes and values as recorded by Zephyr as of September 30, 2019. For the explicit display of data concerning the Middle East region and Africa, data from the Refinitiv deals intelligence – Regional Deals Matrix – as of September 19, 2019 was used. This data was also used for the analysis of trends in the EMEA region. The date range for Q3 2019 is deals announced between 01/07/2019 – 30/09/2019 inclusive. Deal value calculations are based on M&A deals for which value is disclosed.

 

Editor: Eric Peghini

Author: Margarida Veloso

 

References:

https://0-www-bvdinfo-com.lib.unibocconi.it/BvD/media/reports/Global-M-A-Review-Q3-2019.pdf

https://markets.ft.com/data/league-tables/tables-and-trends

https://www.refinitiv.com/en/products/deals-intelligence

https://www.defensenews.com/top-100/2019/07/25/uk-defense-company-acquired-for-5-billion/

https://www.mirafunds.com/au/en/footer/press/bayer-and-lanxess-to-sell-their-stakes-in-currenta-to-macquarie-infrastructure-and-aeal-assets.html

https://www.ledsmagazine.com/leds-ssl-design/packaged-leds/article/14035873/bain-capital-and-carlyle-make-public-market-play-to-acquire-osram

https://www.ft.com/content/1c1855fc-bce5-11e9-b350-db00d509634e