Friday 22 February 2008 BUY & BUILD ACTIVITY REACHED RECORD LEVELS IN 2007 – IT WILL BE TOUGHER IN 2008 A buoyant M&A market and plentiful debt allowed Private Equity-backed companies to make a record number of follow-on acquisitions in 2007 – this will be hard to repeat in 2008 A ten year study on the buy and build strategies of private equity owned portfolio companies in Europe, released today by PPM Capital, the mid- market private equity firm, in conjunction with Mergermarket, has found that 2007 saw a record number of 385 follow-on acquisitions (“Builds”) by private equity-backed businesses (“Buys”). The 385 transactions represent more than a 10-fold increase on the number completed in 2000. Two high profile examples are the restaurant group Tragus that acquired Ma Patter’s and Strada and leisure group Merlin Entertainment that in 2007 bought Madame Tussauds to add to its Gardaland, Aquatica and Legoland acquisitions. No. of follow-On Acqusitions ("Builds")* by PE-backed firms ("Buys") 450 385 400 339 350 300 245 250 200 165 150 100 82 45 43 50 33 5 15 0 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 * Builds w orth more than €5 million or w ith >€10 million of sales Commenting Neil MacDougall, Managing Partner of PPM Capital said: “We have seen the continued growth of buy & build strategies in recent years, with 2007 representing a peak in both the volume and speed of follow-on investments by private equity-backed portfolio companies. Undoubtedly some of this simply reflects the strong M&A market in the first half of last year, but given the current debt market conditions, we predict that 2008 will be the year of focus on portfolio companies generally.” “If private equity firms are to continue to achieve their target returns in turbulent times they will need to concentrate on creating value within their portfolio companies by using their expertise to manage and grow those businesses. One of the key ways to do this is via a buy and build strategy.” “Historically many follow-on deals were funded with debt so the current turmoil in the debt market will make the pursuit of buy and build transactions harder. Portfolio companies that are not over-leveraged and have a small and supportive bank syndicate may still have capacity to pursue an acquisition strategy. However, newer portfolio businesses with higher leverage, or older deals that were refinanced to repay their shareholders, may not be able to use debt to fund buy and build transactions. Clearly private equity houses may choose to fund follow-on deals with equity but for businesses with less debt capacity they may have to be more creative and work with trade buyers by merging businesses or forming joint ventures as a means to create value.” -ENDS- For further information please contact Equity Dynamics: Jane Kirby, 07825 326 441 Corinna Vere Nicoll, 07825 326 440 Notes to Editors PPM Capital is a leading source of private equity finance for mid-market transactions. An established office network operates in London, Munich, Paris and Chicago with 26 local investment professionals. Although PPM´s investment portfolio is broadly based, the firm has established a reputation for its expertise in the healthcare, retail, leisure, business and financial services sectors and a number of successful investments have recently been completed. Recent Investments €176.5 million acquisition of orizon AG from GL Aktiengesellschaft in 2007 GBP107.5 million acquisition of Paramount Restaurants from Starlight in 2006 GBP183 million acquisition of Azzurri Communications from 3i in 2006 €230 million acquisition of Histoire d´Or from Apax-Partners in 2006 €320 million acquisition of Jost Group from Alpha Investors in 2005 Acquisition of BST Safety Textiles from Mr. Johann Berger in 2005 Recent Divestments €1.3 billion sale of Phadia to Cinven in 2007 Sale of BST Safety Textiles to the WLRoss Group in 2006 Sale of OREFI Participation to Investcorp in 2006 €190 million sale of Upperpoint Distribution to Close Brothers PE in 2005 €393 million sale of Barracuda Group to Charterhouse Capital Partners in 2005 €765 million sale of Astron Group to RR Donnelley in 2005 €345 million sale of Finnish Chemicals to Kemira Oyj in 2005 Recent Awards Real Deals/BVCA Private Equity Awards 2007: Large Deal of the Year Award (Phadia) ACQ Finance Awards for Excellence 2007: Large Deal of the Year (Phadia) ACQ Finance Awards for Excellence 2007: German Private Equity Firm of the Year European Venture Capital Journal 2006: Buy-Out Realisation of the Year by Trade Sale (Astron) PPM is committed to adding value to portfolio companies and has an extensive track record of successful portfolio management. ´Buy and Build´ transactions are designed to support the growth of portfolio investments through strategic acquisitions.
Pages to are hidden for
"PPM Buy _ Build Monitor 2007"Please download to view full document