KKR to acquire BMC Software for $8.3bn

BY Fraser Tennant

In its largest acquisition since the financial crisis, leading global investment firm KKR is to buy BMC Software, a global leader in IT software solutions, in a deal valued at $8.3bn.  

BMC is being acquired from a private investor group led by Bain Capital Private Equity and Golden Gate Capital, and includes GIC, Insight Venture Partners and Elliott Management. The group has owned BMC since 2013.

Since then, BMC has reallocated hundreds of millions of dollars toward higher growth R&D and go-to-market initiatives to address the massive digital disruption that is taking place in industries around the globe. Furthermore, the company has helped companies accelerate their cloud adoption.

"With the support and partnership of our investor group, BMC significantly accelerated its innovation of new technologies and new go-to-market capabilities over the past five years," said Peter Leav, president and chief executive of BMC. "Our growth outlook remains strong as BMC is competitively advantaged to continue to invest and win in the marketplace.”

Acquirer KKR has a long record of supporting technology companies, having invested over $26bn in the TMT sector in the last decade. KKR also has experience with a number of enterprise systems software related investments, including Mitchell, Epicor and Calabrio.

"In an ever-changing IT environment that is only becoming more complex, companies that help simplify and manage this essential infrastructure for their enterprise customers play an increasingly important role," said Herald Chen, KKR member and head of the firm's technology, media & telecom (TMT) industry team and John Park, KKR member. "We are thrilled to partner with the talented BMC team to accelerate growth, including via M&A, building on BMC's deep technology expertise and long-standing customer relationships."

Financing for the transaction is being provided by Credit Suisse, Goldman Sachs Bank USA, Jefferies Finance LLC, Macquarie and Mizuho Bank.

“Customers can expect the BMC team to remain focused on providing innovative solutions and services with our expanding ecosystem of partners to help them succeed across changing enterprise environments,” added Mr Leav. “We are excited to embark on our next chapter with KKR as our partner."

The KKR/BMC transaction is subject to regulatory approvals and other customary closing conditions and is expected to be completed in the third quarter of 2018.

News: KKR to acquire PE-backed IT management business BMC in reported $8.3bn deal

PE giant Silver Lake acquires Zoopla parent in £2.2bn deal

BY Fraser Tennant

In a move that is expected to give a massive boost to the PropTech sector, US private equity (PE) firm Silver Lake is to acquire ZPG, parent company of Zoopla, one of the UK’s largest internet property search companies.

The deal will see the PE giant pay £2.2bn for ZPG, a leading residential property data and software provider with a range of products, including, in addition to Zoopla, the PrimeLocation, uSwitch and SmartNewHomes websites.

Since its initial public offering in 2014, ZPG has evolved and diversified and made significant progress toward becoming the platform of choice for consumers and partners engaged in property and household decisions. Founded in 2007, ZPG's websites and apps attract over 50 million visits per month and over 25,000 business partners use its services.

“ZPG is a great growth technology company,” said Simon Patterson, managing director of Silver Lake. “It has established strong positions in property classifieds, home and financial services markets by innovating in product and marketing. We are delighted to partner with Alex Chesterman, one of Europe’s leading and most accomplished technology entrepreneurs, to invest in ZPG’s continued growth.”

Founded in 1999 and headquartered in Silicon Valley, Silver Lake is the global leader in technology investing, with an estimated $39bn in combined assets under management and committed capital.

“I  am firmly of the belief that ZPG will benefit from Silver Lake’s technology expertise and global network, which will help accelerate our growth,” said Alex Chesterman, founder and chief executive of ZPG. “The terms of the acquisition represent an attractive premium that recognises the quality of ZPG’s businesses and the strength of its future prospects and allows shareholders to realise today in cash the potential future value of their holdings.”

The acquisition is subject to conditions, including receipt of merger control approval from the European Commission and the Financial Conduct Authority (FCA), and is expected to be completed during the third quarter of 2018.

Mr Chesterman concluded: “I am very excited about the opportunity this deal offers to our employees, customers and partners as we move to the next stage of ZPG’s development and growth.”

News: Zoopla, Uswitch and Primelocation owner ZPG sold for £2.2bn

2018 a strong year for PE – report

BY Richard Summerfield

Building on an impressive 2017, 2018 looks set to be another strong year for the private equity industry, according to the Akerman 'PErspectives on U.S. Middle Market Private Equity' report, based on data from PitchBook.

Not only did the industry accumulate record levels of dry powder in 2017, but the US tax reform and persistently low interest rates were also beneficial, helping to drive record or near-record buyout and exit activity. The report also notes near-historical highs in several other categories for sub-$500m US buyout funds, including the number of deals and add-on deals closed, number of closed exits and fundraising.

Furthermore, US funds with less than $500m under management set record-highs in 2017 for total deal value, add-on deal value and deal exit value.

Overall fundraising for funds between $500m and $1bn grew last year. The sector raised a record $39bn , up from $35bn in 2016, and a total of 117 funds closed. Fundraising is expected to continue to grow in 2018, provided that the economy remains healthy.

Deal activity was down slightly in 2017, with 1133 transactions completed worth a combined $44.8bn, from 1258 deals worth $51.2bn in 2016. However, dealmaking is  expected to grow in 2018, particularly in the mid-market, due to “heightened interest in Section 1202 of the Internal Revenue Code, which allows PE funds to avoid the 23.8 percent federal capital gains tax on dispositions of qualified portfolio companies”, according to Carl Roston, co-chair of Akerman’s Corporate Practice Group.

“In today’s market environment, PE fundraising and transaction volumes have maintained healthy levels thanks to a host of favorable market dynamics. Factors driving this PE activity include low interest rates, a growing economy, the reduction in marginal federal income tax rates, the relative outperformance of domestic middle market private equity compared to other asset classes, benign credit markets, and the rebalancing of portfolios by institutional investors,” said Mr Roston.

He added: “With growing competition and robust valuations for quality buyout targets, increasingly there is a premium on sophisticated deal sourcing through industry relationships, as well as on cost-effective and efficient processes that facilitate closed deals, collaborative relationships with management teams and prudent risk management.”

Report: PErspectives on U.S. Middle Market Private Equity

PE investment into CEE reached €1.6bn in 2016, reveals new data

BY Fraser Tennant

A vibrant market typified by strong interest from GPs and LPs, Central and Eastern Europe (CEE) companies saw private equity (PE) and venture capital investments totalling €1.6bn in 2016 – the highest since 2009 – according to new data.

In its ‘Central and Eastern Europe Private Equity Statistics 2016’ report, Invest Europe reveals that the CEE region’s total PE fundraising amount rose 62 percent year-on-year to €621m in 2016, as larger fund managers returned to the market, and in line with a Europe-wide increase in fundraising for the asset class.

In addition, European investors from outside the CEE region provided 58 percent of the total capital raised, while funding from investors outside of Europe grew nearly nine-fold, particularly from the US. Long-term private investors contributed 43 percent of the overall fundraising amount, with funds-of-funds the largest source of capital, accounting for 27 percent, followed by pension funds with 16 percent.

In terms of investment capital, 2016 was mostly focused on Poland, followed by the Czech Republic, Lithuania, Romania and Hungary respectively. The most targeted sector was consumer goods and services, which attracted 23 percent of the investment value, while information and communication technology (ICT) followed on 22 percent.

“PE activity in Central and Eastern Europe was strong in all key areas last year,” said Robert Manz, managing partner at Poland’s Enterprise Investors and chairman of Invest Europe’s CEE Task Force. “Investments, divestments and fundraising all demonstrated a vibrant market with robust interest from GPs and LPs.

The report also notes that the total number of companies divested in CEE increased to a record high of 112 in 2016, mainly driven by exits of venture-backed companies. Furthermore, sale to another PE house – the secondary market – became 2016’s most utilised exit route in terms of amount, accounting for €476m of value at historical investment cost and 46 percent of the region’s total divestment value.

Finally, trade sale remained the most common route in terms of the number of companies divested at 37. Poland was the largest market in the region for exits, at 35 percent of divested amount at cost, followed by the Czech Republic, while ICT was the region’s most important sector for divestments, including two out of the four largest exits last year.

Mr Manz concluded: “The region’s fund managers are hard at work maximising buying and selling opportunities, while institutional investors are showing renewed appetite for the region.”

­­­­Report: Central and Eastern Europe Private Equity Statistics 2016

Russian oligarch swoops for Holland & Barrett in £1.8bn deal

BY Fraser Tennant

Helping itself to a big slice of the growing £10bn health and wellness market, investment fund L1 Retail has acquired Holland & Barrett from US private equity firm The Carlyle Group for £1.8bn.

Acquired by Carlyle in 2010 as part of its purchase of Nature's Bounty Co. (now NBTY), Holland & Barrett has experienced growth of over 90 percent in the years since Carlyle first invested in the brand. Founded in 1870, Holland & Barrett has stores in more than 1150 locations worldwide, a significant rapidly expanding online ecommerce capability and a global employee base of more than 4200 associates and staff.

"We are delighted to now be in partnership with the L1 Retail team and its advisory board of internationally-renowned retailers,” said Peter Aldis, chief executive of Holland & Barrett. “We have upgraded much of our core store portfolio to concept stores to deliver additional in-store theatre and increased customer engagement. New products launched through our ethical sourcing programme have also been a key growth driver helping to underpin our substantial investment to gain presence across an increasingly global health and wellness market.”

The fund acquiring Holland & Barrett, L1 Retail, is the retail investment arm of the LetterOne Group, an international investment business headquartered in Luxembourg. Controlled by the Russian billionaire Mikhail Fridman, the acquisition of Holland & Barrett is the first deal undertaken by his L1 Retail vehicle (further diversification has seen Mr Fridman set up L1 Technology and L1 Health).

"Holland & Barrett is a clear market leader in the UK health and wellness retail market, with attractive growth positions in other European and international markets, and growing online presence, with a leading customer loyalty programme and 10 million active cardholders,” said Stephan DuCharme, managing partner at L1 Retail. “We believe that the company is well positioned to benefit from structural growth in the growing health and wellness market and has multiple levers for long term growth and value creation."

Advising Carlyle during the sale to L1 Retail was Goldman Sachs, Houlihan Lokey, UBS, PwC, Latham Watkins LLP and OC&C. The transaction is expected to close by September 2017 subject to customary regulatory approvals. 

Mr Aldis concluded: “Carlyle has been a great partner for Holland & Barrett over the last few years and we look forward to building on this track record as we enter the next chapter with L1 Retail."

News: Holland & Barrett sold for £1.8bn to Russian billionaire