PE fundraising strong in CEE reveals new report

BY Fraser Tennant

Private equity (PE) fundraising for Central and Eastern Europe (CEE) hit the highest annual level in a decade in 2018 with €1.8bn, according to a new report by Invest Europe.

In ‘2018 Central and Eastern Europe: Private Equity Statistics’, the association reveals that buyout funds in CEE raised a total of €1.1bn last year, while the region’s venture capital (VC) funds attracted over €500m for the second year running.

Furthermore, PE investment into companies across CEE reached €2.7bn, the second-highest amount ever achieved, following 2017’s record €3.5bn. The number of companies backed increased by 50 percent year-on-year to almost 400, also the second-highest level on record. This was driven by a sharp increase in CEE companies supported by VC.

The number of PE and VC-backed exits in CEE also reached an all-time high in 2018, with 128 companies divested. This represented a total value of over €1bn for the fifth year running, measured at historical investment cost. Poland accounted for over half of this total exit value with €575m.

“The strong levels of private equity fundraising, investment and exit activity in Central and Eastern Europe in 2018 demonstrate that the region continues to develop as an attractive investment destination,” said Robert Manz, chair of Invest Europe’s Central and Eastern Europe Task Force. “Global investors see that private equity and venture capital investment is one of the best ways to access the region’s robust markets and high-growth companies.”

In addition, Poland saw CEE’s highest amount of PE investment with its companies receiving €850m in total last year, while the Czech Republic saw €767m invested into its companies via PE and VC funds. Hungary had the highest number of companies receiving investment with over 190 backed last year, almost half of the regional total.

In terms of sectors, biotech and healthcare saw the highest share of CEE’s PE investment, with 32 percent of the total value in 2018, while consumer goods and services companies received 27 percent of funding.

The report also notes that the CEE region also has strong technology start-up credentials, including Czech cyber security group Avast – which was 2018’s largest tech initial public offering (IPO) on the London Stock Exchange at a valuation of £2.4bn.

Report: 2018 Central and Eastern Europe: Private Equity Statistics

Bain buys 60 percent stake in Kantar

BY Richard Summerfield

Bain Capital is to acquire a 60 percent stake in data analytics firm Kantar from debt-laden British multinational advertising and public relations company WPP.

The deal values Kantar at about $4bn. The sale will give WPP agencies, including Ogilvy and Wunderman Thompson, an infusion of funds to reduce their debt and rebuild. WPP said it will use about 60 percent of the proceeds of the sale to cut its net debt to the low end of a targeted range of 1.5-1.75 times core earnings for 2020. The rest of the money will be returned to shareholders. The deal is expected to close in early 2020, subjected to approval from WPP shareholder and regulatory approval.

Private equity giant Bain was engaged in an auction for Kantar and is believed to have overcome Apollo Global Management, Platinum Equity and Vista Equity Partners in the final round of bidding.

“Kantar is a great business and we look forward to working with Bain Capital to unlock its full potential,” said Mark Read, chief executive of WPP. “As a strategic partner and shareholder in Kantar, WPP will continue to benefit from its future growth while our clients continue to benefit from its services and capabilities. I would like to thank Eric Salama, his team and everyone at Kantar for their tremendous contribution to WPP – a contribution that will continue as we develop the business together. This transaction creates value for WPP shareholders and further simplifies our company. With a much stronger balance sheet and a return of approximately 8 percent of our current market value to shareholders planned, we are making good progress with our transformation.”

“Kantar is a market leader in many areas and we are excited to be partnering with its management team and WPP to build on this remarkable platform for growth,” said Luca Bassi, a managing director at Bain Capital Private Equity. “We see many opportunities for expansion and will invest in technology to expand the company’s capabilities and reinforce its global leading position.”

“Our new ownership structure presents a great opportunity for Kantar, our employees and our clients,” said Eric Salama, chief executive of Kantar. “In Bain Capital we have a partner who shares our ambition, brings relevant expertise and – with WPP – can help us accelerate our growth and impact for clients. We are focused on delivering ‘human understanding at scale and speed’ and the ‘best of Kantar’ more consistently. We will do so by investing more in talent and by becoming a more technology-driven solutions provider.”

News: Bain Buys Huge Stake in Market Research Business for $4 Billion

Merlin goes private

BY Richard Summerfield

A consortium including private equity giant Blackstone, the Canada Pension Plan Investment Board (CPPIB) and KIRKBI, ​​​​​an investment vehicle controlled by the founding family of the Lego brand, have agreed a deal to acquire Merlin Entertainments for around $7.5bn.

The deal, which will take Merlin off the stock market, is one of the biggest European private equity deals in recent years, and will allow the company to invest more in its assets and deliver on growth plans.

The 455 pence per share offer is the third attempt by the group led by KIRKBI to take Merlin – the theme park operator which runs the Legoland attraction, Madame Tussauds and the London Eye – private, having unsuccessfully proposed a price of 425 pence.

Once the deal has been completed, KIRKBI will own 50 percent of Merlin, while the other half will be jointly owned by Blackstone and CPPIB. The deal will see the consortium assume $1.1bn of Merlin’s outstanding debt.

Shares in Merlin have suffered in recent years; falling below their IPO price following a 2015 accident on a rollercoaster at the firm’s Alton Towers theme park and the 2017 terrorist attacks in London. In May, activist investor ValueAct Capital called on Merlin to take itself private given the level of investment needed in the company. Those calls appear to have been heeded.

For Blackstone and KIRKBI, the deal to acquire Merlin is something of a homecoming. In 2005, Blackstone paid $105m to acquire the company, with KIRKBI also taking a stake in the firm. The company launched a $5.6bn IPO in 2013 which saw Blackstone’s stake in the company valued at over $1bn.

“As the long-term owner of the Lego brand and as a strategic shareholder in Merlin since 2005, we have great pride and passion for this amazing company, its management team and its employees,” said Søren Thorup Sørensen, chief executive at KIRKBI. “With a shared understanding of the business and its culture, we believe that this group of investors has the unique collective resources necessary to equip Merlin, including the Legoland Parks and Legoland Discovery Centres, for their next phase of growth. We are committed to ensuring Legoland and the other activities in Merlin reach their full potential, which we believe is best pursued under private ownership, in order to deliver fantastic experiences to visitors of all ages around the world.”

“We are pleased to partner with KIRKBI and CPPIB to acquire a business we know very well,” said Joe Baratta, global head of private equity at Blackstone. “We are prepared to commit the substantial resources required to support the long-term objectives of Merlin, which will require significant investment to ensure its long-term success. We believe we are uniquely placed through our Core private equity strategy to make this investment alongside our partners at KIRKBI and CPPIB. We look forward to backing Nick Varney and his strong management team in driving Merlin into the future.”

News: Lego family, Blackstone take Merlin private in $7.5 billion deal

Blackstone acquires US logistics assets from GLP in $18.7bn deal

BY Fraser Tennant

In a deal which is the largest-ever private real estate transaction globally, multinational private equity (PE) firm Blackstone has acquired three US logistics assets from transportation solutions provider GLP for $18.7bn.

The transaction totals 179 million square feet of urban, infill logistics assets – almost double the size of Blackstone’s existing US industrial footprint. Drilling down, Blackstone will acquire 115 million square feet for $13.4bn and its income-oriented non-listed real estate investment trust (REIT) – Blackstone Real Estate Income Trust (BREIT) – will acquire 64 million square feet for $5.3bn.

One of the leading owners of logistics properties, Blackstone’s real estate business has approximately $140bn in investor capital under management. It operates around the globe with investments and people in North America, Europe, Asia and Latin America. The firm has acquired over 930 million square feet of logistics globally since 2010.

“Logistics is our highest conviction global investment theme today, and we look forward to building on our existing portfolio to meet the growing e-commerce demand,” said Ken Caplan, global co-head of Blackstone Real Estate. “Our global scale and ability to leverage differentiated investment strategies allowed us to provide a one-stop solution for GLP’s high quality portfolio.”

Singapore-based GLP is a global investment manager with $64bn assets under management (AUM) in real estate and PE funds. Its real estate fund platform is one of the largest in the world, spanning 785 million square feet.

“GLP was able to leverage our deep operating expertise and global insights in the logistics sector within four years to build and grow an exceptional portfolio,” said Alan Yang, chief investment officer of GLP. “We are proud of the business our team built and are confident it will continue to flourish under Blackstone’s leadership. We are looking forward to expanding our footprint in the US to continue to seize key opportunities in the US market.”

Frank Cohen, chairman and chief executive of BREIT, concluded: “These properties are a complementary addition to our stabilised commercial real estate portfolio, which is oriented toward our highest conviction themes, such as logistics.”

News: Blackstone bets big on Amazon, e-commerce with $18.7-billion acquisition

PE investment in Europe hits record €80.6bn, reveals new report

by Fraser Tennant

Private equity (PE) investment in European companies reached a new record of €80.6bn in 2018 – a 7 percent year-on-year increase – according to a new report by Invest Europe.

According to the association’s ‘2018 European Private Equity Activity Report’, PE  funds invested in over 7800 companies last year – also a new record – with 86 percent of the total made up by small and medium-sized enterprises (SMEs).

The report also reveals that investment increased across all segments of PE, including larger buyouts, mid-market investments and growth capital, with venture capital backing for European companies hitting an all-time high of €8.2bn.

“Record investment levels show that private equity and venture capital can identify attractive companies with the capacity to grow whatever the broader political and economic climate,” said Michael Collins, chief executive of Invest Europe. “Europe is packed with high-potential and innovative businesses, and private equity is increasingly seen as a supportive partner for companies looking to expand.”

In addition, fundraising remained strong in 2018, with €97.3bn committed to European PE – the highest total since the financial crisis. Investors from outside Europe contributed 46 percent of total fundraising. Pension funds remained the largest investor group, accounting for almost one-third of total fundraising.

In terms of European venture capital fundraising, a new high of €11.4bn was reached, up 11 percent from 2017. Private investor interest increased with family offices and private individuals accounting for 20 percent of capital raised, which was closely followed by funds of funds and other asset managers on 19 percent. The proportion contributed by government agencies fell to 18 percent, the lowest share in a decade.

“European venture capital has truly come of age thanks to a combination of strong returns, a growing band of billion-euro-plus tech and life sciences start-ups, and a string of high-profile exits, including the listing of music streaming service Spotify and the sale of mobile payments platform iZettle,” said Nenad Marovac, chair of Invest Europe. “There are eager strategic buyers and open markets around the world for Europe’s top-quality start-ups. The result is increasing appetite among global institutional investors who see European venture as the way to invest in some of the world’s most dynamic and entrepreneurial companies.”

The report covers PE activity on over 1400 firms, directly verified by the fund managers via the European Data Cooperative (EDC). The EDC holds data from over 3300 European PE firms on 9000 funds, 75,000 portfolio companies and 255,000 transactions since 2007.

Report: 2018 European Private Equity Activity Report