“High market valuations meant that last year we chose to focus on liquidity and to maintain strong discipline to avoid making acquisitions at inflated prices. We sold most of the mature part of the portfolio for a total value of around €10 billion and refinanced the younger investments thus returning in total around €5 billion to investors at a high multiple of cost. We were lucky in our timing.
In 2008 we expect the contraction in lending multiples will stabilise one turn of ebitda lower. We expect pricing to adapt downwards. But it will take some time as vendors still have to reduce prices and lower expectations.
Bank financing will be more difficult. You now have to work with several banks, a consortium to get deals done in our €1 billion to €4 billion range. Before you could just deal with the lead underwriter. Pre-deal syndication is critical now.
The pipeline is strong, but in a volatile environment, you cannot afford to get excited. You have to be sure your investments are good long-term transactions, consistent with the firm’s long-term objectives.” Dominique Mégret, chief executive, PAI Partners.
PAI partners put the for sale sign up outside most of its more mature investments in 2007 and found willing buyers to the tune of €10 billion, handing €5 billion back to investors. In March it sold Saur, a water and waste management business, to a consortium led by Caisse des Dépôts et Consignations and including Séché Environnement and Axa Investment Managers.
Elis, a European leader in the textile rental and well-being services industry; Vivarte, a specialist retailer of footwear and clothing in France, and Provimi, an animal nutrition company, were also successfully put on the block in 2007.
The firm elected to stay mostly on the sidelines when it came to replenishing the portfolio with fresh transactions in 2007, as it watched valuations hit historic highs.
But it did not abstain entirely. Lafarge Roofing, a construction business, and Kaufman and Broad, a French real estate developer, both joined PAI’s stable in the course of the year. The acquisitions underlined PAI’s strategy as it enters a more uncertain economic climate of buying businesses with long-term staying power.