IK engineers billion-Euro return in secondary sale

European buyout firm CVC Capital Partners has bought engineering company DYWIDAG-Systems International from Industri Kapital, delivering a triple digit IRR and a double digit return on its investment after two years.

European buyout firm Industri Kapital has sold engineering company DYWIDAG-Systems International to CVC Capital Partners. Terms were not disclosed, although a banking source said the company had been sold for well above a billion euros.

The buyout firm registered a three digit IRR, a double digit return on its investment and the operating profit margin rose from 8 to 12 percent during Industri Kapital’s ownership, the source said.  

Industri Kapital expanded the company acquiring 14 suppliers to the construction and mining industries including Artéon and Galaxy in France, Contec Bausysteme in Germany and Soprofint in Chile.
DYWIDAG-Systems International works on infrastructure projects, such as bridges or slope stabilization as well as in mining roof support and tunnel construction. It anticipates sales of around €700 million ($962 million) this year.  Before the acquisition by Industri Kapital, DSI generated around €300 million in sales in 2004. The growth is equivalent to 35 percent per year since slightly before Industri Kapital acquired the company in July 2005 for €175 million. 

Detlef Dinsel, a partner with Industri Kapital, said the company had had good underlying organic growth and enjoyed a boost from IK’s buy and build strategy. “There are a lot of opportunities out there for this company which has a good story to tell, after we have left, in the next stage of investment,” he said.

“Each of the markets DSI operates in is quite small and it has an interesting position in all of these. The company is also well protected in the event of downturn and is significantly more robust because of its spread. “ said Daniel Schmitz, senior managing director of CVC Capital Partners in Frankfurt.

Some elements of its portfolio will not be affected in a global recession, the US, for example, “is not going to stop mining coal any time soon.” It also produces big infrastructure projects like bridges which are often counter cyclical to the economy at large. The company demonstrated this when it grew through most of the last recession from 2000-4, where only one of its years was flat, he said