Public pursuit

Europe’s public markets are finally beginning to come under attack from private equity firms as they hold a gun to the corporate head, writes Andy Thomson.

A spate of recent hostile approaches for listed companies suggest that European private equity’s tentative attitude toward quoted assets may be undergoing a sea change. Swedish healthcare firm Capio (Apax Partners/Nordic Capital), Swiss packaging firm SIG Holding (CVC Capital Partners) and German data services business Techem (Macquarie European Infrastructure) have all recently felt the hot breath of financial investors on their collars.

Up to now, Europe has lagged way behind the US on the take-private front. According to information provider Dealogic, the first ten months of this year saw 72 public to private deals worth a total $178.6 billion (€139.8 billion) in the US compared with 44 worth $46.85 billion in Europe.

The main reason for this discrepancy has been the bigger regulatory stumbling blocks faced by Europe’s private equity firms compared with their American counterparts. For example, in Europe it is notoriously difficult to squeeze out minority shareholders (the level for an automatic squeeze-out in Italy, for example, is a whopping 98 percent). In addition, even when they are listed, European companies are often still controlled by family groups with suspicious views of private equity’s motives.

However, there are some signs of a more favourable wind blowing in European private equity’s direction within the PTP arena. In a number of jurisdictions, the squeeze-out level has been reduced to more realistic proportions in recent years. Target companies have also been demonstrating a greater willingness to open up their books to interested parties.

Such developments appear to have coincided with some eye-catching take-private transactions. Europe’s largest to date was completed in May this year when Dutch media group VNU was swallowed by AlpInvest Partners, Blackstone Group, Carlyle Group, Hellman & Friedman, Kohlberg Kravis Roberts and Thomas H Lee Partners in an €8.7 billion deal. In October, the UK’s Anglian Water agreed a £2.25 billion ($4.2 billion) bid from a consortium that included 3i and Australia’s Industry Funds Management.

The tendency noted at the outset for the region’s private equity firms to also now consider unsolicited approaches may indicate another dynamic at work. Given the pressing need to identify homes for the enormous weight of money that the asset class now has to invest, public stocks must be prepared to absorb their share. And if they’re not a willing recipient, they may be forced to become an unwilling one.