CD&R embraces ‘partnership deals’ with stakeholders

  • More CD&R capital deployed since 2009 involved stakeholders
  • CD&R teams up with furniture retailer to buy France’s BUT
  • CD&R inks 14th partnership transaction

Clayton Dubilier & Rice’s deal to team up with a unit of XXXLutz Group to buy French furniture retailer BUT marks its 14th acquisition since 2006 under an approach it uses to tap capital from sellers and other partners for acquisitions.

All told, about 55 percent of the capital it’s deployed since 2009 falls into CD&R’s “partnership transactions” bucket, according to a source familiar with the firm.

Also called “solution capital” deals, the approach evolved in recent years as a way to avoid more costly buyouts, the source said.

By working with sellers and other stakeholders to reinvest in the business, the approach helps CD&R invest in quality companies outside the competitive auction process.

“Solution capital has become a unique sourcing angle for CD&R, opening up new avenues of deal flow,” the source said.

To be sure, other GPs deploy a similar approach by offering sellers an ownership stake in many deals. It’s often described as offering a “second bite at the apple” when private equity firms exit a successful deal and deliver a gain to stakeholders that bought in at the beginning of the acquisition.

But CD&R appears to be embracing the approach for a larger part of its overall deal flow.

In one recent example, Ingersoll Rand participated in CD&R’s sale of Hussmann to Panasonic, a move that generated additional returns for the company. Ingersoll Rand sold the company to CD&R in 2011 but retained a stake.

CD&R worked with a strategic buyer, XXXLutz Group unit WM Holding, to buy BUT, the largest furniture retailer network in France, in a deal announced June 29. In 2015, BUT generated revenue of about $1.44 billion.

CD&R’s first solution-capital deal took place in 2006, with sellers Alberto Culver and the Bernard Family investing in Sally Beauty.

Last year, CD&R inked two portfolio company acquisitions in that vein: Vets First Choice, with an investment from shareholders of the company, and Motor Fuel Group, with participation from the company’s management team.

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Correction: This report has been updated to correct the spelling of Clayton Dubilier & Rice. 

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