HgCapital defies market gloom

HgCapital, a pan-European private equity firm, has defied the gloom in the M&A markets and carried out two deals in September: a co-investment in a Swiss fastenings business; and the sale of a German software business.

In mid-September, HgCapital joined with Swiss private equity investor Capvis in a €325m (US$461m) buyout of Koenig Verbindungtechnik (KVT), a fastenings and sealing technology products subsidiary of German-listed Klöckner.

Capvis had announced the deal with the same price of €325m in July and as sole acquirer, but with the investment being made from Capvis III, a €600m fund which closed earlier this year, an equity partner was always likely to be sought.

Also this year, Capvis acquired a majority stake in Bartec, a German provider of industrial safety technologies to companies in the oil, gas, chemicals, petrochemicals and pharmaceutical industries, from Allianz Capital Partners.

In the KVT deal, the two investors will “enjoy equal rights as investors” and the transaction is subject to approval by the relevant competition authorities. As part of the deal, HgCapital Trust, a listed trust giving investors the opportunity to participate in all of HgCapital’s investments, will inject about £5.5m.

Dietikon, Switzerland-headquartered KVT sells force fastenings, rivet systems, screw threads, adhesive products, related automation solutions and expanders for hydraulics and automotive applications, with clients based primarily in the engineering, automotive, electronics and transportation industries, as well as in medical engineering, aerospace and construction. The company generated sales of €120m in 2007.

In the same week, HgCapital also announced a 3.7 money multiple on the disposal of Germany’s Addison Software, a provider of business-critical solutions to accountancy firms and SMEs, to multimedia group Wolters Kluwer.

No price was disclosed for the sale, but HgCapital said that the transaction had generated a return of 3.7 times its original investment of €78m in June 2005 and a 55% internal rate of return. Nic Humphries, chief executive and head of TMT at HgCapital, said that the exit had returned £123m on an original cost of £33m to investors.

Funding for the original deal had been arranged and underwritten by NIB Capital Bank and PricewaterhouseCoopers, with Linklaters Oppenhoff & Radler advising.

While under HgCapital’s ownership, Addison acquired competitor PBSG and converted to a network of wholly owned sales centres, during which time its revenues and profits more than doubled and personnel grew from 175 to more than 340.

Last year, HgCapital made a 79% IRR and 2.9 times money multiple on the £500m sale of IRIS Software and Computer Software Group to rival private equity investor Hellman & Friedman. The exit netted a profit of £239m for investors.