One Plus One Equals 19X For Alpine Equity

EUROPEAN DEAL OF THE YEAR: Alpine Equity Management AG

Target : AmannGirrbach

Price: Undisclosed

Return Multiple: 19x, with a 51 percent IRR

You could say that the Austrian buyout firm Alpine Equity Management AG really sank its teeth into dental supply company AmannGirrbach to win Buyouts European Deal of the Year Award for 2011.

Over the course of a seven-year holding period, Alpine Equity transformed a family-owned Austrian supplier of bridges and crowns from €7 million ($7.5 million) revenue in 2003, with a single German distributor, into an integrated, €46 million-revenue corporation with more than 80 distributors around the world.

By the time Alpine Equity exited the business last year, selling it to mid-market buyout shop TA Associates of Boston, at an undisclosed price, the Austrian firm was able to claim a 19x return on its investment and a 51 percent IRR.

Omer Rehman, a managing director and partner at Alpine Equity, said the €110 million firm specializes in internationalizing small companies in German-speaking companies. Target companies typically have €20 million to €30 million in revenue and in most cases are family-owned, without sophisticated financial management but with good growth potential, Rehman told Buyouts. “That’s our job, to internationalize those companies.”

Alpine Equity is itself a bit of a startup, one of a handful of buyout shops operating in Austria. Organized originally in the 1990s as the equity-investing arm of a regional bank, Hypo Landesbank Vorarlberg, the unit was carved out in 1999, rebranded Alpine Equity, and began to bring in outside investors, including other banks, private foundations, insurance and wealthy individuals, plus management. The firm started private equity fundraising in 2000.

“We were one of the first entrepreneurs developing the market in private equity in Austria,” Rehman said. The firm typically writes equity checks of €5 million to €10 million in the portfolio companies it invests in; there is almost no competition in that segment, at the lower end of the mid-market, he said. “We are not focusing on a special industry,” he said. “We’ve found a perfect niche. We have an active source market and an active exit market.”

Alpine Equity exclusively sources its deals through a personal network of local contacts of its four investing pros; Rehman said he spends half his time on the road in places such as Zurich, Munich and Vienna to stay in touch with business prospects, bankers and

The firm was three years old at the time of this deal. Amann Dental GmbH was an Austrian producer of products and supplies for use in dental offices. Alpine Equity acquired a minority stake in 2003, providing €1 million of growth capital and €1 million of mezzanine debt. The arrangement was good for 30 percent control of the company.

Like many of Alpine Equity’s targets, Amann Dental was a family owned business, Rehman said. “They knew the market and the product. They did not know how to structure and finance growth.”

Apart from lacking a management structure to drive growth, Amann Dental was entirely dependent on a single customer, the German distributor Girrbach Dental GmbH. Likewise, Girrbach Dental relied entirely on the manufacturing capabilities of Amann Dental. In 2004, Alpine Equity struck a deal to combine the two companies to form AmannGirrbach.

The add-on had the effect of diluting the firm’s stake to 26 percent control, but the deal included a “dragalong” provision that would enable the company’s ultimate sale by the minority owner, Rehman said. In the meantime, the combination of Amann’s manufacturing capability and Girrbach’s network for distribution and sales provided the optimum setup for internationalization.

“We did heavily internationalize the company and invest a lot in R&D,” he said. Over the course of several years, Alpine Equity expanded AmannGirrbach’s distribution network. Today the company has a network of more than 80 specialist distributors, concentrated in western Europe but also in North and South America, Africa, Australia and Asia.

Alpine Equity also oversaw AmannGirrbach’s rollout, in the financial crisis year of 2009, of an affordable and easy-to-use CAD/CAM system that bolstered the company’s process for developing products. The technology gave the company the potential to grow 15 to 20 percent annually, rather than the conventional dental market, which has a growth rate of seven percent.

By 2010, with the credit crisis beginning to ease, Alpine Equity began to consider its opportunity for an exit. “The market condition at that time was bad,” Rehman said. But the firm thought the rocky conditions might work in its favor, he said. “This was a perfect time for an exit. Health care is pretty stable, and the company was doing extremely well.”

The company had grown to €46 million in revenue in 2010, from €7 million in 2003, and EBITDA had grown to €8.5 million from less than €1 million. Alpine Equity began shopping for an investment bank to run its exit auction, ultimately selecting William Blair & Co. LLC of Chicago, Rehman said. “AmannGirrbach was doing so well we thought a global bank would extract a higher value than a regionally focused bank.”

Both strategic and financial buyers showed interest, Rehman said. In October, mid-market buyout shop TA Associates announced its agreement to buy Alpine Equity’s stake in AmannGirrbachas well as a portion of the stakes of the other owners. The other owners continued to have seats on the company’s board.

The exit represented a vindication of Alpine Equity’s strategy in buying small companies with an eye toward growth, Rehman said. “When you hit €50 million to €60 million of turnover, all these middle market firms become interested.”

Alpine Equity is likely to begin marketing in the fall for a new fund, which probably will be in the €100 million to €150 million range, Rehman said. That will give the fund the capacity to make eight to 10 transactions with an equity size typically of €8 million to €20 million.

The firm’s existing fund has a lifetime IRR of 20 percent net cash return, and the AmannGirrbach case, with its dragalong provision, demonstrates that an investor need not take majority ownership of a portfolio company to reach a successful exit, Rehman said. “A lot of private equity companies are now taking minority stakes,” he said. “We’ve been doing this for almost 10 years.”


• Transformed a pair of family-owned, regional companies into a corporation with global reach

• Raised revenue 6.5x, from €7 million ($7.5 million) in 2003, to €46 million in 2010

• Raised EBITDA nearly 9x, from less than €1 million to €8.5 million

• Navigated a successful exit in choppy 2010 market, attracting multiple bidders, both strategic and financial