Palamon Capital Partners has snapped up a significant shareholding in German consumer goods retailer DS Produkte.
With recession looming, buyout firms are scrambling to find businesses with predictable earnings.
“In an economic slowdown, people don’t buy large white goods but they do buy small, pleasant products,” said Holger Kleingarn, who led the deal for Palamon.
Hamburg-based DS Produkte sells innovative consumer products in the beauty, electronic and household goods sectors that have an average selling price of between €20 and €30. Its products are sold to consumers online, on television or through catalogues.
“DS Produkte grew significantly in the last downturn,” Kleingarn said.
Investing in value retailers is a strategy that is gaining traction among private equity firms in the current economic climate.
In Germany, Advent International owns fashion discounter Takko, while ECI owns Bargain Booze in the UK.
Kleingarn described the deal as an equity growth investment, and added: “There was modest financing involved.”
Palamon bought its stake from the company’s founding owners, who will continue to run the business.
Commerzbank and Deutsche Bank, DS Produkte’s house banks, provided senior debt and working capital to support the deal, which was valued at between €50m and €100m.
“Lending in this market environment is driven by relationships and reputations,” Kleingarn said.