Investment Professionalss: Approximately 120; U.S. Team: 14
Strategy: Control-stake buyouts in consumer, financial services, health care, industrials, and technology, media and telecommunications
In the last six months, European buyout shop
In April Permira bought Seal Beach, Calif.-based BakerCorp, a provider of rental equipment for companies in the industrial markets Permira plans to expand in Europe, for $960 million. Last month Permira closed its take-private of Renaissance Learning Inc., a Wisconsin Rapids, Wis.-based provider of technology-based student programs for kindergarten through 12th grade schools, for around $455 million. And it agreed to buy Genesys, a supplier of enterprise software and services it intends to expand through acquisitions and new business lines, from Alcatel-Lucent, in deal valued at $1.5 billion.
The deals mark the culmination of an almost decade-long expansion that began with the New York office and continued with a Menlo Park office, opened in 2008. In between, in 2005, the firm hired Tom Lister, a 13-year veteran of
“We opened the New York office with definitely a ‘walk before you run’ strategy,” John Coyle, a partner with Permira, told Buyouts. “As we grew and became more established in the U.S., we expected to start making direct investments here, but our mentality was not immediately, ‘Hey, go do a deal.'”
An increased U.S. presence for Permira, which manages approximately €20 billion ($27.4 billion), means more competition for large U.S. shops like
The U.S. Deals
Permira employs 120 investment professionals, who deploy $250 million to $700 million at a time to buy companies in the consumer, financial services, health care, industrials, and technology, media and telecommunications sectors.
The firm, , which until 2001 did business as Schroder Ventures, invests around the world, out of 12 offices in Frankfurt, Guernsey, Hong Kong, London, Luxembourg, Madrid, Milan, Paris, Stockholm, Tokyo, and the two U.S. offices. It is investing out of its €9.6 billion fourth fund, closed in 2006; in the third quarter it started raising its fifth fund, seeking €6.5 billion.
Just as Permira’s U.S. activity has increased, however, it faces challenging financing market and stagnant economic growth that’s driving many global buyout firms to emerging markets like Brazil or China, or to alternative lines of business such as credit management.
Permira isn’t scrambling to open additional offices in Latin America or Asia, or the United States for that matter, Coyle said, but many of Permira’s portfolio companies are already tapping into growth in emerging markets via its 12 offices, such as Hong Kong. And for now it is sticking with a strategy of making more U.S.-based acquisitions, particularly in technology and industrials, Coyle said.
In technology, the firm is especially interested in software companies that support services such as call centers, which Brian Ruder, a Permira partner, said continued to grow through the recession as companies increased their interactions with customers via the Internet and specifically through social media.
Genesys, for example, offers a one-stop source for real-time routing and reporting of customer interactions across voice, e-mail and Web channels for major banks and companies such as Bank of America, J.P. Morgan and American Airlines. Most of the company’s recurring revenue comes from maintenance and hosting services.
In the industrials sector, Permira is seeing heightened interest from U.S. companies to expand globally. “We’re trying to find U.S. companies that either are international or we think can and should be international,” Coyle said. “That resonates incredibly well with CEOs and boards right now, because in general companies are trying to diversify outside the U.S.”
BakerCorp, for example, has expanded only modestly to date in Europe with branches in France, Germany and the Netherlands. The company rents pumps, tanks and other water containment and filtration equipment that industrial customers use to clean up factories and other work sites. Permira was initially skeptical of the expansion opportunity because many European industrial companies tend to own such assets themselves. But Permira professionals in Europe learned from prospective customers during due diligence that there was serious appetite among industrial companies there to migrate toward renting such equipment.
“By the end of that process we had conviction that the opportunity was much bigger than even BakerCorp appreciated and that our network could execute on it,” Coyle said.
Altogether, Permira has bought seven U.S. companies comprising more than $26 billion in disclosed deal value. (This includes one company, Memec, which Permira bought in 2000, before it opened the New York office. See table for detail on Permira’s U.S. deals.) By contrast, the firm closed 40 deals outside the United States since 2000 with a total disclosed deal value of about $118 billion.
Before 2011, Permira’s previous three U.S. deals took place in 2005 and 2006. Its first U.S. portfolio company, Intelsat, was a huge success. The firm, alongside
Permira followed up that deal with another success, making 2.2x its invested capital in Aearo Technologies, a manufacturer of hearing protection devices, safety eyewear, hard hats and other personal protection equipment. The firm bought the company in 2006 for $765 million and sold it a year later to 3M for $1.2 billion. The results of its remaining investment from that time period, the mammoth $17.6 billion club buyout of Freescale Semiconductor the same year, remains to be seen. In the third quarter, the company reported a loss of $88 million, compared with a loss of $156 million for the same period in 2010, according to Bloomberg Businessweek.
After 2006, Permira largely went quiet in the United States, although it invested in several companies with significant operations here. In 2007, for example, it bought Germany-based clothier Hugo Boss, and in 2009 it bought NDS Group, a U.K.-based provider of technology that helps companies deliver digital content to televisions and mobile devices. But it didn’t buy another pure U.S.-based company until this year.
Coyle attributed the firm’s dormancy here to a few reasons. For one, the firm operates out of one global fund with carry distributed evenly throughout Permira’s offices (Coyle was adamant that Permira would not entertain raising a U.S.-focused fund). After the financial crisis of 2008, this somewhat relieved the pressure of different geographic teams to invest hastily, or “put points on the board” to justify their existence, Coyle said.
Secondly, many of the U.S.-based companies Permira was seeing in 2009 and 2010 were being sold by other sponsors. So-called secondary deals are unpopular at Permira, accounting for only about 12 percent of all the deals it ever closed.
“We think that it is increasingly hard to create significant value for our investors buying something that others have done well with,” Coyle said. “In the absence of a meaningful growth plan, which for us typically relates to international expansion such as in the case of BakerCorp, secondaries are really not that interesting to us.”