Tapping in-house expertise

Sweden-based car accessories and trailer company Thule’s purchase of most of US peer Advanced Accessory Systems highlights the importance of a firm using its staff’s investment experience to help agree a deal.

For Thule, which is owned by UK-based buyout firm Candover, its advantage lay in its detailed knowledge of AAS. John Arney, a managing director at Candover responsible for Nordic investments, had previously worked at JP Morgan Partners, the large buyout arm of the US investment bank that is now being spun off on its own.

JPMP had sold AAS to Castle Harlan for US$260m in April 2003, just after Arney had left to join Candover. And when Candover acquired 75% of Thule for €465m in October 2004, it had immediately been linked in the press with the bolt-on acquisition of AAS.

And, although the negotiations between Castle Harlan and Thule took more than six months to complete, the deal was proprietary as the Candover portfolio company initiated the discussions, according to Alan Johnson, president and chief executive officer of AAS.

The deal pattern has been repeated elsewhere, especially as secondary investments – where a private equity firm buys a company from another buyout firm – become more common and the industry matures and people switch firms.

In February, for example, US-based alternatives investment company Carlyle acquired IMO Car Wash in the UK for an undisclosed sum, also from JPMP. UK-based buyout firm Bridgepoint had backed the original deal in 1999 when it paid £110m for IMO before selling it on for £350m to JPMP in January 2004.

A key figure in the transactions was Andrew Burgess, formerly a director of Bridgepoint who handled its LBO of IMO and who moved to Carlyle in October to become a managing director.

For the buyout firms, knowledgeable dealmakers are invaluable, as they know the sector and the companies and usually the management.

UK-listed 3i has been widely reported to be the favourite to acquire local healthcare company Four Seasons from Allianz Capital Partners as the portfolio company’s incumbent management previously worked

for 3i when it owned Westminster Healthcare.

And although that deal has yet to be agreed, Nordic buyout firm EQT has said this type of understanding is invaluable when it comes to getting comfortable with a sector’s trends in order to add more debt to a company and thereby pay a higher price.

EQT partnered with Australia-based Macquarie Bank to pay £1.822bn for contract caterer Compass Group’s travel concession subsidiary, Select Service Partner. SSP had been expected to sell for £1.2bn–£1.4bn in a Citigroup-run auction.

To get comfortable, EQT had already recruited advisers that had either run SSP, such as former SSP Worldwide president Lena Hosberger (who now manages EQT’s Swedish healthcare portfolio company Aleris), or worked for its rivals, such as EQT partner Patrick De Muynck, who had worked at Elior until 2001.