UK firms go shopping in the US

In a very rare move for European private equity firms, Terra Firma and Permira have both pulled-off substantial acquisitions in the US in the space of a week.

Terra Firma has acquired aircraft leasing business AWAS from Morgan Stanley for US$2.5bn, while Permira has stumped up US$756m for Aearo Technologies. According to Thomson Financial, the Terra Firma deal represents by far the largest MBO of a US company by a Europe-based private equity firm.

Traditionally, trans-Atlantic buyouts have been a one way street, with European firms very wary of entering the more mature US market. Notable exceptions include BC Partners’ buyout of Mark IV Industries, the Doughty Hanson-led MBO of Knowles Electronics and EQT’s joint venture with Carl Zeiss to acquire Sola.

JP Morgan began the sale of AWAS in August 2005, after John Mack returned to the company as CEO. The bank began the process to sell the unit in August 2005. The deal is the first major disposal by the bank, which has said that profits from the sale of the non-core division will be reinvested into core operations.

Terra Firma’s acquisition is being funded by a mixture of equity and debt underwritten by JP Morgan, which also acted as financial advisers to the firm on the transaction. The US deal follows a string of big-ticket European acquisitions by the company which is currently raising its second fund.

Permira, another UK-based firm that is also in fundraising mode, has announced the acquisition of Aearo Technologies from Bear Stearns Merchant Banking. The high-growth safety products business is based in Indianapolis, Indiana, with revenues of more than US$420m in 2005.