and the Canada Pension Plan investment Board, people with direct knowledge said. The elevators deal was struck in Februa
Posted: Tue Apr 26, 2022 10:47 am
and the Canada Pension Plan investment
Board, people with direct knowledge said. The elevators deal was
struck in February, just as the crisis caused by the coronavirus
pandemic started to roil markets. Its hefty €17.2bn price tag was
emblematic of a multiyear boom in private equity-backed deals that
had pushed asset prices higher. While buyout firms often sell on
chunks of equity after agreeing to large deals, the crisis has left
Cinven and Advent trying to sell down at a high price tag when some
investors have less funding to allocate to private equity. This has
caused the process to take longer than usual...People close to
Cinven and Advent said the majority of the equity syndication was
accounted for and only a small chunk remained. Even if no more
investors came in, the groups would still be able to complete the
acquisition, the people said; the risk is only that they would end
up holding more of the business than planned. Typically, buyout
groups try to avoid having too much of a fund concentrated in one
deal because it can drag on overall performance if it goes badly.
Advent's latest fund is worth $17.5bn and Cinven's is €10bn...
Speculation has also mounted over whether Advent and Cinven will
look to sell parts of Thyssenkrupp's lifts business, such as the
North American unit, after the deal completes. The battle for
Thyssenkrupp's
lifts business was fiercely fought
over for months, before Advent and Cinven finally saw off
competition from Brookfield, Finland's Kone, and an investor group
led by Blackstone and Carlyle. ... The Thyssenkrupp lifts unit,
which employs more than 50,000 people and generated €8bn in sales
last year, is widely seen as relatively recession-proof because the
majority of its revenues come from contracts to service elevators.
The share prices of rivals Kone, Schindler and Otis have not been
hit hard by the crisis.But the sheer size of the deal has
complicated matters. Advent and Cinven's bid values the company,
whose lifts are installed in skyscrapers such as One World Trade
Centre in New York, at about 14 times its adjusted earnings of just
under €1.2bn, two people familiar with the matter said at the time
of the deal. Its total leverage, the ratio of its debt to earnings,
will be about eight times, one of the highest levels recorded on a
large European private equity buyout in recent years. The deal is
scheduled to close in July, people familiar with the process said.
None of those contacted said they expected it to fall through, a
prospect that would be disastrous for Thyssenkrupp. The German
industrial conglomerate is relying on the money from the sale to
fund billions of euros worth of pension liabilities and shore up
its remaining steel,automotive and materials businesses.
A. [3 points] What kind of acquisition
does the article describe?
B. [3 points] Is this a traditional
private equity acquisition? How many funds are involved? Why?
C. [2 points] Was there competition to
buy this unit? What is the expected effect of competition on the
offered price?
D. [2 points] How much debt is used in the transaction? Do you
think that the level is sustainable? Why?
Board, people with direct knowledge said. The elevators deal was
struck in February, just as the crisis caused by the coronavirus
pandemic started to roil markets. Its hefty €17.2bn price tag was
emblematic of a multiyear boom in private equity-backed deals that
had pushed asset prices higher. While buyout firms often sell on
chunks of equity after agreeing to large deals, the crisis has left
Cinven and Advent trying to sell down at a high price tag when some
investors have less funding to allocate to private equity. This has
caused the process to take longer than usual...People close to
Cinven and Advent said the majority of the equity syndication was
accounted for and only a small chunk remained. Even if no more
investors came in, the groups would still be able to complete the
acquisition, the people said; the risk is only that they would end
up holding more of the business than planned. Typically, buyout
groups try to avoid having too much of a fund concentrated in one
deal because it can drag on overall performance if it goes badly.
Advent's latest fund is worth $17.5bn and Cinven's is €10bn...
Speculation has also mounted over whether Advent and Cinven will
look to sell parts of Thyssenkrupp's lifts business, such as the
North American unit, after the deal completes. The battle for
Thyssenkrupp's
lifts business was fiercely fought
over for months, before Advent and Cinven finally saw off
competition from Brookfield, Finland's Kone, and an investor group
led by Blackstone and Carlyle. ... The Thyssenkrupp lifts unit,
which employs more than 50,000 people and generated €8bn in sales
last year, is widely seen as relatively recession-proof because the
majority of its revenues come from contracts to service elevators.
The share prices of rivals Kone, Schindler and Otis have not been
hit hard by the crisis.But the sheer size of the deal has
complicated matters. Advent and Cinven's bid values the company,
whose lifts are installed in skyscrapers such as One World Trade
Centre in New York, at about 14 times its adjusted earnings of just
under €1.2bn, two people familiar with the matter said at the time
of the deal. Its total leverage, the ratio of its debt to earnings,
will be about eight times, one of the highest levels recorded on a
large European private equity buyout in recent years. The deal is
scheduled to close in July, people familiar with the process said.
None of those contacted said they expected it to fall through, a
prospect that would be disastrous for Thyssenkrupp. The German
industrial conglomerate is relying on the money from the sale to
fund billions of euros worth of pension liabilities and shore up
its remaining steel,automotive and materials businesses.
A. [3 points] What kind of acquisition
does the article describe?
B. [3 points] Is this a traditional
private equity acquisition? How many funds are involved? Why?
C. [2 points] Was there competition to
buy this unit? What is the expected effect of competition on the
offered price?
D. [2 points] How much debt is used in the transaction? Do you
think that the level is sustainable? Why?