10 Standout
Private Equity
Deals of 2020

First Quarter

Private equity started the year with record levels of dry powder. As a result, many market commentators expected to see record deployment of capital. Of course, 2020 took a sharp and unforeseen turn. The global pandemic was followed by lockdowns and restrictions on businesses and consumers, throwing uncertainty in the way of dealmaking.

Despite emerging COVID-19 fears, 2020 investment started in very positive territory with Europe’s largest leveraged buyout deal in a decade – the acquisition of ThyssenKrupp’s elevators business by a consortium led by Advent International and Cinven – along with the announcements of several other high-value deals. Investment focused primarily on businesses with proven track records and predictable, long-term revenue streams. There was also a noticeable trend towards consortium deals, which have the benefit of pooling resources and expertise, as well as spreading risk.

Overall, private equity investment in 2020 is down considerably on 2019 (see 2020 Private Equity Market Roundup). However, dry powder has continued to accumulate and is now estimated at around $1.5 trillion globally, with $250 billion of funds focused on Europe, according to Preqin{{1}}{{{Private equity: Where are the bargains?</br>Source: Funds Europe}}}, leading many to expect a boom over the coming months and years.

Prior to the sale, the elevators division was ThyssenKrupp’s most profitable business unit. It is seen as recession-proof due to the steady revenue stream from long-term elevator servicing and maintenance contracts – elevators were reportedly still being serviced in Wuhan at the height of its lockdown. Debt to earnings for the deal was around eight times, one of the highest ratios in recent years. The sale process was conducted by auction, in which the buyers saw off rival consortia including Blackstone, Carlyle and others{{2}}{{{Thyssenkrupp turns tables in private equity megadeal</br>Source: Financial Times}}}.

iQ was formed in 2016 as a £2 billion joint venture between Goldman Sachs and The Wellcome Trust and provides private purpose-build student accommodation in the UK. The acquisition was the UK’s largest private real estate deal to date and showed confidence in the projected expansion of the UK’s higher education sector, amid growing demand from international students{{3}}{{{Blackstone to buy UK student flats from Goldman for £4.7bn</br>Source: Financial Times}}}.

German fibre internet provider Deutsche Glasfaser was founded in 2011, with KKR acquiring a majority stake in 2015. The deal was an example of the growing appeal of internet infrastructure businesses for private equity, offering the potential for long-term returns and growth. This potential has only been enhanced by the move to remote working as a result of the pandemic{{4}}{{{KKR to sell ultrafast German internet business in €2.8bn deal</br>Source: Financial Times}}}.

UK waste management business Viridor, a division of the listed water and waste company Pennon Group plc, was bought by a consortium led by KKR in an all-cash deal. The target business is seen as recession-resistant because of its long-term contracts with local authorities{{5}}{{{KKR to buy recycling group Viridor in £4.2bn deal</br>Source: Financial Times}}}.

Second Quarter

As European countries experienced varying degrees of lockdown and government-imposed restrictions in response to increasing COVID-19 cases, there was a marked decline in the number of deals struck in the second quarter. Despite this, one of the biggest transactions of 2020 was announced at the beginning of June, in what many saw as an encouraging sign that, despite all the market disruption and uncertainty, private equity firms were feeling more confident about new deals.

Talks between the buyers about a bid for Spanish network operator MasMovil had reportedly begun at the beginning of 2020, but were put on hold when the pandemic struck. The deal was finally completed in November, with MasMovil delisted from the Madrid Stock Exchange. The deal was reportedly leveraged at a lower level than many private equity investments before the COVID-19 pandemic (estimated at around 4.5x EBITDA){{6}}{{{Spain’s MasMovil to be acquired in €5bn private equity buyout</br>Source: Financial Times}}}.

Third Quarter

Uncertainty and volatility continued into the summer months, with many European governments loosening restrictions only to tighten them again as fears of a ‘second wave’ of the virus deepened. Against this backdrop, European private equity investment increased by 59% in the third quarter compared to the second quarter, according to Preqin data. There were a number of high-value deals announced, particularly in technology, healthcare and infrastructure, which were among the best performing sectors of 2020.

Macquarie Group originally acquired Viesgo, a provider of regulated electricity networks in the Iberian market, alongside Wren House Infrastructure in 2015, and in May 2020 became the sole owner. Under the terms of this transaction, EDP’s Spanish electricity distribution subsidiary and Viesgo’s electricity distribution units will be integrated into one company, an example of increasing consolidation in the infrastructure sector. Macquarie Group will retain a 24.9% stake.

Hg, a long-time of backers Visma, and CPPIB increased their stakes in the Norway-based software company as Montagu, which had been an investor since 2010, exited. TPG and Warburg Pincus also joined the consortium as new sponsors. The deal valued Visma at an enterprise value of £9.32 billion ($12.2 billion), reportedly making it the world’s largest-ever private equity software deal{{7}}{{{Hg leads further majority investment in Visma valued at US$12.2 billion in the world’s largest ever software buyout</br>Source: Hg}}}.

Permira’s investment in German group Neuraxpharm, producer of specialty pharmaceuticals for central nervous system disorders, was claimed to be the largest private equity investment in pharmaceuticals so far in 2020. The company is seen as resilient to the virus crisis, with the deal stemming in part from an expected surge in demand for Neuraxpharm’s products. The valuation was 13x forecast EBITDA and the agreement followed a rapid auction process{{8}}{{{Permira buys German specialty pharma group Neuraxpharm</br>Source: Reuters}}}.

Fourth Quarter

Amid new waves of the virus, a disputed US election, and Brexit negotiations, volatility has remained a factor through the fourth quarter. However, in November, with the prospect of effective vaccines on the horizon, green shoots began to appear with investors beginning to feel more confident about the recovery.

Despite the low margins generated by supermarkets, Asda’s extensive UK freehold property portfolio made it an appealing target, given the potential for sale-and-leaseback deals or use of the sites as security for loans. The Issa brothers and TDR Capital already co-own the UK petrol station operator EG Group and it is expected that the deal will lead to significant synergies between the two businesses.

Flender is a Germany-based specialist in mechanical and electrical drive technology used in a wide range of industries around the world, most notably renewable energy production. Siemens had said that it intended to spin off and publicly list the subsidiary, but a sale to private equity proved a more efficient and appealing option.

Michael J. Preston

T: +44 20 7614 2255

Gabriele Antonazzo

T: +44 20 7614 2353

Michael James

T: +44 20 7614 2219