Almost no part of the business world has escaped the impact of the COVID-19 pandemic. The lockdowns that sought to control the spread of the virus had the side effect of sucking demand out of the world economy. That led to a need for liquidity: business plans were simply not designed to cope with the write-off of an entire financial quarter.
In some cases, the response was straightforward. Existing liquidity lines with relationship banks were increased, or new ones put in place. But other cases have been more complex, requiring different approaches by portfolio companies and their private equity backers.
After Providence had built up a stake of 9.2% in Spanish telecoms group MasMovil, a consortium also comprising Cinven and KKR agreed to acquire the remaining 90.8% of shares in MasMovil via a cash offer, in what would be the 13th largest ever take-private in Europe, according to Mergermarket data. MasMovil has been particularly successful at consolidating smaller players and recently bought LycaMobile Spain Limited for £320m (approved by the Spanish National Commission on Markets and Competition on 5 June 2020). We expect more private equity interest in listed targets in the coming months as COVID-19 continues to have an impact on share prices, although a recovery in public markets is narrowing the value gap.
KKR agreed to acquire a 60% stake in the professional beauty and retail hair business (the Wella portfolio) of Coty in an auction transaction. The Wella portfolio includes the Wella retail hair business in Brazil, US-based Clairol and OPI, and UK-based ghd (Good Hair Day). Reflecting the increasing use of hybrid instruments, KKR also agreed to make an additional investment of $1bn in NYSE-listed Coty via convertible preferred shares. KKR has reportedly been following Coty for some time, and this transaction may have been a buying opportunity created by current market conditions.
After acquiring CEP, a French provider of mortgage insurance brokerage and credit brokerage services, Bridgepoint is expected to consolidate its market position in France and further expand in the rest of Europe to boost growth, both organically and via strategic acquisitions. The investment is seen as a vote of confidence in the recovery of European property markets and has proved that transactions in sectors impacted by COVID-19 can still be executed in the current environment.
Spanish perfume company Puig Beauty & Fashion Group SL partnered with BDT Capital Partners LLC to acquire UK-based Charlotte Tilbury Beauty, a brand known for its celebrity ties and strong social media following. The deal marks the end of a long-running process, in which Puig and BDT saw off interest from large strategic investors, including Unilever and L'Oréal, as well as rival sponsors. The deal underlines the attractiveness of quality assets that are well positioned in the current market.