Clairfield Review Q2 08 - Syncap
Clairfield Review Q2 08 - Syncap
Clairfield Review Q2 08 - Syncap
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Second quarter 20<strong>08</strong><br />
CLAIRFIELD REVIEW<br />
A publication of <strong>Clairfield</strong> Partners: leaders in mid-market M&A and corporate finance in Europe, the USA, and Australia<br />
<strong>Clairfield</strong> UK sees silver lining<br />
Mid-market M&A remains unscathed by recent upheavals in credit markets<br />
Albert Ganyushin<br />
Andrew Taee<br />
It is said that economists have predicted nine of<br />
the past five recessions. The UK market seems particularly<br />
open to diverse interpretations. UK banks<br />
have fared better than their US counterparts in the<br />
recent write downs. The 2007 earnings for most<br />
British banks are similar to their 2006 earnings.<br />
However, the banks’ low share prices tell a different<br />
story about investor confidence.<br />
First quarter M&A figures for the UK reflect<br />
pessimism in the financial markets. Announced<br />
deals with UK targets numbered 649 in the first<br />
quarter of 20<strong>08</strong>, the lowest opening quarter volume<br />
since the first quarter of 2003. The announced<br />
value of UK-target transactions also decreased,<br />
from over 89 billion dollars in the first quarter of<br />
2007 to 50 billion dollars for the same period in<br />
20<strong>08</strong>, a drop of 44 percent.<br />
The good news is that M&A in the mid-market has<br />
remained relatively unscathed by the recent turmoil.<br />
Albert Ganyushin, managing director at Carlton,<br />
<strong>Clairfield</strong>’s UK partner, says such deals are not<br />
exposed to financing markets to the degree that<br />
multibillion dollar deals are. He expects the UK<br />
1,000<br />
900<br />
800<br />
700<br />
600<br />
500<br />
400<br />
300<br />
200<br />
100<br />
0<br />
Number of mid-market deals in the UK, 2005-20<strong>08</strong><br />
1Q05 2Q05 3Q05 4Q05 1Q06 Q06 3Q06 4Q06 1Q07 2Q07 3Q07 4Q07 1Q<strong>08</strong><br />
Total number of deals Undisclosed value or under $500 million<br />
Source: Thomson Financial<br />
mid-market to maintain a steady transaction volume,<br />
especially as private equity lowers its sights<br />
and turns its attention to attractive mid-market<br />
companies.<br />
Cross-border business is having an increasing impact<br />
on UK M&A activity. The low dollar makes the<br />
United States especially attractive for UK buyers<br />
looking to invest abroad. Carlton has worked on<br />
behalf of several UK clients who made acquisitions<br />
in the United States, including business services giant<br />
Rentokil Initial’s acquisition of Ehrlich Inc, a<br />
Pennsylvania-based pest control company. Fenner,<br />
a polymers producer based in Yorkshire, completed<br />
the acquisition of Pennsylvania-based Prodesco in<br />
January 20<strong>08</strong>. The investments also flow the other<br />
way, as the US corporations often see the UK as<br />
a platform for business expansion in Europe. In a<br />
transaction of this kind, Carlton advised Spectris<br />
plc on its disposal of Spectrum Inspection Systems<br />
to Illinois Tool Works Inc. Further abroad, Carlton<br />
completed an equity placement and launch of a<br />
corporate finance fund focused on Greater China<br />
for Somerley, a leading Hong Kong and PRC investment<br />
bank in December of 2007.<br />
In a busy first quarter, Carlton has also been involved<br />
in providing capital structure advice and<br />
arranging a new debt facility of £300 million<br />
for Benfield Group Limited. Benfield is a leading<br />
global provider of insurance and reinsurance<br />
intermediary, risk advisory and related<br />
services. The company is listed on the London<br />
Stock Exchange and has a market capitalization<br />
of approximately £600 million.<br />
“The present economic conditions are having<br />
some ripple effects on mid-market M&A,”<br />
says Andrew Taee, CEO of Carlton. “Credit is<br />
tighter and all parties must be more realistic<br />
going into the acquisition process. However,<br />
even with these difficulties, our deal flow continues<br />
with little interruption. We continue to<br />
see opportunities for our clients, and for us.”<br />
UK transaction spotlight: Carlton client Fenner makes acquisition in the USA<br />
Fenner plc acquired Prodesco Inc. for up to $65 million. Fenner plc is a global leader in reinforced polymer<br />
technology. It is the number one producer of heavyweight conveyor belts in the world in addition<br />
to manufacturing specialized polymer products. Based in Pennsylvania, Prodesco designs, develops and<br />
manufactures technical fabrics that are used by industrial, aerospace, and chemical equipment OEMs.<br />
Secant Medical, Prodesco’s wholly owned subsidiary, develops and manufactures specialized textile structures<br />
for the growing medical device market. <strong>Clairfield</strong> Partners in London and New York originated the<br />
transaction and acted as the exclusive financial advisor to Fenner plc.
NEWS BRIEFS<br />
Partner at <strong>Clairfield</strong> Spain lectures on crossborder acquisitions<br />
Brian O’Hare<br />
<strong>Clairfield</strong> Partners Australia issues independent expert report<br />
on the Resource Pacific/Xstrata megadeal<br />
Victor Rudenno<br />
Brian O’Hare, founder and partner of Coram <strong>Clairfield</strong><br />
in Barcelona, gave a seminar on international<br />
aspects of crossborder acquisitions on April 11th.<br />
The seminar forms part of the course Company Acquisitions:<br />
A Complete Vision, offered under the<br />
auspices of the Executive Education program of<br />
Barcelona’s Pompeu Fabra University.<br />
Mr. O’Hare sits on the academic committee of the<br />
program, which is geared towards financial or legal<br />
directors and strategic consultants.<br />
The lecture focused on cross-cultural understanding<br />
in the acquisition process, a subject on which<br />
Mr. O’Hare has ample experience. In the last two<br />
years alone, he has overseen five crossborder transactions<br />
involving Spanish companies.<br />
“The students were surprised that crossborder<br />
transactions represent such a large percentage of<br />
worldwide M&A,” says Mr. O’Hare. “The fact is that<br />
50% of the business of Europe’s 100 largest com-<br />
<strong>Clairfield</strong> Partners in Australia, InterFinancial,<br />
recently participated in one of the most talked<br />
about transactions of 2007 — Resource Pacific’s<br />
AU$1 billion (€600 million) takeover bid by Swiss<br />
mining giant Xstrata.<br />
InterFinancial has extensive experience in mining<br />
and resources and had a long relationship with key<br />
executives of Resource Pacific, a coal mining company<br />
based in Sydney.<br />
Victor Rudenno, director of resources at<br />
InterFinancial’s Sydney office, managed the valuation<br />
team.<br />
Resource Pacific owned the Newpac Mine in New<br />
South Wales, an underground coal mine that recently<br />
developed a long wall mining operation. The<br />
mine, where Resource Pacific hoped to ultimately<br />
triple output of semi-coking coal to 8 million tons<br />
per year, is especially valuable now that coal prices<br />
are at record highs. Semi-coking coal is used in<br />
the production of steel.<br />
With such an attractive resource at stake, Resource<br />
Pacific was previously the object of attention with<br />
a takeover bid from New Hope Corp., also located<br />
in Australia.<br />
Xstrata Coal is the world’s largest exporter of<br />
thermal coal and the world’s sixth largest mining<br />
company. Xstrata made an initial bid in December<br />
2007 of AU$963 million, or AU$2.85 per share for<br />
Resource Pacific.<br />
Percent of total deal volume worldwide<br />
panies is outside their country of origin. Although<br />
the world is getting smaller, cultural differences<br />
continue to play a key role in business negotiations.<br />
Understanding and leveraging on these cultural<br />
differences is still oftentimes what makes or breaks<br />
a transaction.”<br />
Crossborder transaction values as percentage of<br />
transaction values worldwide<br />
24%<br />
27%<br />
36%<br />
34% 34%<br />
29%<br />
1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007<br />
Source: Thomson Financial<br />
InterFinancial was engaged to provide an Independent<br />
Experts Report to shareholders with a<br />
valuation to aid in determining whether Xstrata’s<br />
bid price for Resource Pacific was fair and reasonable.<br />
After analyzing the value of Resource Pacific’s<br />
asset portfolio, it was clear that the valuation of<br />
the company was higher than the initial bid price.<br />
Given the uncertainties surrounding many of<br />
the variables that go to estimating the value of<br />
the company, InterFinancial applied a Monte Carlo<br />
simulation to provide a statistical distribution of<br />
likely values.<br />
The shareholders did not accept the initial bid<br />
and Xstrata eventually raised its offer by 12% to<br />
AU$1.<strong>08</strong> billion, or AU$3.20 per share. This price<br />
was ultimately accepted by the shareholders and<br />
Xstrata obtained 100% of the company in February<br />
20<strong>08</strong>.<br />
“Xstrata’s initial offer did not fully reflect the inherent<br />
value of the Newpac mine, which has 252<br />
million tons of coal in reserve, and the potential to<br />
significantly increase production given the available<br />
local infrastructure,” says Dr. Rudenno. “Resource<br />
Pacific also holds a four-million-ton shipping allocation<br />
at Australia’s export terminals. These allocations<br />
are rationed, so Resource Pacific’s quota<br />
is highly desirable to any mining export operation<br />
especially given the planned increase in future export<br />
capacity. It was gratifying that our valuation<br />
played a part in providing shareholders with an<br />
additional AU$119 million (€70 million) in value.”<br />
2 <strong>Clairfield</strong> <strong>Review</strong> <strong>Q2</strong> <strong>08</strong><br />
26%<br />
31%<br />
34%<br />
32%<br />
46%
SynCap<br />
Carlton<br />
Acquisition<br />
UK/Germany<br />
Rentokil Initial<br />
acquired<br />
medentex<br />
Sale<br />
Netherlands/Czech Republic<br />
Sale<br />
Netherlands<br />
Vitae<br />
was sold to<br />
Manpower Inc.<br />
Boer & Croon<br />
Independent Expert Report<br />
Australia<br />
InterFinancial<br />
Rosa Sistemi<br />
was sold to<br />
Aksìa Capital III Fund<br />
K Finance<br />
Vos Logistics<br />
sold<br />
Vos Noord<br />
to<br />
CTP Products<br />
Boer & Croon<br />
Sale<br />
Italy<br />
AU$51 million<br />
for sale of its<br />
Engineering Business<br />
<strong>Clairfield</strong> <strong>Review</strong> <strong>Q2</strong> <strong>08</strong><br />
Rentokil Initial acquired medentex, a German<br />
waste disposal company, for approximately<br />
€12 million. Rentokil Initial plc is<br />
one of the world’s largest business services<br />
companies with annual revenues of £2.2<br />
billion and a market cap of approximately<br />
£1.8 billion. The company has some 70,000<br />
employees providing a range of services in<br />
over 40 countries. medentex GmbH is active<br />
throughout Europe in environmentallyresponsible<br />
and hygienic disposal of waste<br />
materials from dental practices.<br />
Vos Logistics, a Dutch transport and logistics<br />
services company, sold its activities in<br />
the northern part of the Netherlands to<br />
its management. After completion of the<br />
transaction, Vos Noord was renamed De<br />
Vries Transport Group. The buy-out team<br />
was led by Edwin De Vries, managing<br />
director of Vos Noord, and sponsored by<br />
CTP Invest, a Czech commercial property<br />
developer with activities in built-to-lease<br />
property solutions and customized leasing<br />
arrangements.<br />
Vitae, a professional placement company,<br />
was acquired by Manpower, a world leader<br />
in the employment services industry.<br />
Vitae has 10 offices in the Netherlands and<br />
focuses on candidates in specialist fields.<br />
Vitae will initially operate under its own<br />
brand. Manpower, based in the USA, is a<br />
$21 billion company with a network of<br />
4,500 offices in 80 countries. Manpower<br />
Netherlands has 150 offices with 900<br />
consultants.<br />
Rosa Sistemi, a leader in the manufacturing<br />
of precision linear components, was sold to<br />
Aksia Capital III Fund. Rosa Sistemi serves<br />
companies that are active in the machinery<br />
and automation industries. Sales in<br />
2007 were approximately €11 million, with<br />
continuing growth of 20% per year and an<br />
EBITDA of approximately 20%. Aksia Group<br />
is an independent private equity fund<br />
based in Milan, Italy.<br />
CMI, an ASX listed company and leading<br />
supplier of automotive components to<br />
Australian and US automobile companies,<br />
engaged InterFinancial to prepare an Independent<br />
Expert Report in connection with<br />
the proposed sale of the majority of its CMI<br />
engineering division for AU$51 million (€30<br />
million).<br />
SELECTED TRANSACTIONS Q1 <strong>08</strong><br />
Acquisition<br />
France/Belgium<br />
Newtec Packaging<br />
acquired all industrial<br />
assets and the business<br />
of FL Systems<br />
intuitu<br />
SynCap<br />
Sale<br />
Netherlands/Belgium<br />
Vos Logistics<br />
sold<br />
Vos Tank Services<br />
to<br />
Begoos BVBA<br />
Boer & Croon<br />
K Finance<br />
Acquisition<br />
Italy<br />
Axa Private Equity<br />
acquired<br />
Idroma<br />
Merger<br />
Spain<br />
DataLogic<br />
merged with<br />
Sistac<br />
Coram <strong>Clairfield</strong><br />
K Finance<br />
Sale<br />
Italy<br />
Cape Natixis<br />
sold<br />
Schmid<br />
to<br />
Siparex<br />
Newtec–Alvey, a subsidiary of Newtec<br />
Packaging of France, acquired all industrial<br />
assets and the business of the Belgian<br />
company FL Systems. Newtec Packaging<br />
specializes in filling machines, palletizing<br />
systems, and turnkey continuous materialhandling<br />
equipment with sales of more than<br />
€55 million and 280 employees. FL Systems<br />
develops, designs, and manufactures order<br />
picking and internal goods flows systems<br />
as well as palletizing and depalletizing<br />
systems.<br />
Vos Logistics, a Dutch transport and<br />
logistics services company, sold its tank<br />
service activities to Begoos BVBA. Vos Tank<br />
Services is active in tank cleaning and tank<br />
services for logistic service providers. The<br />
main branch in Pernis, Holland is the largest<br />
tank cleaning site in the Netherlands and<br />
is strategically located in the Rotterdam<br />
harbor area. Begoos BVBA is a Belgian<br />
conglomerate of companies.<br />
AXA Private Equity acquired Idroma, an<br />
industrial holding based in Italy. Idroma<br />
controls Duplomatic Automazione, active<br />
in the manufacturing of turrets for CNC lathes,<br />
and Duplomatic Oleodinamica, active<br />
in the production of valves and hydraulic<br />
components. Its main clients are companies<br />
in the automation industries. Sales in<br />
2007 totalled approximately €42 million.<br />
The acquisition was made by the Italian<br />
team of the Small Cap Buyout unit of the<br />
French AXA Private Equity fund.<br />
Data Logic and Sistac signed a merger<br />
agreement. Datalogic, based in Reus, retails<br />
computers under the trade name “Beep”.<br />
Sistac, based in Alicante, retails computers<br />
under the “PC Box” and “PC Coste” trade<br />
names. The merged company is the leader<br />
in computer specialty stores in Spain with<br />
sales of €260 million and approximately<br />
700 retail stores. The stores will continue<br />
to use their current trade names.<br />
Cape Natixis, the Italian-French private<br />
equity fund, sold Schmid to Siparex Private<br />
Equity. Schmid, based in Milan, creates<br />
and markets fabrics and accessories for<br />
the haute couture footwear sector. Sales<br />
in 2007 reached €17 million. Schmid was<br />
sold for more than €19 million to the Italian<br />
branch of the French private equity fund<br />
Siparex.<br />
3
4<br />
New colleagues<br />
Greg Rudd<br />
Dean Johns<br />
Berend Lockefeer<br />
Melvin Sie<br />
<strong>Clairfield</strong> Partners in Australia (InterFinancial) has<br />
recently made three new appointments.<br />
Greg Rudd was appointed internal advisor on<br />
government to the Tolhurst Group, the parent<br />
company of InterFinancial. Mr. Rudd was previously<br />
a lobbyist in his own business for 12 years. He was<br />
a senior policy advisor during the Hawke/Keating<br />
administrations in Australia from 1983 to 1996. Mr.<br />
Rudd has strong relationships with all of Australia’s<br />
current federal and state governments. Mr. Rudd<br />
also brings expertise on Malaysia, China, and<br />
Taiwan to <strong>Clairfield</strong> Partners.<br />
Dean Johns, associate director, has over five<br />
years of experience in various corporate finance<br />
assignments with Ernst & Young Transaction<br />
Advisory Services in Brisbane. Previously Mr. Johns<br />
worked at Ferrier Hodgson. His expertise covers<br />
M&A, valuations, corporate restructuring and<br />
workouts, and investigating accountant reviews.<br />
Berend Lockefeer, director, began his career<br />
in the investment banking industry (currency<br />
and interest rate derivatives) in Europe. At<br />
PricewaterhouseCoopers in Amsterdam, he was<br />
involved in M&A, capital raisings, valuations, and<br />
strategic advisory. In 2000 Mr. Lockefeer moved<br />
to London where he was appointed in an interim<br />
CLAIRFIELD PARTNERS<br />
www.clairfield.com<br />
Australia<br />
Level 3, 167 Eagle Street<br />
Brisbane<br />
Tel: +61 07 3218 9100<br />
Fax: +61 07 3218 9199<br />
www.interfinancial.com.au<br />
Austria, Czech Republic,<br />
Slovakia, Hungary, Poland<br />
Cobenzlgasse 32<br />
A-1190 Wien<br />
Tel: +43 1 470 2388<br />
Fax: +43 1 470 2670<br />
www.modern-products.net<br />
Germany, Belgium<br />
Mendelssohnstrasse 72<br />
D-60325 Frankfurt am Main<br />
Tel: +49 69 707 969 60<br />
Fax: + 49 69 707 969 99<br />
www.syncap.de<br />
intuitucapital<br />
management role in a start-up business. Mr.<br />
Lockefeer moved to Australia in 2001 and consulted<br />
to InterFinancial on a number of transactions<br />
before becoming director.<br />
Melvin Sie has joined <strong>Clairfield</strong> Partners in the<br />
Netherlands (Boer & Croon) as a business analyst.<br />
Mr. Sie holds a masters in finance & investment<br />
from RSM Erasmus University in Rotterdam and a<br />
masters in international management from ESADE<br />
in Barcelona. Prior to joing Boer & Croon, Mr. Sie<br />
completed an internship at Lazard in Amsterdam.<br />
Silvia Cartaña has rejoined <strong>Clairfield</strong> Partners<br />
in Spain (Coram <strong>Clairfield</strong>). Ms. Cartaña formerly<br />
worked as an analyst at Coram. In her new capacity<br />
as office manager, Ms. Cartaña will handle account<br />
management, human resources, and marketing.<br />
Ms. Cartaña has a degree in business administration<br />
from ESADE in Barcelona.<br />
Silke M. Pratnekar has joined <strong>Clairfield</strong> Partners<br />
in Austria and Central and Eastern Europe (MP<br />
Corporate Finance) as office manager. Ms.<br />
Pratnekar will be responsible for administration<br />
and internal business coordination. Ms. Pratnekar is<br />
studying communications science at the University<br />
of Vienna.<br />
France<br />
Place Vendôme<br />
356 rue Saint Honore<br />
75001 Paris<br />
Tel: +33 1 40 20 12 34<br />
Fax: +33 1 40 20 12 35<br />
www.intuitucapital.com<br />
Italy<br />
Via Durini 27<br />
20122 Milano<br />
Tel: +39 02 763 948 88<br />
Fax: +39 02 763 109 67<br />
www.kfinance.com<br />
The Netherlands<br />
Amstelveenseweg 760<br />
1<strong>08</strong>1 JK Amsterdam<br />
Tel: +31 20 301 4350<br />
Fax: +31 20 301 4359<br />
www.boercroon.nl<br />
Spain<br />
Diagonal 520, 6-5<br />
<strong>08</strong>006 Barcelona<br />
Tel: +34 93 487 0330<br />
Fax: +34 93 215 8186<br />
www.coram-clairfield.com<br />
United Kingdom<br />
38 Berkeley Square<br />
London W1J 5AE<br />
Tel: +44 207 355 2211<br />
Fax: +44 207 355 1633<br />
www.carltoncf.com<br />
United States<br />
18 East 41st Street<br />
New York, NY 10017<br />
Tel: +1 212 370 4343<br />
Fax: +1 212 370 4044<br />
DISCLAIMER: No part of this report may be reproduced without the written permission of <strong>Clairfield</strong> Partners or one of its partner firms. The information herein has been obtained<br />
from sources that we believe to be reliable, but we do not guarantee its accuracy or completeness. While we endeavour to update on a reasonable basis the information presented<br />
in this report, there may be regulatory, compliance or other reasons that prevent us from doing so. Much of the information contained in this report is subject to variation due to<br />
changes in market conditions, legislation or regulatory matters and <strong>Clairfield</strong> Partners does not undertake to notify any recipient of the report of changes to the information contained<br />
herein. This report is not to be construed as an offer to sell or the solicitation of an offer to buy any security in any jurisdiction. Additional supporting information is available<br />
upon request. Please contact: Research Desk, <strong>Clairfield</strong> Partners, Tel: +34 93 487 4623, email: research@clairfield.com<br />
<strong>Clairfield</strong> <strong>Review</strong> <strong>Q2</strong> <strong>08</strong>