UPDATE: Good morning Eurohubsters, Craig McGlashan here.
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And now to the business of the day…
We have the inside story of one private equity firm that had portfolio companies banking with the now-failed Silicon Valley Bank. Andera Partners’ Olivier Litzka explains what the collapse means for the life sciences sector.
Next we have some more news on Triton Partners’ competition with Bain Capital to take Finnish construction company Caverion private, while an amended offer by Providence Equity Partners to buy listed conference firm Hyve has got the green light from board members.
We also take a deep dive into cybersecurity with Summa Equity, as the firm’s Christian Melby and Jacob Frandsen talk to Nina Lindholm about its recent acquisition of Logpoint, and we have a deal involving Three Hills Capital Partners.
Life science support.
First up we take a look at the fall-out from the collapse of Silicon Valley Bank (SVB), which regulators in the US seized on Friday.
PE Hub Europe’s Nina Lindholm spoke to Olivier Litzka, partner and part of the life sciences team private equity firm Andera Partners, which had portfolio companies banking with SVB in the US.
“On Friday we did what everybody did: checked out the exposure of the different portfolio companies,” he said. One of those companies had a “very large” exposure while some had “minimal” exposure. But all have recuperated their money, said Litzka. Andera itself had no exposure, while Litzka declined to identify which portfolio companies had exposure to SVB.
“The acute topic of SVB is gone from the portfolio, which is great.”
While those firms have got their money out, the collapse of SVB is “a problematic setup for investing in the life science area, especially in earlier stage development companies”, said Litzka.
“Let’s see if there is any contagion. It seems limited at the moment. It could be that this bank, which has a very specific model, couldn’t survive due to specific circumstances. Maybe also due to less-than-ideal decisions made by the management. Easy to say in hindsight, but it could be just the fall of one specific bank, and then things move on.”
Andera is still likely to take a look at the portfolio companies to ensure a similar situation does not happen again. “There’s obviously some thinking in the audit committees about whether the cash is well protected and well balanced in its allocation on maybe more than one bank,” said Litzka. “There will also be talk about risk mitigation policies.”
That said, Litzka was generally bullish about life sciences, pointing to his firm’s “huge dealflow” as well as two large acquisitions earlier this week by Pfizer and Sanofi as a sign of “positive momentum” in the sector.
“It’s not all bad, and we continue to do our work as we’ve done for the last 20 years. I’m not concerned for the time being. Let’s see what the news brings. I don’t see other banks which are worth having a special focus on.”
Ticking up.
A quick update now on Triton Partners’ take-private bid for Finnish construction firm Caverion. Triton has agreed to buy more of the outstanding shares, which would lift its shareholding of 9.9 percent to 29.99 percent, according to a filing yesterday. Of those agreed to be purchased, half are subject to a termination right if a third party offers €9.50 per share and Triton doesn’t match the offer. Triton’s current offer is €8.95 per share.
A competing offer from Bain Capital has a threshold of 50 percent (previously two-thirds). Bain is offering €8 per share immediately or €8.50 nine months after its tender offer closes. Triton’s threshold is 90 percent, although the Caverion board has asked if the firm would be willing to lower it.
Bain has also suggested that Triton’s offer might be delayed by competition controls, something that Triton has refuted. You can read more on that topic here.
The Caverion board is still weighing up the latest two offers.
Getting together.
Sticking with take-privates, and the board of Hyve Group, a UK-based organiser of international exhibitions and conferences, has reached an agreement with US private equity firm Providence Equity Partners on the terms of a recommended cash offer.
The offer is for 108p per share, which would value Hyve at approximately £320 million ($389 million; €363 million) on a fully diluted basis and £481 million on an enterprise value basis.
The price offers a premium of around 40.8 percent to Hyve’s closing share price on 17 February, just before Providence’s interest was announced, or 49.4 percent on the three month volume weighted average up to that date, or 59.5 percent over the six-month average. It also implies an enterprise value multiple of around 20.3x Hyve’s EBITDA for the year to 30 September, 2022.
Hyve already has irrevocable undertakings or letters of intent to take control just shy of 17 percent of the outstanding shares.
Providence had earlier made offers of 101p per share and then 105p per share.
Private equity firms certainly seem to feel that the conferences sector is a strong bet again. Our affiliate site PE Hub covered Blackstone’s move for Cvent Holding Corp this week, for instance (a subscription to PE Hub is required to read).
Cybersecurity.
Summa Equity believes that the increased vulnerability of digital infrastructure and rise in cyber threats will create opportunities in the cybersecurity sector, partner and CIO Christian Melby and investment director Jacob Frandsen told PE Hub Europe’s Nina Lindholm.
The Stockholm-based private equity firm announced the acquisition of Logpoint, a Danish cybersecurity operations platform, in early March. Logpoint is a provider of various security technologies converged into a single platform: foundational security information and event management (SIEM), user and entity behaviour analytics (UEBA), security orchestration, automation and response (SOAR), and systems applications and products (SAP) security technologies.
“The vulnerability that relates to digital infrastructure is getting higher and higher and there are more imminent threats, which is why we feel for Summa to invest in cybersecurity is very meaningful and right,” Melby explained. “And it’s a sub-industry that we’ve been tracking for a couple years now.”
While a growing industry, in Europe the choice of investment options seems limited. “The fact of the matter is that there aren’t many sizeable European cybersecurity companies within the space,” Melby explained. “And this was partly also the attraction for investing in Logpoint.”
With Logpoint, Summa will primarily focus on organic growth, according to Frandsen. Given Logpoint has completed two other acquisitions, Immune in 2008 and agileSI in 2020, inorganic growth is not completely off the table either. This would be on a more selective basis. “That will be M&A that could complement the Logpoint product as it is now,” Frandsen explained.
Hybrid.
Three Hills Capital Partners (THCP) has invested in Kernel Global via a debt/equity hybrid structure.
Kernel is a platform that invests in and operates high-potential recruitment businesses globally. The firm is based in London.
The investment will be used to support the firm’s growth plans, centred on building its multi-brand platform via both M&A and organic growth, according to a release.
THCP will hold a significant minority stake in Kernel.
That’s all from me – I’ll speak to you again tomorrow.
Cheers,
Craig
Editor’s note: This article originally misstated Bain’s offer threshold as two-thirds, instead of the new value of 50 percent.
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