Payments are the focus today, as we break the news that Baird Capital has announced a growth capital investment in a B2B cross-border payments provider. PE Hub Europe’s Nina Lindholm speaks to Baird partners Michael Holgate and Andrew Ferguson about the deal and their thoughts on investing in the wider financial services sector.
Elsewhere, we have a deal in waste management, with Cube Infrastructure Managers and Equitix Investment Management having completed the acquisition of a majority stake in a company in the sector.
We then round things out with a brief look at a couple of take-privates: a profit warning from an EQT target and the closing of a takeover by Providence Equity Partners and Searchlight Capital Partners.
Tailwinds
Baird Capital this morning announced a growth capital investment in London-based Freemarket, a provider of B2B cross-border payments.
PE Hub Europe’s Nina Lindholm spoke to Baird partners Michael Holgate and Andrew Ferguson about the deal.
“The B2B payment segment has lagged behind B2C from a technology adoption perspective, but as digitalisation increasingly permeates the business landscape, B2B tech adoption within payments is increasing,” said Holgate.
That comment chimed with what others in the private equity sector have been telling us. Corsair Capital partner Raja Hadji-Touma told me last week that in the corporate cashflow management sector, business to business was particularly attractive, with the business to consumer sector having been “played out”.
Hadji-Touma also believed that independent financial services firms were in many cases providing better products than big incumbents – something with which Baird agreed.
“Some of those huge businesses are locked in legacy systems that were built in the ’60s and ’70s,” Ferguson told Nina. “Here we are in 2023, and they’re competing against the new boys on the block.”
Large asset managers and banks also struggle to implement these changes with speed. Independent technology-first providers are “stealing the lunch” from these major providers, according to Ferguson, who added this is an opportunity Baird continues to see and like.
Larger providers must look at the more significant areas of their businesses first, providing an opportunity for a myriad of smaller providers to come in and “nibble away” at the market, according to Ferguson.
The nimbleness of these smaller providers seems to be the key. Regulators are putting pressure on big banks and insurers to be stable businesses, according to Holgate. “They also put red tape around them, dictating what they can and can’t do, which again inhibits them being able to be nimble and bring in technology at the speed they want to,” he added.
You can read more on Baird’s plans for Freemarket in the full interview.
No waste
We’ve had plenty to write about the waste management sector over the last few months, including Energy Capital Partners’ take-private of Biffa, Abris-backed GreenGroup’s acquisition of UAB Zalvaris and Exponent Private Equity’s exit from Enva.
Add another one to the pile, because Cube Infrastructure Managers and Equitix Investment Management have completed the acquisition of a majority stake in RiverRidge Holdings, a waste management and energy recovery company in Northern Ireland.
RiverRidge is based in Belfast. It generated £60 million ($74.5 million; €68.9 million) in revenue in 2022.
BGF has exited its minority stake in RiverRidge as part of the transaction. BGF has invested £16 million in the company since its first investment in 2016, according to a release.
Cube made the investment via Cube Infrastructure Fund III.
“The investment in RiverRidge Holdings represents a unique opportunity for Cube to acquire an essential infrastructure asset in a new geographic location, with the embedded opportunity to pivot towards the generation of renewable energy from waste,” said Saket Trivedi, partner of Cube Infrastructure Managers.
Take-privates
Dechra, a UK-based veterinary pharmaceuticals company subject to a £40.70 per share (total equity value of around £4.6 billion) take-private offer from EQT, warned yesterday that its operating profit for the year to 30 June is likely to be lower than the £186 million it had forecast in its interim results in February.
The company blamed the trading environment from January to April 2023 being “more volatile and challenging than anticipated” when it made its February forecast.
Dechra’s share price closed at £31.74 yesterday, having been in a range of £36-£38 since EQT’s interest became public in mid-April. Before then, it had been around £26.
EQT and Dechra in mid-May extended the deadline for EQT to make a firm offer to 2 June.
Speaking of take-privates, the move for UK-based conference company Hyve Group by Providence Equity Partners and Searchlight Capital Partners is complete, after Hyve was delisted from the London Stock Exchange yesterday.
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