Bregal Unternehmerkapital scores 10.5x return with EA sale

BU's exit from EA generated a 76% IRR and returned over €1bn in capital gains, says BU co-founder Florian Schick.

Florian Schick, managing partner, BU

Bregal Unternehmerkapital (BU) made a 10.5x return on its exit from EA Elektro-Automatik, Florian Schick, co-founder and managing partner of BU, told PE Hub Europe. The sale generated a 76 percent IRR and returned over €1 billion in capital gains.

BU announced in late October that it would sell EA, an electronic test and measurement device provider, to Fortive Corporation for an enterprise value of €1.58 billion.

EA’s evolution from a “European technology leader” to a “global market leader” was aided by its “significant” expansion into the US and Asia, which accelerated EA’s international sales and marketing activities, Schick said. The firm acquired EA from its founders via its BU II fund in 2019.

Viersen, Germany-based EA’s revenues grew from €56 million in 2019 to around €170 million in 2023, which was achieved purely organically with no add-on acquisitions, he added.

The firm achieved this growth by investing in EA’s infrastructure as well as capabilities. “One of our first decisions in 2020 was to double EA’s production capacity,” said Schick. “Although this is rather unusual for a financial investor, it’s something that’s common across our industrial tech transactions.”

BU also expanded EA’s R&D team and launched various product series, Schick added.

Selling EA was then a natural progression as BU transformed the company into a global leader while achieving key elements in its value creation plan well ahead of schedule and “significantly overperforming” its investment thesis. “There was very strong interest in EA both from strategic buyers as well as financial sponsors at very attractive valuation levels,” Schick said.

Looking ahead

BU invests in mid-sized companies in Germany, Austria, Switzerland and Northern Italy. It is part of the international private equity firm Bregal Investments. It looks for companies with high cash conversion and strong market positions.

The firm has just made a majority investment in cloud-based ecommerce provider Billbee. “We have an active pipeline of companies that we want to buy, all with similar characteristics to EA: real market leaders with very strong financial metrics and outbreak potential.”

No exit

The exit market is possibly the weakest in 10 years due to macroeconomic uncertainty, rising interest rates and a liquidity crunch, according to Schick.

However, it is still possible to receive attractive multiples in exit processes with good preparation and strong assets. “EA is a very good example for this,” he said.

In terms of private equity investments, Schick does not expect a significant recovery anytime soon. Having said that, he believes there will be liquidity for the best assets in the market.

The firm also anticipates “strong” dealflow for primaries, buying directly from founders/family investors, which accounts for about 80 percent of BU’s investments. “This market is wide open because the decision to sell or to look for a partner is not so much driven by price or interest rates, but rather driven by industrial reasons to bring on a partner.

“We believe the next vintage may be even more attractive for our strategy.”