The Carlyle Group beat several large strategic players in the race to acquire Czechia’s Meopta Optika, one of the winners in the booming semiconductor market, with a novel approach to financing one of the deciding factors. The private equity firm now wants to combine Meopta’s expertise with its compatriot Tescan Orsay to solve one of the biggest difficulties facing the microchip sector, managing directors Carlyle’s Friedel Drees and Vladimir Lasocki told PE Hub Europe.
Carlyle, in partnership with management, agreed to acquire Přerov-headquartered Meopta in late May from the Rausnitz family, which will take a minority stake. The deal involves the Carlyle Europe Partners investment advisory team, in which Drees sits, and Carlyle Europe Technology Partners investment advisory team, of which Lasocki is co-head.
The size of the deal was nearly €700 million, Czech newspaper Hospodarske Noviny reported at the time. Washington, DC-headquartered Carlyle declined to comment on the financials.
Meopta can trace its roots back to 1933. Despite its long history, its standing in a bleeding edge technology is what attracted Carlyle – a sector that is booming thanks to the rise of tech such as generative AI and the Internet of Things.
Meopta supplies optical components to companies that build wafer fabrication equipment – mainly inspection equipment – for semiconductors.
“Think of hoover-sized assemblies that bring together high-end sophisticated optical components, which are coated, polished, shaped together with complex shaped mechanical parts that serve as an optical channel to guide the image that is made of those wafers,” said Lasocki.
“If this was an engine, it would be the carburettor.”
That sophistication puts Meopta in an enviable position, according to Lasocki.
“It’s a very scarce capability, certainly in Europe. Partly because supply creates demand. There are not many companies that supply equipment and services for producing microchips and they have a very narrow set of critical suppliers because their levels of demands are the highest in the world.”
While demand is growing, anyone familiar with Moore’s Law will know that the transistors on microchips are getting smaller – something Carlyle hopes to exploit by bringing Meopta’s ability to manufacture at scale to Tescan, a Brno-headquartered company that Carlyle agreed to buy in December.
Tescan builds scientific instruments, including electron microscopes that can view far smaller objects than optical microscopes – something that semiconductor production will eventually require.
“Today a business like Tescan makes 300 devices a year,” said Lasocki. “It’s different from making industrial-grade equipment. If we marry those two competencies, and we can build electron components at scale, then we can supply into the future of metrology for the semiconductor industry – and that is potentially a big deal.”
Carlyle also sees growth in the wider European microchip sector, through initiatives such as the EU’s European Chips Act, which aims to make the bloc more competitive and resilient in the semiconductor sector.
“Increasingly, the supply chain will re-localise to Europe and the US, so a whole new ecosystem of players like Meopta will be created to supply this super exciting market,” said Drees. “One pillar of our investment thesis was that we have this great opportunity to back one of the local champions in this space.”
Growing in such an environment will involve investment in research and development, and capacity.
“You’re in an industry where you tend to be the sole source for everything you make for your clients, and there’s a lot of knowledge transfer when you make something new, because it’s bespoke to their particular equipment,” said Lasocki. “That’s a very long-term relationship and commitment, so your partners are looking at how much you’re willing to invest. CapEx is essential to winning long term business. If you buy another company then don’t invest behind it, it won’t convince customers to come.”
Other value drivers will come from the fact that the deal is a primary MBO, a transaction type in which Carlyle said it usually brings expertise such as best practices rationalisation.
Carlyle also sees potential business in medical and high-end industrials. Medical tools such as dental intraoral scanners have similar characteristics to the end devices for Meopta products, for instance.
Aside from the tech, Carlyle had to deal with financial complexity too.
“This deal is representative of what we’ve stood for in the last 25 years at Carlyle Europe,” said Lasocki. “Complex situations where we need to mobilise global sector views and deep local reach.”
Carlyle, which has $164 billion of AUM in its private equity strategy, has 29 offices across the world. That global presence, plus previous silicon chip investments, meant “we were hopefully able to look through the current volatility in the semiconductor market, which is characterised by very high secular long-term growth driven by several mega-trends but also has short term volatility that can make you nervous if you don’t understand what’s driving these trends”, said Drees.
“It’s hard to find these situations and to invest behind this mega-trend,” he added. “We were extremely lucky that we could get it done. It’s a very good case study of how to not only find an interesting asset in this space, but unlock a deal like this in the current market environment.”
The local knowledge meanwhile was useful as Carlyle faced what the entire private equity industry is dealing with – that the benign conditions of debt markets over the last 10 years, with low interest rates and plenty of liquidity, are over.
With the help of its London-based capital markets team, Carlyle created a financing package with local banks, an approach it felt was the most cost-competitive, flexible and quickest, as well as being with banks already familiar with Meopta.
That speed, coupled with the chance for the family to remain a partner, allowed Carlyle to win the deal ahead of large strategic players that were interested, Drees and Lasocki said.