ECB and Fed moves key to dealmaker’s re-entry; Silver Lake’s Cedig to merge with Oakley’s Grupo Primavera

Good morning Eurohubsters, Craig McGlashan here.

Inflation and the cost of living crisis seem to be the biggest worries keeping people up at night these days – just look at the Fed last night joining the ECB’s move last week in upping rates. One dealmaker I spoke to yesterday told me that getting deals done has become very difficult – but that getting some certainty around central banks’ thinking should help ease the pain a little.

Rule of three. The dealmaker outlined three criteria for dealmaking to get back to normal. One of these was knowing the outcome of a few factors – including central banks’ direction of travel.

“In the next two, three or four months, are central banks both in the US and Europe going to go for what is expected?” he said. “Are they going to go bolder or go more dovish? We need the next few months to see which trajectory they are taking.”

The other two criteria were the debt markets reopening – right now they are “by invitation” only in Europe, he said – and some certainty around the energy supply situation in Europe.

“The energy situation in Europe is a big unknown at this stage,” he said. “Governments are saying ‘just start saving energy’. We need to see how this unfolds. Maybe it’s going to be really bad, maybe it’s going to be okay.”

Distractions. Keeping with the energy theme, another dealmaker worried that with the focus of policymakers and the public shifting to the cost of living and away from the climate crisis, there is at least a short term risk of a hit to the business models of target or portfolio companies that focus on tackling climate change.

“There’s a drive in Europe to move away from gas guzzlers to electric cars,” he said. “And suddenly, we’re discounting the price of petrol because petrol is too expensive. That was the opportunity to say, ‘let’s get away from petrol because it is too expensive’. But now places like France have discounted their petrol prices or their taxes on petrol to make it affordable, which is entirely political, but is a step in the wrong direction. There’s going to be lots of that.”

The dealmaker was more optimistic for the longer term, however.

“Look out the window – this summer has been scorching,” he said. “I think people get it. Even those who don’t get it are beginning to look out the window and say, ‘I might not be completely right here.’ Those trends, I think, are permanent. But in the very short term, there might be some consequences in the wrong direction.”

The impact of rising rates and inflation on the dealmaking landscape are going to be a big focus for us in the coming months. We’d love to get your thoughts on how they will affect both your business and the wider industry. You can share them with me at craig.m@peimedia.com

Join the club. Deals wise, we saw an interesting combination yesterday as Cedig, a provider of cloud business management services, announced that it has entered an agreement to combine with Grupo Primavera.

Upon completion, Silver Lake, will remain the majority shareholder of the combined company. Oakley Capital, which created Grupo Primavera through twelve acquisitions and is its majority shareholder, will join KKR and AltaOne as minority shareholders in Cegid. The combined company is valued at approximately €6.8 billion.

The transaction is expected to close in the third quarter of 2022.

Based in Lyon, France, Cedig is a provider of cloud business management services for finance, human resources, CPAs, retail and entrepreneurial sectors. In 2019, Cedig acquired HR services provider Meta4 and more recently, it bought VisualTime, a time management system.

The addition to the Grupo Primavera family establishes a solid position for Cegid in Iberia and offers expansion opportunities for Grupo Primavera through Cegid’s presence in Latin America.

“Through our investment and strategic development executed since 2016, Cegid has become a pan-European and global player with strong positions in multiple geographies including France, Spain, and Portugal, with important market presence in 12 other countries and selling in more than 130 countries,” said Christian Lucas, co-head of Silver Lake EMEA and vice-chairman of the board of directors of Cegid. “The market for digitisation solutions in the European mid-market, namely through financial management software, is large and growing meaningfully, and the combined company will be uniquely positioned to capitalise on this opportunity as it continues to expand.”

That’s it from me – have a great weekend.

Cheers,

Craig