Good morning Eurohubsters, it’s Craig McGlashan here with the Dealflow.
Inflation and recession worries are hovering over much of Europe – this week Citi predicted that UK inflation could hit 18 percent early next year – and are already impacting dealmaking decisions, even in sectors such as healthcare that are typically resilient to recession concerns, one senior dealmaker told me.
Critical care. The dealmaker’s firm concentrates on the middle market and he has a particular focus on healthcare.
“There have been situations that in other times, we might have leapt forward into,” the managing director, who was speaking on background, told me yesterday. “But they have been slightly too capital intensive in the current situation, or we have been concerned about the end-customer impact of the current environment, so we backed away a little bit and decided to watch and see what happens.”
The worsening economic backdrop “clearly raises the bar for us in terms of understanding how resilient those businesses will be in the face of rising inflation, and the impact that has on the debt, as well as the impact that has on our customer sets”, he said. “That’s absolutely critical to us.”
We’d love to hear more dealmakers’ thoughts on how rising rates and inflation are affecting the private equity outlook, from sector choice to debt/equity splits and everything in between. Feel free to drop me a note at firstname.lastname@example.org with your observations.
Metal merger. Hot off the PE Hub Europe presses this morning is a write-up from David Wansboro on OpenGate Capital entering exclusive negotiations to purchase Extol. Talks are taking place with private equity firm MCH and Fernando Busto, founder and CEO of Extol.
The acquisition is part of a larger plan to create a European group focused on the aluminium extrusion market. OpenGate plans to merge Extol with French company Aluminium France Extrusion to form a new entity titled Aluminium Solutions Group (ASG).
Extol, or Extrusiones de Toledo, is a Toledo, Spain-based manufacturer of aluminium extrusions. Aluminium France Extrusion is headquartered in Saint-Florentin and is also a manufacturer of aluminium extrusions.
The proposed new entity, ASG, will consist of four plants in Nantes, Saint-Florentin and Ham, France with a further plant in Toledo, Spain. The group will continue to supply extruded aluminium products to the European construction, transport, machinery, equipment, infrastructure, and consumer goods sectors.
OpenGate is headquartered in Los Angeles, while MCH is based in Madrid.
Warming up. Speaking of mergers, Patrizia Infrastructure has completed the merger of its portfolio companies SAREN Energy and Kvitebjørn Varme. The new entity has an estimated value of €350 million.
“Through this merger, we are creating one of Norway’s largest district heating companies with a diversified asset base that is well-positioned for future growth,” said Matteo Andreoletti, head of infrastructure equity, Europe and North America at Patrizia.
SAREN Energy was established in 2020 following the merger of Norwegian firms Sarpsborg Avfallsenergi (based in Sarpsborg) and Kvitebjørn Bio-El (based in Fredrikstad).
The merger aligns with Augsburg, Germany-headquartered Patrizia’s ESG strategy to achieve net zero carbon status across its operations and real assets portfolio by 2040.
Air quality. Sticking with the ESG and energy theme, Resurgens Technology Partners-backed EnergyCAP has bought Wattics, a provider of energy management analytics and monitory software.
Dublin-based Wattics’ software identifies anomalies, monitors air quality and triggers real-time notifications and recommendations to end-users.
Boalsburg, Pennsylvania-headquartered EnergyCAP provides energy and sustainability enterprise resource planning software.
“As we worked to identify growth opportunities for EnergyCAP, Wattics stood out as a platform that will enable the company to drive accelerated growth — integrating its product roadmap, expanding product breadth and executing cross-selling initiatives,” said Resurgens managing director Fred Sturgis. “Sustainability and energy conservation have become increasingly integral to business operations. We are excited to invest deeper into the space and support EnergyCAP customers as they reduce their carbon footprint.”
EnergyCAP will look for M&A opportunities, specifically for software companies specialising in greenhouse gas tracking and energy consumption reduction.
Resurgens is an Atlanta-based tech-focused private equity firm.
Moving up. Finally, Levine Leichtman Capital Partners (LLCP) has promoted Monty Ismail and Luc Sandmann to director in the firm’s investment management group. Also, LLCP has hired Debra Sherman as a director in its investor relations group. Ismail and Sandmann are based in LLCP’s London office and Sherman is based in the firm’s Los Angeles office.
Michael Weinberg, managing partner of LLCP, said in a statement: “We are very pleased to recognise Monty’s and Luc’s hard work and leadership roles supporting our European business with their well-deserved promotions. At the same time, we are excited to welcome Deb to our investor relations team, which is critical to the long-term growth of our firm. We are confident that our three new directors will make many important contributions to LLCP in the future.”
Ismail and Sandmann joined LLCP in 2018 and 2019, respectively. Prior to joining LLCP, Sherman worked at Ares Management.
LLCP is a mid-market private equity firm that manages $9 billion of assets and has offices in Los Angeles, New York, Chicago, Charlotte, Miami, London, Stockholm, The Hague and Frankfurt.
That’s it from me – see you on Thursday.