Interest rate outlook bodes well for PE; OMERS adds Network Plus

Morning Eurohubsters, Craig McGlashan here.

There’s a heatwave across much of Europe right now and we’re happy to report that the dealflow on the continent has also been sizzling. And despite clouds in the economic outlook for the eurozone, there could be some silver linings for private equity.

Eurozone inflation expectations fell below 2 percent on Monday as recession worries grew thanks to potential cuts in Russian gas supply.

While recessions generally aren’t good news, the drop in inflation expectations might put the brakes on any European Central Bank rate rises – in the medium term at least. That should lessen the debt interest burden for PE firms and their portfolio companies.

“I’ll bet my money on the ECB ending its hikes well before we get to policy rates of 2 percent,” Erik F Nielsen, group chief economics adviser at UniCredit, told Reuters on Monday. If correct, that leaves little room for lifting from the ECB’s current deposit rate of minus 0.5 percent.

Adding Network Plus. The first deal to cross our radar this week was OMERS Private Equity on Monday entering into an agreement with management shareholders and Livingbridge to buy Network Plus. Network Plus is a Manchester, UK-based utility and infrastructure repair and maintenance service provider.

“As long-term partners with evergreen capital, OMERS is uniquely placed to support the business going forward, not least the role it has to play assisting UK infrastructure with the significant investment required across energy transition, decarbonisation and sustainability,” said Jonathan Mussellwhite, senior managing director and OMERS head of European private equity.

Tech two. If you’re in the technology business, any worries over recession in Europe certainly don’t seem to be bothering your potential suitors. Here’s the details on just two of the deals that came in on Friday.

Helsinki’s CapMan agreed to buy a majority stake in Finnish cybersecurity and IT services provider Netox. Netox founder and CEO Mikko Luhtaniemi, chairman of the board Niko Candelin and other key employees will remain significant shareholders.

Netox offers cybersecurity, cloud, server and network services, mostly to SMEs and public sector entities. The company, founded in 2004 and headquartered in Oulu, has since 2019 had sales growth of 80% per annum.

“As a niche market leader with a winning culture, the company is perfectly aligned with CapMan Buyout’s investment strategy,” said said Pia Kåll, managing partner at CapMan Buyout.

Taken private. Hg Capital has invested in Ideagen, the Nottinghamshire, UK-based specialist in compliance software for regulated industries. Ideagen has delisted from the London Stock Exchange’s Alternative Investment Market.

Ideagen serves companies across industries including life sciences, banking, finance, insurance and healthcare. More than 10,000 companies use Ideagen’s software including brands such as Heineken, Bank of New York and British Airways.

“We are excited to work with the Ideagen team,” said Christopher Fielding, Joris Van Gool and Jean-Baptiste Brian, partners at Hg. “They have been responsible for building a high-quality business that will now have greater flexibility to execute and accelerate longer term growth plans, including investments in product, technology, talent and large scale, accretive acquisitions.”

That’s it from me – I’ll be back tomorrow.

Cheers,

Craig