Mayfair bets on pets; Patrimonium and COI back software tester

Oakley and Coller outlooks.

The market for pet-related businesses has been growing at pace over the last few years and there has been plenty of private equity interest.

Adding to that trend this morning, Mayfair Equity Partners has taken a stake in a company that connects pet owners with pet sitters.

Next we look at an area of tech that might not be as headline-grabbing as generative AI but is nevertheless vital to the whole industry – software testing. Patrimonium Private Equity and COI Partners have acquired a majority stake in a DACH-focused testing company.

We then have the latest in our 2024 outlook series, as Irien Joseph hears from Oakley Capital’s Steven Tredget about Southern Europe’s rich investment opportunities thanks to its need for digitalisation, and Nina Lindholm talks to Francois Aguerre of Coller Capital about why there will be growth in secondaries next year.

Take-privates are up next, as BC Partners outbids Apax Partners in pursuit of UK tech consultancy Kin and Carta, before we finish with another exit by Eurazeo, this time from a mineral-based products producer, alongside Ardian, Mérieux Equity Partners and Eximium.

Pet boom

Fresh out of the blocks this morning is a deal in a sector that has grown and grown in the last few years – pet ownership.

Mayfair Equity Partners announced this morning that it has taken a majority stake in TrustedHousesitters, a subscription-based pet-sitting and travel company. The transaction values the business at over $100 million.

Rockpool Investments, an existing investor, will exit its stake and reinvest alongside Mayfair.

TrustedHousesitters is a global marketplace that connects pet owners with pet sitters. The company is headquartered in Brighton in England. Since its founding in 2010, the company has grown its operations to more than 140 countries. The business recorded 158 percent year-on-year growth in 2022, supported by a rising pet population, according to a press statement.

Testing times

Patrimonium Private Equity and COI Partners have acquired a majority stake in software testing company TestSolutions.

TestSolutions has turnover of €16 million and has clients in mobility, aviation and finance, most of which are blue-chip, according to a statement. It focuses on the DACH region and is based in Frankfurt am Main.

The private equity firms are betting on the chunk of software development that testing takes up – some 20-30 percent of the total costs of a new development, they reckon. “New security and data protection requirements are giving this market additional impetus,” the statement added.

Nowhere is that more true in the possibilities that generative AI is bringing both for cybersecurity but also cybercrime – something touched on by Bain Capital Tech Opportunities partner Darren Abrahamson in a recent interview with PE Hub Europe.

Part of Patrimonium Private Equity and COI Partners’ strategy will be to buy companies to become a leading provider of software testing in the DACH region.

“Many companies in German-speaking countries are only at the beginning of implementing their digitalisation strategy and digitalisation always means integrating software,” said Ulrich Mogwitz, managing director at Patrimonium Private Equity, in a statement.

Go south

This scope for digitalisation is something we’re hearing about again and again on PE Hub Europe, in various geographies.

This morning, Steven Tredget, a partner at Oakley Capital, told PE Hub Europe’s Irien Joseph that Southern Europe has rich investment opportunities thanks to its need for digitalisation, with consumers and businesses lagging adoption rates in Northern European countries.

Tredget was speaking in the latest of our outlook pieces for 2024.

Here’s some more from him on tech:

Why does the PE model work well for companies in the sector?

Oakley’s buy-and-build model is particularly well-suited to mid-market tech companies. These are often companies which have made some substantive headway in their development but remain in the early stage of their overall growth – which lends to strong potential for consolidation, especially within fragmented markets. Rather than betting on an expanding market to fuel individual company growth, our investments aim to accelerate this process of consolidation and create market leaders who can grow market share.

Our investment in Ecommerce One illustrates the effectiveness of this approach. The company is now an emerging leader in digital solutions for online merchants, thanks largely to its series of recent acquisitions and add-ons. Moreover, many of these platform-building deals are funded through equity rather than debt financing, which is more favourable particularly in the current market conditions.

There are rich investment opportunities in Southern Europe for example as there is still much scope for further digitalisation, with both consumers and businesses lagging adoption rates in Northern European countries. This creates ample opportunity for market disruptors to be created through the support of an institutional investor.

You can learn more about Oakley’s outlook in the full interview here.

In for seconds

Our second outlook Q&A of the day features, rather aptly, the secondaries market.

Coller Capital predicts volume growth within the secondaries market in 2024 to get a boost by large fundraises and difficulties in the exit market, Francois Aguerre, partner, co-head of investment and global head of origination, told PE Hub Europe’s Nina Lindholm.

“Large funds have been raised – and are being raised in our market,” said Aguerre. “That could lead to volume growth or price increase, or both. Considering the pressure on the supply side, I suspect it will first lead to volume growth.”

The M&A market is “inactive”, said Aguerre, adding that the IPO side is in even worse shape. While bad news for PE firms looking for exit options, secondaries firms are having a much better time. “We therefore benefit directly in our ability to price our solution at higher levels, through stronger bargaining power,” said Aguerre. “At this point, industry participants don’t yet see a clear pick-up of the M&A market. The longer it lasts, the better for the secondary market.”

Take-private tussle

BC Partners has entered the race to take UK tech consultancy Kin and Carta private, topping Apax Partners’ offer by 10p a share and winning the board’s recommendation.

BC Partners is offering 130p a share, valuing Kin and Carta’s total equity at around £239 million ($303 million; €276 million). That’s a premium of 8.3 percent (or 10p) to Apax’s revised offer, 66.7 percent to the closing price before Apax made its first offer in October, 66.2 percent to the three months to that point and 79 percent over the six months to that point.

Although Apax made a ‘final’ offer earlier in December, adding 10p to its original offer, it reserved the right to make another offer if another bidder came in.

Potentially crucially though, BC Partners’ offer has support from several big shareholders. Coast Capital Management, Sand Grove Capital Management and Samson Rock Capital have given irrevocable undertakings to vote in favour of the BC offer, representing about 22.1 percent of Kin and Carta’s issued capital.

Coast Capital had been dismissive of Apax’s original 110p per share offer, saying at the time that it “unequivocally rejects Apax Partners’ opportunistic and inadequate bid” and was “immeasurably disappointed with the board’s failure to seek a fair value for shareholders”. Coast Capital noted at the time that analysts’ consensus price was 160p – something the BC offer still falls short of, but has won Coast’s support nonetheless.

Europa Partners is financial adviser to BC Partners and Linklaters is its legal adviser.

Second exit

While we’ve written plenty about the difficulties of the exit market this year, one private equity firm is finishing on a flurry.

Following its entering exclusive negotiations earlier in the week to sell Dutch Ophthalmic Research Center, Eurazeo and its partners Ardian, Mérieux Equity Partners and Eximium have sold their stakes in Humens to Leto Partners.

The equity investment by Eurazeo has generated a cash-on-cash multiple of 2.7x and an internal rate of return 65 percent since the carve-out from Seqens in 2021. The proceeds for Eurazeo’s balance sheet amount to €33 million.

Humens is a high-purity mineral-based specialty products producer. It mainly supplies sodium bicarbonate to the pharmaceuticals, cosmetics and agri-food industries.