CD&R is hoping for a boost in innovation among German machine builders.
(Photo: obs)
Frankfurt The investment company Clayton, Dubilier & Rice (CD&R) has expansion plans for the German market. “Germany is an important market for us, not least because of the machine builders. Digitization will bring a new boost to innovation here,” says Jörg Killmer, partner in the London office of the private equity house.
For this purpose, the company recently brought in additional expertise. “The appointment of Gordon Riske, the former CEO of Kion Group AG, as Operating Advisor of the CD&R funds corresponds to the core of our DNA.”
Private equity funds buy medium-sized companies and parts of groups in order to restructure them over a period of several years. The exit from the investments takes place via the sale to industrial addresses or an IPO. In Germany, CD&R includes the Kalle Group, which produces sausage casings and sponge cloths.
“We also do transactions under EUR 1 billion if we see potential for future growth. There are practically no upper limits; we took over the Morrisons supermarket chain in 2021 for the equivalent of around twelve billion dollars,” explains Killmer.
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According to Killmer, the joint venture with the chemical group BASF at Solenis was very successful for everyone. After the joint exit from the specialist for water treatment applications, one can imagine further partnerships of this kind. Germany is a core market for CD&R and the aim is about one participation there each year.
The private equity industry is raising money faster and faster
Experts are increasingly having mixed feelings about the boom in the private equity market. As long as there are no noticeable interest rate hikes by the central banks, even more investors will direct their funds to the private equity sector for lack of alternatives.
“Private equity funds are collecting sums in the tens of billions at ever shorter intervals. It used to take around four to five years to raise funds, now it takes one to two years. That’s a bit worrying,” says industry expert Alexander Binz from Circle Eleven. For example, the “dry powder” – the uninvested capital – continues to increase.
>>Read here: EQT goes on a company hunt with a mega fund
In the healthcare sector, Killmer has seen significant increases in the valuations, in many cases the so-called multiples have arrived in the range of 15 to 20 times the operating result, the Ebitda.
“With interest rate increases, loans for acquisitions would become more expensive. As a result, the operational performance of the companies will be even more important,” believes Killmer, who before joining CD&R worked at the private equity house Triton and before that he worked at the investment bank Goldman Sachs.
The current CD&R fund has a volume of around 16 billion dollars. Around half of this has been invested so far, of which around 3.5 billion in Europe. According to Killmer, CD&R is also interested in minority shares. At Belron, for example, the financial investor initially held a 40 percent stake, but today it is likely to be less.
The company repairs glass damage to vehicles, known in Germany under the Carglass brand. “We were also traded as potential buyers for the industrial service provider Bilfinger. In general, we have deep experience with industrial service providers such as Spie, who bought Hochtief Solutions and SAG in Germany with our support, but I cannot comment on rumors about specific companies,” says Killmer.
In financial circles it is said that a new CEO will take office at Bilfinger in March, and there will certainly be no transactions before then.
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