2011 going private survey

8/3/2019 2011 Going Private Survey

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Key Conclusions

While markets across Europe began to recover rom the lows o 2009, deal activity or the mostpart remained subdued, with the number o transactions across Europe recovering to 2008 levels,with 13 transactions being announced (2009: 9). The aggregate value o transactions or the periodrose more substantially to $11.5 billion (2009: $1.97 billion). Average transaction size also increasedto $884 million (2009: $220 million).

As in previous years, the UK market accounted or the most signicant share o relevant transactionsin terms o both value and volume, with seven transactions announced having an aggregate valueo $7.863 billion.

Transaction Volume 2006-2010

0

5

10

15

20

25

30

35

Number of

Transactions

2006 2007 2008 2009 2010

35

13 13

9

23


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Jurisdiction

The UK maintained its positionas the most active market inEurope, accounting or seven othe 13 relevant transactions withan aggregate value o $7.863billion (2009: $732 million). Thisincluded, however, one deal whichwas subject to the shared juris-diction o the UK Takeover Paneland the Netherlands Authority orthe Financial Markets (Apollo andCVCs bid or Brit Insurance). Withtwo urther transactions (the

acquisitions o Teleplan Interna-tional and SMARTRAC) subject tothe jurisdiction o the Nether-lands Authority or the FinancialMarkets, the Dutch Market wasthe second most active market inEurope.

The survey showed a more evenspread o transactions across thevalue range compared with theprevious year, with a higher

average transaction value o$883.3 million. This contrasts tothe previous year where transac-tions were concentrated towardsthe lower end o the value range(2009 average transaction value:$219.2 million).

Going private transactions makeup a signicant percentage ototal private equity transactions,particularly when analyzed byvalue, refecting the generallyhigher average transaction valueo going private transactions.While these gures represent anincrease upon those or 2009 (7%o total private equity deal valueand 4% o total deal volume),they are still lower than 2008gures where 30% o privateequity deal value and 14% oprivate equity deal volume wasthrough take private transactions.

1 1

0

1

2

3

Number of

Transactions

$100-$250 >$1000$250-$500 $500-$1000

Target Jurisdiction by Enterprise Value

Enterprise Value (millions)

3

11 1

00 0 000 00 0

1

00

2 2

UK Germany Sweden Ireland FranceNetherlands

0

20

40

60

80

100

Percentageof Private

EquityAcquisitions

Jurisdiction

Total UKGermany Ireland Netherlands SwedenFrance

Going Private Transaction as a Percentage of allPrivate Equity Acquisitions of at least $100 Million

Enterprise Value by Jurisdiction

1220

105 8

10

43

20 2026

101022

11

VolumeValue ($m)

0

2,000

4,000

6,000

8,000

10,000

2007 2008 2009 2010

Average Transaction Value ($m)

3,1002,200

9,4008,840


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Market Inormation

Improving credit markets in 2010helped sponsors pursue transac-tions o increasing value. Whereasin 2009 there were no sponsor-backed going private transactionsin Europe with a value o $500million or greater (the highesttransaction value in 2009 was$366.2 million), 2010 saw sixsuch transactions, o which ourexceeded $1 billion. The largesttransaction in 2010 saw a signi-cant rise in deal value to $4.77

billion rom $407 million in 2009.

Ater a slow start with only tworelevant transactions occurring inthe rst quarter, market activityincreased and remained generallyconstant on a quarterly basisthroughout the year, consistentwith improving market conditionscompared with 2009.

0

1

2

3

4

5

Number ofTransactions

$100-

$250

$250-

$499

$500-

$999

$1000-

$5000

Over

$5,000

Market Activity by Enterprise Value

4

3

2

0

4


Market Activity by Quarter

Quarters

0

1

2

3

4

5

Q1 Q2 Q3 Q4

2

3

44



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UK Transactions Type o Ofer

A going private transaction in theUK can be structured either byway o an oer made to allshareholders or using a tech-nique known as a scheme oarrangement, whereby all theshares o the target are can-celled and new shares are issuedto the bidder in exchange or thepayment o consideration.

Once the threshold or a schemeo arrangement is reached (75%o shares, excluding shares held

by the bidder and its associates),100% control is obtained. Bycontrast, under an oer, statutoryprovisions apply under which thebidder can squeeze out minorityshareholders i 90% o the sharesare acquired.

The UK gures or 2010 showthat a scheme is the preerredroute, with six out o the sevenUK transactions in this survey

making use o a scheme. Overthe past three years, 75% o allsponsor-backed going privatetransactions involving UK targetshave been eected by way o ascheme o arrangement. The onlytransaction to use the oermethod was Apollo and CVCs bidor Brit Insurance where therewas a 95% acceptance condition(in order to reach the squeeze-outthreshold o 95% under Dutch

law). The Dutch target was notcapable o a winding up underthe Companies Act 2006 andthereore could not propose ascheme o arrangement.


$250-$499$100-$249 $500-$999 $1000-$5000

Type of Offer (UK Transactions Only)


1 11

0000

3

Scheme Offer

0

1

2

3

4

25


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UK Transactions Irrevocable Undertakings

Irrevocable undertakings are usedin UK transactions or bidders to

get comort in advance o makinga ormal oer that they will havetarget shareholder support ortheir bid. In a recommended oer,a bidder will usually expect therecommending directors to enterinto some orm o irrevocableundertaking in respect o theshares held by them personally.

Similarly, any shareholders withsignicant stakes will also be

approached to gauge their interestin the bid. However, bidders mustpay heed to the rules set out in theUK Takeover Code, requiringdisclosure o the ull terms o anyirrevocable undertaking, and alsobe aware that the seeking o anirrevocable undertaking will makethe counterparty an insider to theoer. Due to the need to limit thenumber o parties who are aware

that a potential oer may bemade, in practice this means thatonly a very limited number oparties are normally approachedto give such an undertaking.

The dierent types o commit-ment which can be given are:(i) hard undertakings, genuinelyirrevocable commitments bindingunless the oer lapses; (ii) sotundertakings, binding only i

there is no higher competingoer made; and (iii) so-calledsemi-sot undertakings, bindinguntil an oer is made which ishigher by a threshold amount.Hard undertakings were given inall o the seven UK transactions,with semi-sot undertakings alsobeing given in respect o anadditional percentage o thetarget equity in two o thesetransactions.

0

20

40

60

80

100

Percentage of

Target Equity


$100-

$249

$250-

$499

$500-

$999

$1000-

$5000

Irrevocable Undertakings and Letters of

Intent (UK Transactions Only)

Hard (%) Soft (%)

52

1.010004.59

0.49

12.13


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UK Transactions Proposed Changes to the UK

Takeover Code

In July 2011, the Takeover Panel announced a number o changes to the Takeover Code. The implementa-

tion date or the nal changes was September 19, 2011 and they will apply to all oer periods starting on

or ater this date, with transitional provisions applicable to those oers already live at the time o imple-

mentation.

The changes most likely to have the most signicant eect on sponsor-backed going private transactions

are:

n the abolition o deal protection measures, including a prohibition on inducement or break ees;

n the identication o any potential bidder in any leak announcement;

n the introduction o a our-week put up or shut up period or the announcement o a rm oer ollowing

a leak announcement; and

n enhanced disclosure requirements, including the detailed disclosure o nancing arrangements and

oer-related ees.

Deal protection measures have previously been eatured regularly in going private transactions. The

inability to rely on such measures in the uture could result in greater emphasis being placed on the use

o irrevocable undertakings to increase certainty.

The naming o potential bidders and the short timetable as a result o the our-week put up or shut up

period will likely be the greatest challenge to going private transaction volume. As a result o this, bid

preparations will have to be urther advanced and developed prior to a sponsor initially approaching a

target. A recent British Venture Capital Association research survey on the potential impact o the changes

has ound that 20% o potential bidders consider they would denitely be discouraged rom making a bidas a result o the our week put up or shut up period, with over 90% o respondents stating that it took

at least six weeks to organize a bid. The ability o the target board to make a leak announcement and

trigger the shortened timetable bestows upon the board greater power to infuence the course o a bid.

The Takeover Panel may extend the our week period or a particular bid, but will generally only do so at

a late stage in the timetable and with the agreement o the target board. Obtaining the target boardscooperation will thereore become more important.

2011 going private survey

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