The €17.2 Billion Private Equity Buyout of Thyssenkrupp’s Elevator Unit

By Gustaf Baavhammar, Chris Leung, Claire Camoin (University of Warwick), and Vincent Wess, Julius Kalvelage (WHU) | 16/03/2020

 

Overview of the deal

Acquirer: Advent International, Cinven Group, RAG-Stiftung, Abu Dhabi Investment Authority

Target: Thyssenkrupp (Elevator Technology)

Estimated value: €17.2 bn

Announcement date: 27/02/2020

Acquirer Advisors: Rothschild & Co, UBS, Goetzpartners

Target Advisors: Goldman Sachs, JPMorgan, Lazard, Deutsche Bank


Once a symbol for Germany’s industrial strength, Thyssenkrupp is on the brink of survival having been relegated from the blue-chip Dax index last year. The cumulative effect of downturns in Chinese and German manufacturing economies, weak demand for European steel, rising pension costs alongside mismanagement has presented significant downside risk for the steel-to-submarine conglomerate.


The sale is a turning point for the German industrial giant that has seen its core steel business report a loss in Q1’20 and will be Europe’s largest private equity buyout since 2007, when KKR took Alliance Boots private. Thyssenkrupp is selling its elevator unit to pay down €7.1 bn of net debt and reduce structural costs which include pension liabilities (a total of €16 bn). Initial considerations for an IPO were scrapped after investor feedback for a potential €15 bn valuation meant the German company would likely raise less by selling a stake on the stock exchange. Considering Thyssenkrupp’s aims, a sale to private equity seems the most appealing option that would not only achieve value maximisation but brings transaction certainty as a result of reduced antitrust scrutiny and could be completed within months.


A first round auction saw a €17 bn offer by a consortium comprising of Finnish competitor Kone and CVC Capital Partners, outbid competitors in terms of offer value. However, this was withdrawn on grounds of antitrust and legal concerns. The consortium including Advent International, Cinven, Abu Dhabi Investment Authority and RAG Foundation ultimately outbid other private-equity consortiums of Blackstone, The Carlyle Group and Canada Pension Plan Investment Board as well as Brookfield and Temasek by €700 m.

“It’s the remaining pearl of Thyssenkrupp. If you want quality assets, you have to build the conviction to pay for them. We feel good in terms of price.” - Ranjan Sen, Managing Partner at Advent International

Company Details (Acquirer I - Advent International)

Advent International is one of the largest global private equity investors. The firm has invested in over 350 private equity transactions in 41 countries and specializes in 5 core sectors: Business & Financial Services; Healthcare; Industrial; Retail, Consumer & Leisure; and Technology, Media & Telecom.

- Founded in: 1984

- Headquartered in: Boston, US

- CEO: Peter Brooke

- Number of professionals: 275

- AUM: €51.9bn - Total investments: 350+


Company Details (Acquirer II - Cinven Group)

Cinven is a leading international private equity firm focused on building world-class European and global companies. It has a strong performance history in Germany and its funds have acquired more than 50 companies in the DACH region.

- Founded in: 1977

- Headquartered in: London, UK

- CEO: Hugh Macgillivray Langmuir

- Number of professionals: 105

- AUM: €23 bn - Total investments: 130+


Company Details (Acquirer III - RAG-Stiftung)

RAG-Stiftung is a German foundation which was created by RAG Corporation, the largest German goal mining company, to support the discontinuation of the country’s coal mines. In order to secure long-term financing, the foundation has made strategi