Private equity finds cash-rich Germans ready to buy

The enthusiasm among European investors for businesses linked to German’s buoyant economy is benefiting private equity, as trade buyers and rivals alike queue up to buy up German assets.

The $25bn investor Axa Private Equity this week announced the sale of Sulzbach-based chemicals company CABB, for an undisclosed sum, to private equity rival Bridgepoint.

Axa bought CABB in 2007, then helped it to buy SF Chem, a Swiss rival formerly an affiliate of Germany’s Hoechst. It also helped CABB expand into emerging markets by acquiring Indian peer Karavati.

This led to a doubling of CABB’s revenues to €311m by 2011. Two of CABB’s four production facilities are located in Germany.

Private equity investors have also recently found cash-rich German buyers of domestic assets.

In February, Barclays Private Equity announced it had sold Traunreut-based Siteco Group to Osram, a wholly-owned subsidiary of German diversified manufacturer Siemens.

Barclays had held Siteco for four years. Some 1,000 of Siteco’s employees are based in Germany, although it also expanded internationally under Barclays’ ownership, including floodlighting the Taipei Tower, the tallest building.

“We have confidence in the strength of medium-sized businesses in Germany,” said Peter Hammermann, managing director and co-head of Barclays Private Equity in Europe.

Germany’s economy grew by 3.6% in 2010 – the highest rate for 20 years – boosted by mild net export growth, domestic private and public sector consumption, and record low unemployment.

Nick Williams, manager of the £517.4m Baring Europe Select Trust, said listed European small companies should do well, too, given the 20-year high in German business confidence.

“The IFO’s confidence index rising to 111.2 points for February from 110.3 in January – the ninth consecutive month-on-month increase – firmly supports our belief that European businesses, particularly those in the small cap arena, are facing a positive period,” he said.

“European equities should benefit from the strength of Europe’s largest economy and we believe the greatest investment opportunities lie within small caps as domestic economic conditions strengthen.

“The large size of the investible universe of European smaller companies and the strengthening recovery in Northern and Central Europe means that at the stock level there remain tremendous opportunities for investors to experience some of the most positive returns to be had from Western equity markets.”

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David Walker
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