Jan 16, 2020

Private equity "plague" descends on Germany's elevator industry

Illustration: Aïda Amer/Axios

In 2005, a top German politician famously referred to private equity as a "plague of locusts," long predating U.S. political hostility toward the industry. Now, private equity is about to learn if German sentiment has softened.

Driving the news: At least four PE groups are vying to buy the elevator business of German industrial conglomerate Thyssenkrupp, with expectations that the deal value could top $20 billion.

  • Also bidding is Kone, a Finnish elevator maker whose CEO publicly chided private equity's interest in the unit before teaming up with CVC Capital Partners.

Why it matters: Yes, elevators are boring. But they're also vital to urban development and the sort of reliable cash generator that makes buyout barons salivate.

  • Thyssenkrupp is the world's fourth-largest maker of elevators and escalators, but is selling the profitable unit in order to shore up an otherwise-troubled balance sheet.

The big picture: There have been some large buyouts of German targets since the "locusts" comment, such as Bain Capital and Cinven buying generic drugmaker Stada for around €4 billion in 2017, but nothing close to the size of what's being discussed with Thyssenkrupp.

The outcome of this deal could determine how private equity is viewed in Germany, and perhaps even elsewhere in Europe, for years to come. Both by regulators and by other potential targets.

  • If successfully purchased and managed (by someone other than Kone), then "locusts" will become little more than a fun footnote.
  • But, if financially engineered in a callous and/or calamitous way, private equity's future in the country will suffocate from its own swarm.

Go deeper: U.S. private equity firms raised record $300 billion in funding in 2019

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Private equity should breathe a sigh of relief as Sanders surges

Photo Illustration: Sarah Grillo/Axios. Photo: Robyn Beck/AFP via Getty Images

Bernie Sanders has opened up leads in both Iowa and New Hampshire, according to most recent polls.

The big picture: Private equity might be hyperventilating into a paper bag, but it should be breathing a sigh of relief. At least temporarily.

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Investors are getting bullish on Germany's economy

Data: ZEW; Chart: Axios Visuals

Confidence in Germany’s growth outlook has continued to increase, with the latest survey of investor expectations rising to the highest in more than four years.

Details: The ZEW economic research index of expectations for the next six months increased to 26.7 in January, significantly exceeding economists' estimates. The gauge turned positive last month for the first time since April, meaning more respondents are optimistic about the future than pessimistic.

Go deeper: Private equity "plague" descends on Germany's elevator industry

Keep ReadingArrowJan 22, 2020

KKR's Dave & Buster's play may signal new private equity path

Photo: Ben Hider/Getty Images

KKR on Friday disclosed a 6.3% stake in playpen operator Dave & Buster's (Nasdaq: PLAY), and said that it may engage with shareholders on transactions and changes to company management.

Why it matters: Big buyout firms have worked for years to become viewed as management friendly, eschewing hostile takeovers and explicit partnerships with activist investors. What KKR just announced feels like a significant divergence from that path.

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