How active have financial sponsors been in acquiring publicly listed companies and/or buying infrastructure assets?

Private Equity (2nd edition)

Greece Small Flag Greece

Overall, financial sponsors have been quite reluctant to invest in public traded companies or infrastructure during the last year.

Luxembourg Small Flag Luxembourg

The acquisition of public listed entities in Luxembourg is rare.

Infrastructure assets in other European countries such as Spain, Portugal, Greece are commonly acquired by Luxembourg SPVs due to large investors not wishing to invest funds directly in those jurisdictions and Luxembourg’s collateral law being very creditor friendly. Infrastructure projects in Luxembourg itself are less common.

The Netherlands Small Flag The Netherlands

Financial sponsors have been involved in a limited number of deals that concerned publicly listed companies. Recently, a consortium of PAI Partners SAS and several entities affiliated to Charles Johnson and his family acquired 96.7% of the issued and outstanding shares of Koninklijke Wessanen N.V.

Financial sponsors reported a shift in their portfolios, expanding to investment areas such as infrastructure. In 2019 for example, 3i Infrastructure acquired Joulz for EUR 310m from Stedin Group. Joulz is a leading owner and provider of essential energy infrastructure equipment and services in the Netherlands. Furthermore we saw French utility Engie SA selling its remaining coal-fired power plants in Germany and the Netherlands to Riverstone Holdings LLC. Loyens & Loeff advised both 3i Infrastructure and Riverstone Holdings LLC on these transactions.

Through a recent auction process a Mitsubishi-led consortium agreed to acquire the Dutch energy firm Eneco for EUR 4.1bn. At this moment the deal still requires approval from the current 44 municipal shareholders.

Norway Small Flag Norway

Financial sponsors frequently look at acquisition opportunities on the Oslo Stock Exchange in Norway. There has, however, been few public takeover offers on the Oslo Stock Exchange in recent years (less than 10 each year, for the last three years). Only a handful of these offers have been made by financial sponsors.

Financial sponsors are also active within the Norwegian infrastructure sector, and takes up a substantial part of the acquisitions.

Poland Small Flag Poland

Acquiring publicly listed companies constitute a smaller part of the financial sponsors’ activity in Poland.

With respect to buying infrastructure assets, according to the 2018 European Private Equity Activity Report prepared by Invest Europe/EDC, only 2.3% of private equity investments in Europe were investments in the Construction sector and only 0.5% were made in the Real Estate sector.

The above statistics are mirrored in Poland. However, real estate investment funds, in particular from the Republic of South Africa, have become increasingly active on the Polish market. European and Chinese Funds are active in renewable sectors. However due to regulatory changes the number of transaction is limited.

South Korea Small Flag South Korea

Financial sponsors are active in acquiring publicly listed companies as much as they are active in acquiring unlisted companies. As for infrastructure assets, there are a number of financial sponsors (e.g., local and global private equities) that focus on investments in infrastructure assets.

Sweden Small Flag Sweden

Recently, public to private deals by financial sponsors have been rather uncommon, with only one or two transactions per year. Similarly, in 2018 only around 7% of the transactions involved infrastructure assets, although we have seen a significant increase transactions involving renewable energy assets.

Switzerland Small Flag Switzerland

In line with the general trend (see question no. 1 above), financial sponsors are also increasingly active in acquiring listed companies and infrastructure assets. A recent example is the take private of Swiss listed company Kuoni by EQT or the acquisition of Nestle Skin Health by a consortium led by EQT and Abu Dhabi Investment Authority from listed company Nestle.

Belgium Small Flag Belgium

Given the latest political and economic environment in Mexico, the securities market has been somewhat stalled and few tender offers for publicly listed companies have taken place. The most relevant successful tender offer in recent years by a financial sponsor was closed in 2017.

Regarding infrastructure assets, several innovative legal vehicles have been included in the applicable legislation. These vehicles have been designed to promote investment in Mexican infrastructure, and include FIBRAs (REIT-equivalent), FIBRA-Es, CKDs, CERPIs and FICAPs. Due to the foregoing, PE sponsors have been much more active on the infrastructure side. It is worth noting that the current administration in Mexico has promised to promote investment in this sector. That said, one of the first formal acts of such administration was to cancel the half-way built new airport of Mexico City, which represented a several billion dollar investment.

Canada Small Flag Canada

Acquisitions by financial sponsors of public companies are not nearly as common as acquisitions of private companies. Where they do occur, the acquisitions of public companies are virtually all “friendly” acquisitions having been negotiated with the support of the target board and the securing of voting support agreements from key shareholders. Some recent notable pending privatizations by financial sponsors include the acquisition of WestJet by Onex, the acquisition of Canfor Corp. by Great Pacific Capital Corp., and the sale of Ridley Terminals Inc. (a Canadian crown corporation) to a company owned by Riverstone Holdings and AMCI Group.

Investments in infrastructure assets is common in Canada, with many specialty funds established or having a division focusing exclusively on this asset class.

China Small Flag China

Financial sponsors are always playing an active role in acquiring shares of Chinese listed companies. However, in publicly disclosed cases of recent years where controlling stake of a listed company is acquired, more than half of such deals are driven or successfully consummated by state-owned or backed investors. Typical ways for acquiring shares in Chinese listed companies include: (i) privately negotiated transaction, (ii) secondary market trading, (iii) tender offer, and (iv) indirect deal structure devised to acquire shares in the controlling shareholder of the listed companies. As to foreign investments in Chinese listed companies, two latest trends are observed: (i) foreign financial sponsors are seeking earlier stage deal opportunities (e.g., pre-IPO financing) for private companies who have the potential to go public, and (ii) the QFII system, as a tool of financial innovation for opening-up, are largely used by foreign financial sponsors to participate in minority investment in Chinese listed companies (e.g., as of the end of June 2019, QFIIs collectively hold floating stock in China’s A-share market representing a capitalization of hundreds of billion RMB). The said trends were strengthened when China established the Sci-Tech innovation board (SSE STAR Market) in November 2018 which has stimulated the privatization of overseas China-based listed companies and their return to domestic capital market, and when China announced to lift the investment quota restrictions for QFII in September 2019.

Although state-owned or backed entities have long played a dominant role in the infrastructure market, “social capitals” including financial sponsors are recently encouraged by the Chinese government to participate in large-size PPP projects by forming a special-purpose fund or running a joint venture with other qualified market players.

France Small Flag France

Regarding publicly listed companies, out of 36 public offers (other than share buyback) – which were declared compliant by the AMF – over the last 24 months, 3 tender offers were submitted by investment funds.

Although financial sponsors have expressed more interest for publicly listed companies, these figures can be explained, in part, by the fact that French market authority will reject any offer that is conditional on reaching the squeeze-out threshold. Early 2019, this threshold has been reduced from 95% of the share capital and voting rights of the listed target to 90%. This change may encourage bids from PE funds in the future, although the fact that activist funds may acquire blocking minorities is still perceived as a risk. This may be due to recent transactions where activist funds managed to block a squeeze-out.

In 2018, we also saw an increase of investments in infrastructure. €3.9bn have been invested in 111 companies with of predominance of the energy and transportation sectors, both in debt and capital (65% of the investments). 2019 has also been a very active year with a global trend in Europe regarding disposal of telecommunication infrastructures by the main operators.

Germany Small Flag Germany

While public to private deals in Germany are more uncommon in comparison to other jurisdictions, it is mostly driven by the misguided belief that they are overly complex and burdensome. However, Germany does have a large percentage of prominent companies that are not listed (Mittelstand) and therefore, unlike the USA or UK, reduces the pool of potential public targets.

In the current market, financial sponsors are actively considering public deal opportunities with the expectation that financial sponsor public takeovers will continue to rise. There are a number of major deals in the pipeline including KKR being granted approval in November 2019 to purchase over 40% in Axel Springer, which would make KKR the largest shareholder, and to privatise the company. The attempt of Blackstone and Hellman & Friedman to acquire Scout24 was not successful though.

Infrastructure deals are also expected to increase due to the current boom in the sector and as financial sponsors are purchasing assets with prolonged investment periods. Recent infrastructure deals included the acquisition of stakes in targets such as Currenta, the Chemical parks of Bayer, and FlixMobility GmbH, a German-based provider of bus and railway transportation services.

Mexico Small Flag Mexico

Given the latest political and economic environment in Mexico, the securities market has been somewhat stalled and few tender offers for publicly listed companies have taken place. The most relevant successful tender offer in recent years by a financial sponsor was closed in 2017.

Regarding infrastructure assets, several innovative legal vehicles have been included in the applicable legislation. These vehicles have been designed to promote investment in Mexican infrastructure, and include FIBRAs (REIT-equivalent), FIBRA-Es, CKDs, CERPIs and FICAPs. Due to the foregoing, PE sponsors have been much more active on the infrastructure side. It is worth noting that the current administration in Mexico has promised to promote investment in this sector. That said, one of the first formal acts of such administration was to cancel the half-way built new airport of Mexico City, which represented a several billion dollar investment.

United Kingdom Small Flag United Kingdom

Many sponsors have been active in both the public markets and in acquiring infrastructure assets over the last 12- 24 months as they continue to deploy capital in alternative ways. According to figures released by Bain & Co., take-private deals globally reached their highest level in 2018 in terms of both value and count since 2006/07 and can, in part, be explained by the scarcity of quality assets. For UK take-private deals, the depreciation of the pound has also been a contributing factor in this upward trend. Pension funds and similar long-term institutional investors have also been more active in infrastructure deals attracted by traditionally steady returns and stable risk profiles.

Vietnam Small Flag Vietnam

Sponsor backed going private transactions are not common in Vietnam due to their complexity (i.e., public tender offer rules will be triggered when acquiring at least 25% of the outstanding shares of a public company and waiver of the trading band from the State Securities Commission if the purchase price falls outside the trading band) as well as that it is time-consuming to deregister a public company status and delist a listed company.

The infrastructure market has been active in Vietnam as a result of the government prioritizing infrastructure development, though state-owned companies and strategic investors remain dominant players in the infrastructure market.

India Small Flag India

We note that the Securities and Exchange Board of India (Substantial Acquisition of Shares and Takeovers) Regulations, 2011 (popularly known as the Takeover Code in India) has been triggered approximately a dozen times by financial sponsors in India since April 1, 2018. As reported in the data provided by the Indian Department of Industrial Policy and Promotion (DIPP)6, in the financial year 2018-19, specifically with respect to publicly listed companies, (i) 418 acquisitions and investments took place in India; and (ii) these acquisitions/investments were for an aggregate sum of USD 1.31 billion.

As reported by the IBEF, the infrastructure sector in India has witnessed private equity and venture capital investments worth USD 1.97 billion in 2018 and M&A deals worth USD 5.4 billion in 2017.

As per the deal tracker reports released by Grant Thornton , in 2018, 29 M&A and private equity transactions took place in the real estate sector in India, for an aggregate amount of USD 3.3 billion. Till the end of the second quarter of 2019, in India, 5 private equity transactions have taken place in the real estate sector in India, for an aggregate amount of USD 562 million.

Ireland Small Flag Ireland

Public to private transactions by financial sponsors are rarely seen in the Irish market. There were no such transactions in 2018 and there was one such transaction in 2019, the take private of financial services firm IFG Group by UK fund Espiris.

A public-to-private transaction is regulated by the provisions of the Irish Takeover Panel Act 1997 (as amended), the Irish Takeover Rules 2013 (Rules) and the European Communities (Takeover Bids (Directive 2004/25/EC)) Regulations 2006. The Rules regulate the conduct of takeovers of Irish companies listed on certain stock exchanges. The Irish Takeover Panel oversees the application of the Rules to specific transactions.

Financial sponsors (ie, unlisted funds with project equity investment mandates) are considerably active in the Irish infrastructure market. We see strong interest from financial sponsors in social, transportation, waste, digital and energy (particularly renewables and interconnection) infrastructure in Ireland. Key players in the Irish market from an equity investment perspective include Macquarie, AMP Capital, ISIF, DIF, John Laing, Equitix and Partners Group.”

Finland Small Flag Finland

Hannes Snellman: There has been a limited but increasing number of sponsor backed public-to-private transactions in the Finnish market. Financial sponsors have also been very active in transactions involving infrastructure assets – energy (including transmission grids), telecommunication infrastructure assets, and highways/roads – and the trend appears to continue growing in the near future. In addition, the public sector has exhibited increasing willingness to enter into public-private partnerships with financial investors in order to finance and construct significant infrastructure projects such as highways and schools.

Brazil Small Flag Brazil

In recent years, the interest of financial sponsors in acquiring infrastructure assets has been increasing for two main reasons:

The first one is due to the lack of public policies in sectors as health, airports, highways and construction. With short public investments, but with a demand of approximately 220 million citizens, Brazil shows itself as a land of investments opportunities for the financial sponsors. According to a 2019 McKinsey Report, Brazil still lags in infrastructure quality, and there is huge potential to increase investments to eliminate current gaps in the Brazilian infrastructure. As the report shows, to reach world average, Brazil needs to invest approximately 4.7% of GDP/year for the next 20 years to reach the ideal investment index.

The second reason is that due to the corruption inquiry already mentioned in item 1 above, some of the most important infrastructure companies in Brazil had been involved in corruption scandals. Thus, with this type of damage with these Brazilian companies, an enormous market raised for financial sponsors.

Regarding the acquisition of publicly listed companies, financial sponsors have been very active, especially in the health sector, as demonstrated by Carlyle's acquisition of “Rede D'Or” and Advent investment in “Laboratório Fleury”. Other sectors, such as technology, also attracted attention of financial sponsors, as the sale of the cellular tower company T4U to the Blackstone Group.

Austria Small Flag Austria

With regard to publicly listed companies, financial sponsors have not been very active, in part due to the fact that there are few Austrian publicly listed companies with a considerable free float. The only takeover completed in 2018 we are aware of was the acquisition of a majority interest in Wolford AG by Chinese financial investor Fosun.

As for infrastructure assets, while financial sponsors were looking at potential targets, we are not aware of any transaction having been completed recently.

United States Small Flag United States

According to Bain sources, in 2018, public-to-private deals reached their highest level since 2006-2007, both in terms of count and value. According to data from Dealogic, as of August 2019 there were $69.6 billion in deals involving public companies being taken private by US private equity sponsors, a marked increase from $53.3 billion for all of 2018. This trend is expected to continue to accelerate as private equity firms seek to make use of record amounts of cash on hand and avoid the scrutiny of public company disclosure regimes.

Infrastructure (along with energy) exhibited the most growth of any private asset class among the largest US financial sponsors as of Q3 2019. This trend is expected to continue as investors look for consistent income. According to McKinsey data, private market fundraising for infrastructure in 2018 totaled $42 billion, representing 17% increase from 2017.

Japan Small Flag Japan

From December 1, 2017 to December 31, 2020, there were 885 public M&A transactions in which the targets were Japanese listed companies, and approximately 18% of these transactions involved financial sponsors as buyers (Source: RECOF).

Traditionally, financial sponsors have not been active in buying infrastructure assets in the Japanese market partly because regulatory authorities prefer strategic investors over financial investors for the purchase of infrastructure assets. We have not seen active involvement of financial sponsors in buying infrastructure assets such as sanitation and water treatment facilities, roads, airports, railways, hospitals and schools. However, the trend seems to be slowly changing in the energy sector in which an increasing number of financial sponsors are buying interests in renewable energy projects.

Updated: January 16, 2020