Secondary buyouts
As you might expect, private equity companies that buy out public companies normally restructure them and sell them off to another strategic buyer in the same business. But also common is the scenario where a buyout firm sells one of its acquisitions to another buyout firm.
That scenario just took place, for example, when UK-based private equity company Cinven bought a Swedish company, Coor Service Management, from another private equity company from UK-based 3i, another private equity group. It's what is called a secondary buyout.
Coor is the largest facilities management company for Scandinavia, services large companies in terms of building maintenance and safety, as well as running cafeterias. It was spun off in 1998 from Skanska, a Swedish construction group.
The recent Coor deal was for £375, a great deal for 3i, which bought Coor for £90m million in 2004, a fourfold increase. 3i managed to double gross income at Coor in the interim, partly by acquiring internal facilities management operations at companies like Volvo.
This isn't Cinven's first foray into Sweden. In 2005 along with Goldman Sachs, it bought Ahlsell AB, the leading Scandinavian plumbing and electrical equipment distributor, and in 2006, it bought Phadia AB, which makes diagnostic tests for autoimmune problems.
In another example of the secondary buyout phenomenon, 3i this summer sold its holding in Care Principles, a UK psychological healthcare group to UK-based private equity firm Delta Fund. Similarly, earlier this year Cinven (along with JPMorgan Partners) sold off Germany-based Klöckner Pentaplast, the world's leading manufacturer of rigid plastic films to US buyout firm Blackstone Group.
And there are plenty of other examples of the same thing. If a company like 3i could quadruple the value of Coor Service Group, where is the room for further growth? To mix a metaphor, can more juice be squeezed out of these hot potatoes?
